Commercial PACE Financing Brings
New Equity to Projects
By Meghan Marty and Daniel Schleck
Commercial PACE (Property Assessed Clean Energy) is a MinnPACE, a division of the Saint Paul Port Authority, is the
cost competitive way to finance energy efficiency, renewable
State of Minnesota's largest provider of PACE financing for
energy, water conservation, mechanical system replacement and
commercial building owners for energy system upgrades and
other upgrades to new and existing buildings. PACE can pay for
renewable energy projects. Additionally, MinnPACE is entering
new heating and cooling systems, lighting improvements, solar
into strategic partnerships with local lenders to further increase
panels, wind energy systems, structural repairs, insulation, and
the use of the program throughout the State. MinnPACE has
more for almost any property ­ commercial, industrial, non-profit,
many Joint Powers Agreements ("JPA") in place with counties
and agricultural.
and local municipalities allowing PACE loans to be made in
virtually any community within Minnesota.
Furthermore,
In addition to providing a readily available source of financing
MinnPACE has been successful in entering into new agreements
for these specific aspects of redevelopment and new development,
with governmental agencies on almost a weekly basis to further
property owners use PACE to also lower utility bills and contribute
promote the program.
equity following completion. PACE pays for 100 percent of a
project's hard costs and much of the engineering, permitting,
What Type of Projects have been Financed with PACE?
project management and other soft costs. Additionally, terms
The range and scope of projects utilizing PACE financing is
on PACE loans regularly extend to 20 years with debt payment
extensive and includes: energy efficiency upgrades, HVAC,
added to the property's tax bill as a special assessment similar
lighting, motors, compressed air, new manufacturing equipment,
to new roads and infrastructure. Commercial PACE financing
outdoor lighting, and insulation and structural support
automatically stays with the property upon sale and is part of the
improvements for all of the forgoing projects. The types of
taxes that can be assessed to tenants in traditional triple net lease
buildings utilizing PACE financing is also widespread and includes:
situations. However, financing is off-set by savings in Common
industrial/manufacturing, multi-family housing (5+ units),
Area Maintenance ("CAM") and may result in no net increase
agriculture, nonprofits, charter schools and places of worship. In
per square foot of rent paid.
addition, PACE financing is used for energy investments such as
solar, wind and geothermal.
How is PACE Provided to Property Owners?
PACE is a nation-wide initiative, but programs are established
Prime Example of the Use of PACE
locally and tailored to meet regional market needs. State legislation
Earlier this year, Go Wild, LLC secured $6.74 million in PACE
is passed that authorizes municipalities to establish PACE
financing as part of its capital stack for the Treasure Island Center
programs, and local governments are involved in collection of the
redevelopment project in Saint Paul, Minnesota. Treasure Island
assessments and ultimately pay the debt service on PACE loans.
Center is a major, mixed-use redevelopment project scheduled
for completion this fall located at the site of the former Dayton's
PACE can be used to fund projects with no out-of-pocket costs.
department store in downtown St. Paul. PACE funds are being
Since PACE financing terms extend to 20 years, it's possible to
used for energy efficiency upgrades that are projected to cut
undertake deep, comprehensive retrofits that have meaningful
utility costs by 40 to 60 percent. The new building facility will
energy savings and a significant impact on the bottom line. In
be home to TRIA Rink, a fully enclosed rooftop ice arena that
many cases, annual energy savings for a PACE project exceeds the
will be used by the Minnesota Wild as a practice facility. Once
annual assessment payment allowing some property owners to be
opened, the building will also be home to a fitness center, a brew
cash flow positive immediately.
pub, a restaurant, an event center, a multilevel Walgreen's, Tim
Minnesota PACE Programs
Hortons, an orthopedic clinic and office space.
Minnesota passed PACE-enabling legislation in 2010, allowing
Limitations on the Use of PACE
multiple PACE programs to begin operating in the state. There are
While extremely flexible, there are several limitations on the use of
currently two active commercial PACE programs in Minnesota.
PACE. For example, the improvements financed using commercial
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MBA News | November/December 2017 | www.minnbankers.com

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