22B — July 29 - August 11, 2016 — Green Buildings — M id A tlantic
Real Estate Journal
www.marejournal.com
G reen B uildings
By George Crawford, Green Partners Lease your way to energy efficiency
N o one disputes the fact that Energy Savings related retro-fits will r e -
ing to jump the line, even for a special project with a quick payback, is problematic. Projects with or without a payback require upfront fund- ing, which utilizes building cash resources. Jumping the line, even for a project with an extraordinary payback, will result in delays for other projects. Take a boiler retro- fit or a roof replacement as examples. These are typical of the types of projects that must be carefully scheduled both as to timing and building funding availability. A jumping the line approach to their schedul- ing just wouldn’t work.
There is, however, an alter- native to the single “project pipeline” approach, which will be the focus of this article. Think in terms of your di- viding your projects into two separate categories. The first category includes general building improvement projects such as a new roof or interior upgrades - projects that do not increase in cash flow. The second categorywould in- clude projects that improve cash flow, usually through the reduc- tion of energy consumption. So for the purposes of this article, the “project pipeline” has now been divided into two
categories: 1) General Building Im- provement, and 2) Projects which im- prove cash flow. The General Building Im- provement projects would continue to be scheduled and funded as before. Howev- er, projects with paybacks would now be structured to fund themselves. With the implementation of this strat- egy, these “cash flow” projects would no longer be dependent on building funding and there- fore independent of the Gen- eral Building project pipeline. Now we need to go from here
to there. We need to convert the positive cash flow from the Category 2 projects to the actual funding required for project implementation. Our recommended funding solution is equipment leas- ing. An equipment lease will provide 100% of the up-front funding required for imple- mentation (purchase and in- stallation). The “debt service” consists of fixed monthly pay- ments for a term of two to five years. At the end of the lease term, the equipment or the LED product (in the case of a LED retro-fit) is purchased for $1.00. Besides the fact that “energy saving” lease financing has become readily available from a variety of reliable sources, the advantage of lease financ- ing includes the fact that it is a lease and not a loan and therefore does not conflict with restrictive covenants related to loans and mortgages. For more information, we reached out to the M-Core Credit Corp with regard to the practicality of lease financing - which M-Core has been pro- viding for over twenty years. Michael Weisberg, Principal of M-Core advises that the “Financing process is simple, smooth and straight forward. As an example, the one page lease financing application for coops and condos consists of the name and address of the building, their bank and a copy of their annual statement – as provided to their shareholders or condo owners. Applications for other types of buildings are similar. The approval process is fast – usually three to five business days.” He further ad- vises that “Financing a project such as LED lighting makes sense as the project provides sufficient savings that will more than offset the related financing costs. The project not only pays for itself, but can provide free cash flow to the building.” An actual example of a lease arrangement for a LED retro- fit follows: The scope of this project for a two building multifamily com- plex involves the replacement of all existing common area and garage lighting with LED. The existing lighting consists of a variety of fluorescent lighting products. The cost of the retro-fit, with installa- tion, totals $55,840.00 (before continued on page 23B
duce costs. And o f t e n they include e x c e l l e n t oppo r tun i - ties to initi- ate projects w i t h g o o d p a y b a c k s .
George Crawford
Invariably, however, there are usually other competing projects waiting in line for their own funding allocations. Most buildings plan their projects in advance and try-
Green Partners is your one-stop energy efficiency consultant. We offer low cost solutions to help meet compliance requirements for PlaNYC Greener, Greater Buildings legislation.
• Local Law 87 - Energy Audits and Retro-Commissioning • Local Law 84 - Benchmarking and Energy Star
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