CREJ - Property Management Quarterly - April 2016
Most property owners would like to see their energy- efficiency standards increase while watching the cost of maintaining their property decrease. Programs such as Commercial Property Assessed Clean Energy and Global Real Estate Sustainability Benchmark provide an effective way for potential investors and property owners to analyze energy efficiency and assess the business case for sustainability in commercial real estate. The Colorado Energy Office launched CoPACE in December. In just over three months, the program has $50 million worth of PACE financing projects in the pipeline across the Centennial State. The program is an innovative way for assisting property owners in completing energy efficiency, renewable energy and other clean energy building improvements. Further, the program provides a new tool for developers that increases the efficiency of their project and boosts their return on investments. “Until the inception of PACE, investors and building owners never had a real incentive to make robust energy-efficiency upgrades for their buildings, and investors have had no real reason to exceed municipal energy codes,” said Joel Poppert, Colorado Market Leader, PACE Equity LLC. “Regardless of the situation, the ultimate benefit is that in each and every circumstance, all stakeholders win, and our building stock gets a serious energy-efficiency uptick.” State and local governments sponsor PACE financing to create jobs, promote economic development and protect the environment. To get involved, projects must be located in counties that have opted to participate in the program. In Colorado, Boulder County has opted-in and several other counties around the state have indicated that they plan to participate. Interested property owners choose to receive long-term (up to 20-year) financing for as much as 100 percent of the cost of these improvements. This arrangement spreads the cost of clean energy improvements over a longer period than could be obtained with traditional debt financing. Property owners are free to arrange financing directly with one of the listed capital providers or to bring their own capital provider to purchase the Colorado CoPACE assessment (i.e., fund the project). “For many stakeholders, the ultimate goal of PACE is to encourage significant increases in the energy efficiency of the built environment,” Poppert said. “The brilliance of CPACE is that it achieves dramatic energy efficiency upgrades all while providing an incredible return on investment to their projects or whole portfolios.” Poppert will join representatives from Microgrid Energy, Sustainable Real Estate Solutions and the Colorado Energy Office to review the basics of the CoPACE program at U.S. Green Building Council Colorado’s Rocky Mountain Green conference April 21 and 22. The panel will assess the development of the CPACE program, program rules and eligibility criteria, key stakeholders, financing details and how the green building community can benefit from the program. USGBC’s sister organization, the Green Business Certification Inc., acquired the Global Real Estate Sustainability Benchmark in October 2014. GRESB is an industry-driven organization committed to assessing the sustainability performance of real estate portfolios around the globe. While LEED is the measure of an asset’s performance, GRESB is the measure of a real estate company or portfolio’s performance. The implementation of GRESB is a response to large investors who continue to call for more robust sustainability analytics, a desire founded in research that continues to tie sustainability to higher returns and performance. “The worlds of real estate financing and green building design and construction have historically been fairly oblivious of each other. But this is changing – hence GRESB,” said Stephanie Barr, LEED AP BD+C, research associate and projects manager with Institute for the Built Environment. “Investors need clear, quantitative metrics in order to integrate ESG factors into their analytics. They also need a standard benchmark in order to make apples to apples comparisons.” Recently, investors also want the companies and funds that they invest in to show what these investments do when it comes to environmental, social and governance issues. The amount of capital that has an interest in ESG data on real estate investment trusts and property funds is significant. “Sustainability metrics have become a proxy of quality for a real estate asset/investment,” Barr said. “If a REIT is tracking higher-order metrics like sustainability, that means they have their house in order and they are a firm to trust.” Barr and Josie Plaut from the Institute for the Built Environment also will join the Rocky Mountain Green dialogue and will explore the requirements of GRESB reporting and the relevancy to those in property management, development, design, construction and investment. They will evaluate a case study of a large REIT’s experience completing the survey, their achievement of the Green Star designation from GRESB, and the impact this activity has had on their assets, company and investors.