A new financing partnership approved by the Port of Greater Cincinnati Development Authority this week could unleash more than $100 million in energy-related real estate investments in Hamilton County over the next five years.
Already the program has a pipeline of 20 projects involving 570,000 square feet of commercial real estate where $50 million in energy upgrades are being reviewed for potential financing.
The new partnership between the Port Authority and the Greater Cincinnati Energy Alliance will be the region’s main vehicle for PACE loans. PACE, which stands for Property Assessed Clean Energy, is a financing tool that lets property owners use a portion of their property taxes to pay off debt.
“We want PACE to be the next great economic development financing tool,” said Energy Alliance CEO Andy Holzhauser. “It can finance any improvements that save energy, any equipment that consumes energy.”
In addition to PACE, the Energy Alliance and the Port Authority are planning to develop a suite of energy-related economic development programs that enable commercial property owners to find the best way to finance the installation of energy conservation systems along with energy-efficient lighting, factory equipment and heating and cooling systems. Private and public financing will be used to pay off projects that cost between $500,000 and $2 million, Holzhauser said. In some cases, the Port Authority may bundle projects for a larger public bond issue.
No final deals have been signed yet, but Holzhauser said the goal is to get at least a couple of deals closed by the end of this year.
“During some of our initial site visits, we are seeing companies that are paying monthly energy bills totaling five, and even six figures,” said Susan Thomas, vice president of public finance for the Port Authority, in a press release. “These are inefficient properties that house vital business operations. Through this new program, we can drive savings and sustainability, which are good for the bottom line.”
The Energy Alliance has been working since 2009 to promote energy efficiency improvements in homes and businesses. It won a $17.5 million federal stimulus grant in 2010 and has since documented $40 million worth of energy audits and upgrades. The agency has recruited 70 commercial and residential contractors to take part in its programs. It has conducted 3,000 residential assessments and 101 commercial energy audits. More than 1,800 homes have received energy retrofits, while 48 commercial facilities have installed energy upgrades.
Holzhauser said the Energy Alliance is trying to evolve from its early years as a conduit for energy subsidies to a more sustainable model as nexus for property owners, energy consultants, heating and cooling contractors and lending partners. I
“If we can finance as many projects … as we previously subsidized, we’re growing the market,” he said. “It means our region is evolving and there’s gradually less reliance on subsidy.”
The new partnership with the Port Authority will attract some interest in the commercial real estate world, predicted Rick Wooliver, managing partner of National Energy Control Corp., an energy-consulting firm.
“This arrangement could be a major boon,” said Wooliver, who advises manufacturing companies, big-box retailers and school districts on how to reduce their energy costs. “The biggest problem with any energy optimization project is trying to arrange financing. We’ll not only use it for new clients but also … go back and address (past) projects that never got off the ground.”
Wooliver described a downtown office building with “an awful mechanical system” that could have paid for its energy upgrades with the money saved on utility bills. But the building already had a big enough debt load that its bank refused to add more. He wouldn’t name the building, but thinks a deal could be struck through the PACE program.
“These type of arrangements for financing do enable economic development,” he said.