Andrew Meyer Vice President & Associate General Counsel Phone: (314) PACE Players and Their Roles

Transcription

1 Andrew Meyer Vice President & Associate General Counsel Phone: (314) PACE Players and Their Roles

2 Who is involved in a PACE transaction? State Government County Government Program Administrator PACE Capital Provider Mortgage Lender Property Owner Engineers Attorneys Brokers EPCs CEPs Contractors PACE Consultants Bond Issuer Title Company Appraiser County Collector Tax Equity Investors Landlord Tenants Property Managers And many more

3 Overview 1. Authorizing PACE: State and Local Governments 2. Implementing PACE: Program Administrators 3. Seeking PACE Financing: Eligible Properties & Borrowers 4. Originating a PACE Project: Contractors, Engineers and PACE Consultants 5. Funding a PACE Project: Capital Providers 6. Closing a PACE Transaction: Example

4 Authorizing PACE: State and Local Governments PACE is a state-based program authorized by state statute and implemented by local governments. PACE Lender THE ROLE OF THE STATE Work with stakeholders to develop and pass legislation. Determine the appropriate state or local body to implement the PACE program. As a result of the unique needs of each state, PACE programs and requirements vary among states. THE ROLE OF LOCAL GOVERNMENTS Adopt an ordinance implementing the state s PACE legislation. Determine whether it will administer the program or select a third-party program administrator. Create program rules and guidelines, including whether it will have an open market or single lender platform. In some states, the County must also place the assessment on the property, put the assessment on the tax bill, and collect the annual assessment. Project Owner Program Administrator County

5 Authorizing PACE: State and Local Governments In 2010, Missouri passed legislation enabling PACE financing within the state. One or more municipalities may adopt ordinances forming a Clean Energy Development Board, which is a political subdivision of the state tasked with implementing PACE within that jurisdiction. Note: Municipality is defined as counties, cities, towns or villages. A Clean Energy Development Board is authorized, on behalf of municipalities, to: issue bonds, enter into assessment contracts, and place assessments on property. THE MISSOURI MODEL

6 Implementing PACE: Program Administrators PACE Program Administrators may be a public body, a non-profit, an unaffiliated third-party or an entity affiliated with a PACE capital provider. Typical roles of the administrator include the following: Create program guidelines and a formal project application process Develop an assessment contract and other form documents Manage the project application process Perform a technical review of the energy savings analysis Ensure the project complies with state statute Do public outreach and perform contractor trainings Develop criteria to become an approved capital provider Administrators charge application and servicing fees to the project. PACE Lender Project Owner Approve Project Program Administrator Administrator Contract County

7 Implementing PACE: Program Administrators A Clean Energy Development Board may appoint an administrator to administer the PACE program on its behalf. In 2010, The Missouri Clean Energy District was formed as a CEDB, which appointed the Missouri Clean Energy Fund as its administrator. Municipalities throughout the state may opt-in This administrator is tied to a PACE Capital Provider In 2015, Show Me PACE was formed as a CEDB and appointed the Missouri Energy Initiative as its administrator. Municipalities throughout the state may opt-in. This administrator is a nonprofit. In 2013, the City of St. Louis formed Set the PACE St. Louis as a CEDB, which appointed Energy Equity Funding as its administrator. Operates only in the City of St. Louis This administrator was initially a nonprofit, but is not affiliated with a PACE Capital Provider THE MISSOURI MODEL

8 Seeking PACE Financing ELIGIBLE PROPERTIES State legislation typically dictates the types of projects and properties that are eligible to receive PACE financing. 33 states and the District of Columbia have adopted legislation permitting PACE financing for commercial properties. Most states define commercial PACE, or C-PACE, to permit financing for any non-residential property, including agricultural, industrial and multi-family developments with greater than 4 units. Only California, Florida and Missouri currently permit PACE financing for residential properties. ELIGIBLE BORROWERS Since PACE financing is non-recourse and secured only by an assessment on the property, the buyer is typically the fee owner of the property. In some circumstances, a tenant may be the PACE borrower where the fee owner of the property has consented to the placement of the assessment on the property.

9 Originating a PACE Project There are a number of parties involved in the origination and development of a PACE project, including contractors, energy engineers, PACE consultants, PACE capital providers and others. Energy efficiency and renewable energy contractors often propose PACE financing as an alternative source of financing for those projects designed and/or installed by the contractor and will seek term sheets from PACE capital providers. PACE Consultants act as owners reps and seek term sheets from qualified capital providers. Consultants will often take the lead in walking the project through the administrator application and approval process. Energy engineers prepare energy savings reports (also known as energy audits) to determine the amount of PACE financing the project will be eligible to obtain and to ensure the savings-toinvestment ratio is met. In most jurisdictions, mortgage lenders must consent to the placement of the PACE assessment on the property. Obtaining consent from mortgage lenders is typically the first step of the underwriting process and a number of people are involved in seeking consent.

10 Funding a PACE Project: Capital Providers Who can make a PACE Loan? Public Funds vs. Private Funds Open Market Platform vs. Dedicated Lender Platform Hybrid Platform How do PACE Capital Providers Underwrite PACE Projects? Savings-to-Investment Ratio PACE LTV and Total LTV Usual real estate underwriting requirements PACE Lender Assessment Pmts. PACE Financing Project Owner Approve Project Assessment Pmts. Program Administrator Administrator Contract County

11 Closing a PACE Project: Moon Ridge Farms Project Summary: Moon Ridge Foods closed on $4 million of PACE financing in connection with their retrofit of a 75,000 sf hog processing facility near Springfield, Missouri. PACE-eligible upgrades included HVAC upgrades, highefficiency boiler systems, a small solar system, LED lighting and roofing upgrades. Parties Involved: PACE Program: Show Me PACE Program Administrator: Missouri Energy Initiative Project Origination: RAHILL Capital LLC PACE Capital Provider: Twain Financial Partners LLC Mortgage Lender: Bank of Sullivan Borrower: Moon Ridge Foods LLC

12 Closing a PACE Project: Historic Rehabilitation PACE LENDER Bank (Conventional Lender) Equity Debt Proceeds $90,000 FHTC Credits Equity $29,000,000 $1,500,000 $7,280,000 8,500,000 PACE Loan Equity PACE Assessment (Master Landlord) / ######### PROGRAM PACE BORROWER ADMINIST PACE Assessment FHTC Credits Equity $4,880,000 SHTC Credits Equity Equity $1,160,000 $3,720,000 SHTC Credits Member 40% Managing Member, LLC (90%) Brownfield Credits Managing Member 60% (Managing Member) 1% (Master Tenant) 10% (Investor Member) 99% PROJECT SUMMARY: Redevelopment of 158,000 sf building in St. Louis, MO utilizing $8.5 million in PACE Financing PACE-Eligible improvements include roofing, insulation, LED lighting, HVAC and low flow plumbing PARTIES INVOLVED: PACE Program: Set the PACE St. Louis Administrator: Energy Equity Funding Project Origination: Twain Financial PACE Capital Provider: Twain Financial Mortgage Lender: Multiple participating Borrower: Master Landlord Others: State and federal tax equity investors; tenants; management company; state tax credit agencies

13 Thank You Andrew Meyer Vice President & Associate General Counsel (o)