Bill Morris in Bricks & Bucks on October 19, 2022
There’s good news for co-op boards searching for ways to finance retrofits that will cut their building’s carbon emissions. The Mayor’s Office of Climate & Environmental Justice and the New York City Energy Efficiency Corp. (NYCEEC) have released a significantly updated and enhanced version of the Core Program Documents required for PACE loans — a major step toward the approval of low-cost, long-term green financing for co-ops.
After a year of behind-the-scenes machinations, the city has finalized the contracts that qualified lenders will be able to use to begin closing loans. The loans will not be available to new construction or to condominiums.
“Before this, the city didn’t have any contracts that we could use to close loans,” says Genevieve Sherman, head of policy and products at Nuveen Green Capital, one of 12 qualified lenders in the city’s PACE program. “This means that co-op boards and other building owners can now submit applications for funding for energy-efficiency and clean-energy installations. As far as we’re concerned, the program in New York City is now up and running. We’re open for business.”
PACE (Property Assessed Clean Energy) loans allow building owners to secure long-term, fixed-rate loans to pay for building improvements that reduce greenhouse gas emissions — without spending any money up front. Unlike conventional bank loans, PACE loans are repaid through an assessment on the property tax bill that’s spread over the life of the improvement, up to 20 years. (An array of solar panels, for example, has a life expectancy of about 20 to 25 years.) The loans are expected to be a valuable tool for co-op boards trying to comply with building carbon-emission caps set by Local Law 97, which go into effect in 2024.
“There are two or three major loan documents plus a bunch of smaller ones — that’s what the city has updated and clarified,” says Andrew Chintz, financing specialist with NYC Accelerator, which gives building owners free guidance on financing energy-efficiency projects.
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The Core Program Documents spell out the following: PACE loan requirements (including borrower and site eligibility, when an energy audit or feasibility study is required, as well as consent from a property’s mortgage holder); the application process; lender and technical certifications; fees; what happens after a loan is secured; and qualified lenders.
Sherman notes that the city’s slow delivery of the final Core Program Documents will raise the cost of the loans. “The city punished building owners by holding out for a year,” she says. “It’s going to be more expensive to implement these projects because of inflation and rising interest rates. Now, at least, people can start doing the things they need to do to qualify for PACE loans.”
Chintz of the NYC Accelerator agrees that the loans will be more expensive, but he prefers to focus on the endgame. “Yes, interest rates are going up,” he says, “and the cost of the loans is going to depend on how lenders finance their loans and get their capital. But what’s important is that the clean-energy retrofits get done. Now people can go ahead and apply.”
To get free guidance on energy-efficiency financing from NYC Accelerator, click here.
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