C-PACE loan options pursued in Sussex County
January 22, 2021
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GEORGETOWN – Atlantic Ocean Companies pressured Sussex County officials to pave the way for clean energy rated commercial property (C-PACE), a funding option that several developers are pushing to attract more development to the state.
“This is another tool to encourage businesses to locate here, and there is minimal risk but a real opportunity for local businesses and other businesses to locate here,” said the president and co-founder. of Ocean Atlantic Companies, Preston Schell. “We’re at a disadvantage if we don’t pass this because almost every county around us has it.”
Ocean Atlantic Companies is reportedly looking to use a C-PACE loan to advance the $ 30 million Ashton Oaks project, a 178-unit apartment complex west of Fenwick Island. For that to happen, however, Sussex County Council must approve legislation offering the program.
C-PACE loans focus on projects that include energy efficiency, renewable energy measures and are limited by the estimated value of a property. The loan is paid annually as part of the property tax bill. The funding option has been around since a 2008 pilot program, but Delaware authorized his program in 2018.
Today, the Delaware Sustainable Energy Utility Inc. administers the Energize Delaware C-PACE program. The Buccini / Pollin Group secured the state’s first C-PACE loan of $ 3.9 million to cover new heating and air conditioning units in the historic DuPont building in early 2020.
The maximum loan value is usually 15% of the property’s value, but the cap can go up to 20% of construction costs if additional energy savings are achieved.
Schell told the Sussex Economic Development Action Committee (SEDAC) on Friday morning that the C-PACE loan was a closely guarded secret as developers today are looking at energy efficient practices to add value. to their buildings. The loan could cover insulation systems, roofing systems, HVAC and much of the building’s framing.
“It doesn’t make financial sense to build energy-hungry buildings. In our case, we want tenants in our apartment buildings to pay as little electricity as possible. We make them energy efficient for this very reason, ”he said. “When we started studying this program, about 25% of what we are already doing is already qualified. “
Ocean Atlantic hopes to use the C-PACE program to help fund rental complexes, especially those with an affordable component. Schell said he wrote three term sheets for apartment complex projects and that using the loan program would increase returns on remaining equity while reducing capital spending. It can also enable projects that may be delayed due to insufficient returns.
“We had to sit on the sidelines and let the rents appreciate before we could start the project,” said Schell. “The argument we made to our bank is that even with the funding from C-PACE, Delaware property taxes will be half or less than you expect for loans in New Jersey.”
Funding from C-PACE can also give Delaware a competitive advantage, as more than 35 states and the District of Columbia have activated legislation for it. More than $ 800 million of projects have been funded, according to the US Department of Energy. The funding option mirrors that used for other infrastructure projects, such as sewers, water and roads, but expands it to projects that would provide incentives to invest in clean energy technologies.
The program is also an economic driver for clean energy jobs, not just development. A 2019 federal study showed that between 2008 and 2017, projects worth $ 887 million were completed, creating around 13,000 jobs. At the same time, the study found a default on a C-PACE loan on 1,870 transactions.
At the local level, Schell assured SEDAC members that the program had a low risk of default on the C-PACE loan. Based on his analysis of the Sussex County Sheriff’s sales between September 2019 and March 2020, of the 132 properties that could have benefited from C-PACE funding, none were up for auction due to a default. payment of property taxes.
“So if that funding is there, it will allow us to be more flexible with the county and future projects if and when they ask us to offer an affordability component,” Schell said. “It really helps.”
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