PACE FINANCING

White Oak’s Property Assessed Clean Energy (PACE) product is a unique way to finance your energy efficiency, renewable energy, water conservation, and other improvements to commercial properties.  What makes PACE different from a traditional loan is that users repay their project costs (over the useful life of the improvements – up to 30 years) through property assessments that are invoiced as an additional line item on your property tax bill.  The PACE obligation is tied to the property only – There are no personal or parent company guarantees needed – and may transfer with property ownership if the buyer agrees to assume it.

What is PACE?

White Oak’s Property Assessed Clean Energy (PACE) product is a unique way to finance your energy efficiency, renewable energy, water conservation, and other improvements to commercial properties. What makes PACE different from a traditional loan is that users repay their project costs (over the useful life of the improvements – up to 30 years) through property assessments that are invoiced as an additional line item on your property tax bill. The PACE obligation is tied to the property only – There are no personal or parent company guarantees needed – and may transfer with property ownership if the buyer agrees to assume it.

White Oak partners with local governments to make PACE financings happen, so you can work directly with us to set PACE financing terms that meet your unique needs. With PACE, we can finance 100% of your project’s costs (up to 30% of your property’s appraised value), including soft costs such as engineering studies and transaction expenses. We will guide you through the process and provide efficient execution to get your project funded.

Please have a look at our representative financing terms and sample list of eligible upgrades. If you have a project you’d like us to fund, please call us or fill out our brief online application form.

 

Why PACE?

  • Long repayment periods and attractive interest rates reduce the time needed to recoup investments in efficiency projects.
  • Lower rates and more flexible structure than mezzanine debt or equity
  • No guarantee needed from principals or parent companies
  • There’s no need to refinance when selling the property or re-leasing. PACE obligations attach to the property – not its owner or tenant – and payments can be passed to tenants under net leases.
  • Payments can be delayed for up to two years by using PACE proceeds to pre-fund interest
  • PACE arrangements are unlikely to be classified as debt and do not accelerate if payments missed

Energy Efficiency

A sample of eligible energy efficiency improvements:

  • Heating, ventilation and air conditioning systems and their related parts and accessories
  • Efficient lighting systems, including LED, compact fluorescent and others
  • Upgraded windows and window coatings
  • Improvements to doors, walls and other exterior materials
  • Energy efficient roofing materials
  • Water boilers/heating systems
  • Solar, wind and geothermal power systems
  • Electric vehicle charging stations

 

Water Conservation

A sample of eligible water conservation improvements:

  • Low-flow appliances and fixtures
  • Irrigation solutions and related systems and controls
  • Rainwater collection
  • Wastewater recovery or treatment applications

 

Seismic Safety

A sample of eligible seismic improvements (California and Oregon only):

  • Foundation improvements
  • Shear walls
  • Brace and support frames
  • Additional bracing for fixtures and emergency support systems

Financing Terms

Project Size:

  • $500,000 to $200 million (up to 30% of appraised property value)

Use of Proceeds:

  • 100% of hard and soft costs, including engineering studies, appraisals, etc.
  • Capitalized interest, reserves and transaction expenses
  • See Eligible Improvements

Interest Rate:

  • Fixed rates generally range from 6% to 8% but vary by jurisdiction

Terms:

  • Fixed payments spread over improvement’s useful life (10 to 30 years)
  • No covenants to live by
  • No personal or corporate guarantees

What is White Oak’s Property Assessed Clean Energy (PACE) financing?

White Oak’s PACE solution is a unique way for property owners to finance energy efficiency, renewable energy, water conservation, and other improvements to commercial properties. PACE is not a loan and is instead repaid as an additional amount invoiced on property tax statements. The additional line item on your property tax statement is created by signing a contract with the county (the PACE contractual assessment).

Most states have passed legislation enabling this unique financing structure, and cities or counties must opt into the program. White Oak then partners with these local governments, which serve as a conduit. White Oak identifies the projects and sets terms within the boundaries set by state laws and local program guidelines. Once terms are agreed to between White Oak and the property owner, the county is brought in to enter PACE assessments on the tax roll, facilitate funding, and collect future payments.

How is PACE different from a loan?

  1. PACE arrangements are off balance sheet and unlikely to be viewed as debt.
  2. There are no covenants or technical defaults for PACE arrangements.
  3. Personal and/or corporate guarantees are never required for PACE.
  4. PACE obligations never accelerate, even if a payment is missed.
  5. PACE obligations do not attach to the property owner. If you sell the property, PACE arrangements stay with the property.
  6. Long repayment periods typically result in lower installment payments than would be required for many loans.

Why haven’t I heard of PACE financing before?

This is a newer solution continuing to gain awareness. The first state legislation for enabling commercial PACE projects was only passed in 2010, and many areas are still setting up their programs even if state legislation does exist.

What determines whether PACE is available in my area?

Your state must have enabling legislation, and your city or county must create or opt into a program. Many local governments are simply waiting to receive their first request before opting into a program, and White Oak can facilitate that process to make your project happen.

Can PACE be used to fund new construction and redevelopments?

Yes!

Who determines the types of improvements eligible for PACE?

These guidelines are typically established by the state legislation that enables PACE. In addition to energy efficiency, renewable energy and water conservation projects, certain states allow other improvements relevant to that state. For example, earthquake-proofing projects are allowed in California and Oregon. In Florida, storm-proofing improvements are eligible.

How much of the improvement cost will PACE pay for?

100% of improvement costs are eligible, including soft costs such as engineering studies and energy savings analyses. You can also capitalize interest and fees.

How will I make payments?

Your property tax statement will include an additional line-item for your PACE assessment payment.

Can I pay PACE assessments early?

This may vary by area, but usually yes.

What happens if I don’t pay my PACE assessments?

Counties generally have standard procedures for collecting past-due property taxes, and they will typically follow these same procedures for past-due PACE assessments owed. The remaining PACE balance will NOT accelerate, just like your property taxes wouldn’t accelerate.

Can I use other debt to complete an improvement and refinance that debt with PACE?

Yes, in most cases. However, you must indicate before making the improvements that you intend to refinance debt with PACE.

Why would I use PACE instead of bank financing or other capital sources?

  1. PACE arrangements are off balance sheet and unlikely to be viewed as debt.
  2. There are no covenants or technical defaults for PACE arrangements.
  3. Personal and/or corporate guarantees are never required for PACE.
  4. PACE obligations never accelerate, even if a payment is missed.
  5. PACE obligations do not attach to the property owner. If you sell the property, PACE arrangements stay with the property.
  6. Long repayment periods typically result in lower installment payments than would be required for many loans.

Does it matter if there’s an existing mortgage on my property?

If a lender has a mortgage on the subject property, then that lender MUST approve your PACE financing.

Why do senior mortgage lenders consent to PACE?

  1. Annual savings from improvements often exceed annual PACE assessments, improving the property’s cash flow.
  2. PACE arrangements do not accelerate, which means the dollar amount of PACE obligations potentially priming the senior mortgage lender are small relative to the property’s value.
  3. PACE arrangements do not have covenants that property owners could trip.

What if I decide to sell the property?

The new owner will assume payments for the PACE assessment, just like they become responsible for future property taxes on the property. There are no consents or other administrative hurdles required. You also have the option of prepaying PACE obligations before selling the property.

Are C-PACE and R-PACE different than PACE?

C-PACE simply refers to PACE programs for commercial properties, whereas R-PACE refers to PACE programs for residential homeowners. Note that multifamily buildings are generally covered by C-PACE programs, not R-PACE. White Oak only funds commercial projects.

Jeff Habicht
Director of PACE,
White Oak Global Advisors, LLC
415-644-4142
jhabicht@whiteoaksf.com