22A — June 2023 — Creative Financing — Financial Digest — M id A tlantic Real Estate Journal
www.marej.com
C reative F inancing
By Tricia Baker, PACE Equity Low carbon verification pairs greener designs with reduced interest rates
avvy developers and building owners are har- nessing a unique tool to obtain vital reduced-rate fi - nancing in a challenging mar- ket. Recently, a warehouse de- veloper used it to replace $4.5 million of preferred equity. An historic redevelopment project used it to close a $2.1 million gap in their capital stack. The owner of a self-storage facility used it to cover $3 million in the capital stack and lower their overall cost of capital. The common thread between these projects? Each developer saw the value of a lower carbon S
reduce operating expenses and improve property value since they consume less en- ergy and water and produce fewer emissions. And now, energy efficient buildings al - low developers to access more creative financing. In addition to the established financial and environmental benefits of operating a low carbon build- ing, the industry-leading CIR- RUS Low Carbon program has introduced financial and brand advantages that make low car- bon design a key opportunity for developers. Prior to CIRRUS Low
Carbon’s introduction to the market in 2022, no private capital source offered lower rates for greener buildings. Now, developers can for- tify their financing with a significantly lower interest rate when a project meets a design specification out - lined by PACE Equity and the New Buildings Insti- tute. This considerable rate reduction means boosted returns for a project. In fact, on average the financial benefit is 8 times the aver - age incremental cost needed to meet the CIRRUS Low
Carbon specification. PACE Equity’s unique model also includes, at no additional cost, design consultation with an in-house low carbon design team to help the proj- ect qualify for the lower rate. Research by the Center for Active Design indicates 49% of building owners are will- ing to pay more for buildings that have a positive impact on health; achieving low carbon verification allows owners to leverage their green building status as a notable attribute. Beginning with a substantial rate reduction and continuing through the life of the building with an improved net operat- ing income, achieving CIRRUS Low Carbon verification offers abundant financial benefits. Paired with its valuable en- vironmental and fiscal advan - tages, CIRRUS Low Carbon is also a brand-builder. In a low carbon economy where de- mand for green buildings is in- creasing, developers and own- ers who position themselves as leaders in energy efficient design are distinctly ahead of the curve. Low carbon verifica - tion becomes a core element of a building’s brand identity, attracting the growing number of potential residents, tenants, and buyers whose real estate decision-making includes a demand for “green.” “Tenants care about envi- ronmental issues and lower utility costs,” said Shawn Neece, principal at Renew Partners, who used CIRRUS Low Carbon to help finance the redevelopment of a Cleveland theater complex into residen- tial and office space. “Our goal is to have a good building that is efficient over the long run… that brings value to our ten- ants, investors, and us.” CIRRUS Low Carbon uses Commercial Property As- sessed Clean Energy (C- PACE) financing, offering up to 30% gap financing for a project capital stack. Through CIRRUS Low Carbon, green development is a triple win: for the environment, for develop- ers and their bottom line, and for all who visit, work or live in lower carbon buildings. To explore low carbon financing opportunities and view case studies of CIRRUS Low Car- bon verified buildings, visit paceequity.com/lowcarbon. Tricia Baker is senior VP of Strategy & Impact at PACE Equity. MAREJ
building and leveraged their greener design to access a low- er cost of capital through PACE Equity’s award-winning CIR- RUS ™ Low Carbon program. Green designs help owners CIRRUS Low Carbon Verified Residences at the Agora in Cleveland, Ohio.
Get a lower rate when you build for lower carbon CIRRUS Low Carbon lower-rate funding will deliver improved returns when you build using our low carbon design specification. NEW CONSTRUCTION REDEVELOPMENT
RENOVATION RENEWABLES
Visit www.pace-equity.com for more information.
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