Coming off the heels of a global discussion on climate change, the StimULI breakfast on C-PACE financing and sustainability provided a unique dialogue on a collaborative win-win real estate scenario. Not only is there a push to build and retrofit sustainably, but there’s also a great way to finance these projects through C-PACE. Our esteemed panel (Jon Spelke, CleanFund; Adam Todd, Cumming Corp; JB Roberts, Madison Realty Capital; Peter Morris, AECOM) and moderator (David Abel, Planning Report & VerdeXchange) dove into the ins and outs of sustainability in development and construction while clarifying the C-PACE financing method in California.
C-PACE, commercial property-assed clean energy financing, supports sustainable construction in new projects and upgrades to existing buildings. Attendees came to the morning panel from varied roles in the real estate/development/land use community. David Abel led the discussion by asking the group if they wanted to focus on the money and financing aspect or the sustainability tactics of the topic – in true ULI fashion, the audience wanted to hear everything.
Jon Spelke of CleanFund gave a much needed overview of CPACE financing, detailing some of the misconceptions that senior lenders may have. Together with JB Roberts of Madison Realty Capital, Jon presented situations where CPACE can truly add to a project’s capital stack. Adam Todd from Cumming Corp was able to delve into specific sustainability improvements that can be financed via CPACE and significantly reduce utility costs – who knew lighting was the major culprit in existing buildings? Adam also stressed that sustainability as a topic is steadily gaining momentum in California, evidenced by Cumming Corp’s work on the Santa Monica Unified Sustainability Plan for the entire district.
Thankfully, Peter Morris of AECOM was able to qualm the worries of rising construction costs with an overview of measuring risk and cost. Rather than projecting a specific dollar amount, it’s best to assume all the possibilities and be prepared for each scenario. CPACE financing can certainly alleviate financial risk of a project if considered in the capital stack and appropriately projected savings through the project’s operation.
Major takeaways from the panel revolved around CPACE awareness, education and transparency. Educating senior lenders and cost estimators on CPACE is critical – this financing tool can be complimentary to mezzanine loans or replace the mezzanine loan in certain situations. Additionally, the California building code is progressive in terms of sustainability, meaning new construction would not typically adjust construction plans to qualify for CPACE lending. However, existing projects could benefit from major savings by using CPACE as a tool to upgrade outdated systems like lighting, utility and tenant energy usage.
Written by Violet Coker, Public Affairs Representative at Carpenters/Contractors Cooperation Committee