Word is spreading that we have started construction on one of the greenest buildings in the U.S. Melink HQ2 will not only expand our corporate campus for future growth, it will also serve as a model for how to design and construct Zero-Energy Buildings.
What is lesser known is how this project is being financed. Yes, traditional equity and debt will pay for 80% of this $5 million project. There is no getting around the fact that concrete, steel, and glass costs money and plenty of it.
But the other 20% of this project will be financed by PACE – which stands for Property Accessed Clean Energy. This is a smart way to fund energy efficiency and renewable energy improvements that might otherwise get axed from consideration because of budget constraints.
Basically, PACE financing is a long-term loan that gets paid over the long term by the energy savings of the above stated improvements. However, rather than calling it debt, it is recognized as a property tax assessment based on the increased value of the improvements.
In this example, Melink will be able to make $1 million worth of energy efficiency and renewable energy improvements and pay for them gradually over the next 30 years through an assessment on our property taxes. In other words, the energy savings will cash-flow the incremental value.
This is important for the building industry to understand, including developers, architects, and construction firms. The reason is, investing up to 20% on energy improvements can make the difference between a zero-energy building and an energy hog that cripples your business.
There is no personal guarantee required and no additional debt on your balance sheet. You get a fixed rate with fixed payments that can be passed onto your tenants through a triple-net lease.
Moreover, it allows you as the building owner and/or tenant to market your sustainability mindset and accomplishments. And with growing pressure from customers and employees to be part of the solution, there is no excuse for not doing the right thing.
For our project, Ohio PACE and CenterBank have been indispensable partners to making this financing possible for us. In your state, it might be someone else. Either way, if your clients don’t know about this financing tool, you need to educate them on it.
Leading by example is one of the most important things we can do. And with PACE financing, we hope to show countless other building owners and professionals that zero energy buildings are not only proven and practical, but also profitable. Today.