Emily Myers in Green Ideas
For an eight-unit HDFC co-op in Williamsburg, the answer to an aging and expensive oil-fired boiler, inconsistent hot water and comfort complaints from shareholders is to go fully electric by leasing new domestic water heaters and heat pumps. An equipment lease is allowing the building, at 151 Grand St., to complete expensive energy and emission upgrades without having the upfront capital to pay for it.
The co-op has already installed rooftop solar panels. Board member Julia Kravets says the plan is for the solar panels to offset the building’s increased electricity use. In addition, the building’s electric load has been upgraded, which is often an important step towards full-electrification. However, quotes for the purchase and installation of electric heat pumps and water heaters to replace the ancient boiler and steam radiators were beyond the building’s budget.
“One of the challenges, even if your project is heavily incentivized, is that those tax credits or rebates might not come at the point of sale,” says Alex Apter, co-head of marketing and communications at BlocPower, the climate technology firm that facilitated the co-op’s $176,000 project with a lease agreement. “You need the upfront capital, and we finance all that,” he says. The key difference between an equipment lease and a traditional loan is that the financing puts a lien on the equipment, not on the building.
The lease agreement at the co-op includes the design, permitting, installation and financing of the upgrades, which are offset by $60,000 in incentives from Con Ed’s Clean Heat program, as well as perks offered by NYSERDA’s Multifamily Building Programs. BlocPower takes the incentive and charges shareholders $850 a month for the duration of the 15-year lease. At the end of the lease term, the building has the option to buy the equipment for $1.
“It’s really fixture financing,” says Ross Reida, founder of LED.finance, which independently brokers equipment leases and third-party financing options. “These are upgrades that are fixed to a building, so the lender’s security interest is the equipment in a building.” The pricing varies based on the project scope and the risk presented by the building.
Uninstalling the equipment in the event of a default is extremely unlikely. If a building isn’t meeting its financial obligations, the resolution is more likely to come in the form of a lawsuit, with the lender seeking a money judgment or settlement. “It happens rarely, but it does happen,” Reida says.
The board was introduced to equipment leasing via UHAB, a nonprofit that gives support and advice to HDFC co-ops. When considering an equipment lease to pay for upgrades, Reida says a reasonable first step for a board is to reach out to the building’s existing bank and ask about a loan. “Eight out of ten times, a co-op or condo board is going to be rejected, but then the board knows where they stand,” he says.
It’s likely the board will then seek bids from contractors for the proposed work. Reida recommends asking the contractor about financing options as part of the bidding process. “Sometimes the manufacturers that those contractors represent will have financing options,” Reida says.
The 151 Grand St. building is less than 25,000 square feet and therefore does not need to meet the city’s Local Law 97 emission requirements, but the expectation for residents is that the combined solar and electrification upgrades will solve their heating and hot water issues and also save the building money.
The equipment lease also comes with maintenance twice a year to ensure the system stays in good condition. “We are happy it comes with maintenance so every year we know our HVAC system is going to be maintained,” Kravets says.
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