Financing for Multifamily Energy Efficiency Upgrades Learn how to save money and boost your property’s value with energy efficiency improvements and solar installations. Connecticut Housing Coalition Conference Hartford, CT September 22, 2016
Agenda • Welcome and Introductions • Case Study – The Bottom Line • Energy Efficiency Upgrade Process • Financing and Technical Assistance Resources • Project Presentations and Discussion
Case Study The Bottom Line Our First LIME Loan - Projections Oil-to-Gas Conversion: 10 High Efficiency Gas Boilers Installed Total Project Costs: $406,000 Project Sources Utility Rebates $44,000 LIME Loan $250,000 Borrower Reserves $112,000 Total $406,000 Savings Projected: $70,000 per year Loan Payments: $36,000 per year (9 year amortizing term, 6.00%) 3
Case Study The Bottom Line Our First LIME Loan - Reality Savings Projected: $70,000 per year Energy Savings Realized: $75,000 per year O/M Savings Realized $7,500 per year Loan Payments: $36,000 per year Net Cash Flow: $46,500 per year Total NOI Increase: $82,500 per year Increase in Property Value: $825,000 @ 10.0% cap rate $1,031,250 @ 8.0% cap rate $1,375,000 @ 6.0% cap rate 4
Multifamily Properties High Potential for Energy Improvements • Energy cost savings opportunity on the order of $120,000,000 per year. – 240,000 multifamily units – Potential to save $500+ per unit – Public and affordable housing less efficient than market rate -> 8x EUI 5
Green Bank Multifamily Housing What We Do ▪ Help owners save money on energy and operating costs and improve property values ▪ Help reduce tenant utility costs ▪ Help improve tenant comfort and safety ▪ Provide technical assistance, pre-development, and project financing for energy upgrades 6 6
Eligible Energy Efficiency and Renewable Energy Improvements • Heating and cooling systems • Hot water systems • Building envelope - weatherization • Lighting and appliances • Conversion from oil or electric to gas • Renewable energy systems – solar- PV and solar thermal • Qualified health and safety measures • Water efficiency
Eligible Health & Safety Issues Knob & Tube Wiring Mold/ Water Leaks Asbestos Lead Paint CO Off-Gassing Radon 8
Multifamily Partners State partners Program partners Utility partners 9
Benchmark CT • Benchmarking Program – 1,600 multifamily buildings, 12 months • You provide info and access • We provide management tool • Identify targets for efficiency and to improve project cash flow • FREE!
Energy Upgrade Process Pre-Development Financing Utility Incentives & Project Financing Analyze Design and Fund viable Install Operate property engineer project upgrades and monitor performance improvements opportunity 11
What are We Trying to Help Owners Accomplish? Core Core & Custom Passive Deep Energy Measures Measures House Retrofit Pre-Development Financing Utility Incentives & Project Financing
Pre-Development Financing Provided by: Pre-Development Financing Sherpa Loan • Designated service provider • Standardized process/fee schedule Analyze Design and Navigator Loan property engineer performance • Client managed contractor(s) opportunity • Customized technical services 13
Pre-Development Loan Terms SHERPA NAVIGATOR LOAN LOAN • Designated service provider • Client managed contractor(s) • Standardized process/fees • Customized technical services • Client pays 25% of pre-development costs; Green Bank loans 75% • Cost share interest rates • Affordable properties: 0% • Market rate properties 2.99% • Loan repayment due in 24 months or upon project financing/ implementation • No fees, unsecured • If project unable to proceed, owners may request/receive loan forgiveness 14
Utility Incentives Energy upgrade incentives from your local utility maximize the scope of your project by lowering the amount you need to borrow. Energy Utility Energy Inspection assessment letter of efficient and and/or agreement measures payment proposal installed Utility partners 15
New Ecology, Inc. A mission-driven non profit, we seek to bring benefits of sustainable development to the community level, and underserved populations Making the built environment more efficient, healthier, durable and resilient Nationally recognized for our green certification work on affordable multifamily housing, community facilities, renewable energy Boston – Hartford – Providence - Baltimore
“Sherpa” A skilled Tibetan mountain climber with endurance at high altitudes An experienced guide helping others on a mountain climbing expedition.
Which Peaks to Tackle? 18
What tests your endurance? Maintenance Paperwork Tenant turnover Looking for a safe and clear path to the peak, seeking the longer view? Estimate payback and incentives for capital upgrades Understand Renewables options Do you want to lighten your burden? Save money on utilities Reduce maintenance costs Make buildings more attractive, healthy and comfortable for tenants
Sherpa Program Designed to Lighten Your Load • First step – Prepare Application, with support from experienced professionals • Next step - Opportunity Assessment - $250 toward $1900 cost per building Quickly identify practical, cost-effective efficiency and renewable options, potential incentives • Energy Audit with 25% - 75% cost share Deeper analysis of measures costs and savings, and incentives, as prep for financing • And/ Or - Technical Assistance for design, procurement, incentives coordination
Opportunity Assessment 1. Site Visit by Engineer 2. Report includes energy and water efficiency opportunities and range of savings 3. Summarizes historical water & energy data 4. Health & Safety notes Estimated Annual 2 buildings, 22 Savings Summary Consumption Estimated Cost units, low rise Savings Savings ($) Toilets, Aerators, Estimated Potable Showerheads, Clothes 12-17% $400-600 Water Savings Washers Estimated Common Exterior Lighting, Interior Area Electricity Common Area Lighting, 10-15% $300-450 Savings Clothes Washers Aerators, Showerheads, Total Estimated Fuel Heating Equipment, 20-32% $5,750-9,200 Savings Windows, Domestic Hot Water Equipment
Energy Audit Table 1: Financial Summary Upfront Cost Estimated Upfront Cost Simple SIR Incl. EUL [1] Description of Upgrade Annual Savings Excl. Incentive Incentive Incl. Incentive Payback Incentive 0 Aerators [2] $1,500 $1,500 $0 $1,900 8 0 Showerheads [2] $1,100 $1,100 $0 $750 8 $6,850 $6,850 $0 $500 0 10 Apartment Lighting 5.8 $25,600 $18,100 $7,500 $3,500 2.2 20 Air Sealing & Insulation 4.9 $8,000 $3,200 $4,800 $2,750 1.7 10 Interior Common Lighting 3.0 $2,400 $975 $1,450 $500 2.9 10 Exterior Lighting 1.5 11.7 Toilets [2] $11,000 $0 $11,000 $950 25 $9,850 [3] 1.5 Solar PV [3] $11,400 $1,550 $900 11.1 25 1.5 $4,350 $400 $3,950 $675 5.9 10 DHW Equipment 4.5 1.4 $4,000 $0 $4,000 $900 7 Washing Machines 1.3 $3,000 $0 $3,000 $600 4.9 7 Irrigation [2] Space Heating & Cooling 1.0 $120,000 $36,000 $84,000 $7,350 11.4 15 Equipment - Apartments 0.0 $6,000 $0 $6,000 [penalty] - 15 Apartment Ventilation [1] Estimated Useful Life in years. [2] Water savings estimates account for both water and sewer charges. [3] Solar PV upfront cost includes an installed cost rebate of $0.513/Watt. 22
Technical Assistance • Mechanical engineering design • Bid specifications • Construction documents • Bidding out work • Environmental testing • Utility Incentives coordination EVERY STEP OF THE WAY 23
Project Financing for Energy Upgrades LIME Affordable Low Income Multifamily Energy Project Financing C-PACE Market-rate Commercial Property Assessed Clean Energy SOLAR Fund viable Install Operate project upgrades and monitor Solar projects only Commercial solar lease improvements 24
Project Financing Terms LIME Affordable multifamily Type Rate 5-6% Loan term 10-20 years Criteria 1.3x or greater project energy service coverage ratio C-PACE Market-rate project Type 5-6% Rate 5-25 years Loan term 1.0x or greater savings to Criteria investment ratio SOLAR Type Solar-only project Rate Fixed or escalating power purchase agreement 20 years Loan term 25
Project financing terms Affordable multifamily Type Gap Fund 2-3% range Rate up to 12-15 years Loan term Criteria Flexible low-cost financing, layered with other sources, for energy & health/safety, to bring projects across finish line. Details coming soon
Case Study: LIME Gap Financing Affordable Multifamily Description of Heat pumps, Measures: lighting, weatherization, water & roof* Total Loan Amount $296,000 (costs - incentives): Estimated Annual $44,500 Savings: Financing Terms: 20 years, 6.00% Annual Debt Service: $25,386
Retrofit Multifamily Incentive Process Submit Utility Letter of Utility reviews proposal* to Participation proposal utility Issued Energy efficient Utility Letter of CHFA/DOH measures Agreement funding installed issued awarded *Proposal includes: Payment Inspection 1) Scope of work 2) Multifamily Initiative Application 3) Project Fill Out Form 28
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