PACE Financing Property Assessed Clean Energy

wind turbines and more… What Is PACE? PACE is an assessment based financing mechanism for clean energy projects. Clean energy includes efficient heating and cooling systems, insulation, solar panels, wind turbines and more…

Why PACE? Economic Development tool Lowers cost of doing business in your community Directly impacts bottom line of local enterprises Workforce development impact on creating jobs Old building stock is maintained and upgraded Cleaner and healthier air quality in your community Positive impact on environment Presenter Tip: The purpose of this slide is to establish that PACE is an economic development program right out of the gate, rather than just an environmental initiative. Everyone can agree that lowering the cost of business and creating jobs is good. The environment has the potential to be a divisive issue. Talk about the environmental angle last, don’t lead with it.

Old Concept – New Application PACE is a public benefit the local government facilitates through a tax assessment. It works the same way as other financed public benefits. Water & Sewer Service Parks Sidewalks Lighting Downtown renewal And now, PACE Presenter Tip: This slide can ease trepidation that PACE is a brand new program. It puts the establishment at ease, since PACE uses same practice that has been used since the 1700s.

How PACE Works Energy project construction proceeds exactly as it typically would. Rather than using a conventional bank for project finance, property owner uses a PACE provider. PACE provider directs municipality to add a line item to property’s regular tax bill, in annual repayment amounts for duration of the financing. PACE repayment is collected with property tax payments, no additional paperwork or bank payments for the property owner. Municipality remits payment to PACE provider. Presenter Tip: Sometimes it helps to remind the audience that PACE only effects the property owners who choose to use it. It’s 100% voluntary and does not impact the overall tax base in any way.

Most Buildings, Even Non-Profits Who can use PACE? Most Buildings, Even Non-Profits Presenter Tip: Even if non-profits don’t typically receive a property tax bill, the PACE assessment can be added to their water charges or PILOT,. The municipality can also create a new piece of documentation that is issued to the non-profit at the time that taxes normally go out.

32 States + DC, 80+% of US Population PACE Legislative Map 32 States + DC, 80+% of US Population 2009 2014 2010 2009 2010 2009 2009 2010 2011 2013 2009 2009 2012 2009 2008 2013 2013 2015 2009 2010 2015 2010 2015 2009 2009 2013 2015 2010 2013 2009 HI Existing Authority 2010 PACE enabled 2016 legislative initiatives 7

730+ Projects – $230+ mil – 2,700+ jobs created C-PACE Programs Today 730+ Projects – $230+ mil – 2,700+ jobs created RI DC PACE enabled Early stage PACE program development Launched PACE programs PACE programs with funded projects 8

Benefits of PACE No Out of Pocket Cost PACE covers 100% of hard and soft costs No money down Property owners can reallocate funds previously reserved for energy projects Presenter Tip: Most typical lending institutions only provide about 85% of project costs, so the property owner needs to come up with the remaining 15%. Especially important for properties with limited expenditure budgets (non-profits, new businesses, etc.)

Benefits of PACE Long-Term Financing PACE allows terms up to 20 years, while standard commercial lending rarely exceeds 5-7 years. 20 year terms allows projects with long payback periods, rather than only low-hanging fruit with quick paybacks. Allows comprehensive projects with deeper impact on energy usage and significant effect on bottom line.

Benefits of PACE Cash Flow Positive Long terms allow the financing to be amortized up to 20 years. This makes it possible for the annual PACE repayment to be LESS THAN the amount being saved on annual utilities from the project. Example: During the repayment term, the utility bills decrease by $20K annually, PACE repayment is $15K annually, so the NOI increases by $5K. When the financing is paid off, the business is saving $20K+. Presenter Tip: With PACE you don’t have to wait to pay off the financing to see an economic benefit. Even during the repayment process the business is seeing cash flow in.

Benefits of PACE Transferability PACE is attached to a building, not an individual or business. If the building is sold, PACE repayment seamlessly transfers to the new owner as part of the taxes, as well as the savings from the energy project. Removes part of the risk in investing in capital expenditures.

Benefits of PACE Leasing Structures PACE tax assessments can be passed on to tenants under most lease forms. Tenants save on energy costs and experience the same net payments, or sometimes less!

Mortgage Lender Consent 150+ Lenders Support PACE Nationwide PACE becomes part of taxes which is senior to other debts. Most legislation requires existing lenders provide consent or acknowledgement that their lien will become secondary. They usually say YES, here’s why: PACE project makes the lender’s collateral more valuable Positive cash flow enhances the property owner’s ability to make their mortgage payments Only the portion of a PACE assessment in arrears is senior Underwriting standards make sure projects are appropriate

Getting Started with PACE Legislation State passes legislation defining features of their PACE program. Form a coalition of involved stakeholders to draft legislation. PACENation can provide guidance with a “Legislative Checklist” and work with your lawyers upon request. Municipalities within the state pass local ordinances to enable the PACE program. Examples available on www.PACENation.us

Getting Started with PACE Program Models Successful PACE Programs have: Administration entity to process deals Public/Private Sector Funding Relationship with Energy Service Professionals Municipal understanding and cooperation

PACE Commercial Market Stats Cumulative Financing Displaying data for projects with known closing dates (totaling approx. $217 million)

$3.4M PACE Energy Efficiency Project Simon Property Group – Great Lakes Mall, OH $3.4M PACE Energy Efficiency Project “We hope to serve as pioneers in this arena, encouraging others to explore the many ways to reduce energy use now, rather than delaying sound financial and environmental decisions.” George Caraghiaur, former SVP for Sustainability at Simon Property Group 18

$1.4M PACE Energy & Solar Upgrade Prologis, Inc. Headquarters – San Francisco, CA $1.4M PACE Energy & Solar Upgrade “Prologis is participating in the PACE program in order to promote new, innovative solutions for financing sustainable building improvements. It provides the flexibility to drive more energy improvement programs and that’s something everyone should embrace.” Jack Rizzo, Managing Director, Global Construction and Renewable Energy, Prologis 19

Supporting the PACE Marketplace PACENation Supporting the PACE Marketplace PACENation is a non-profit with a mission to promote PACE financing by providing leadership, support, resources, advice, networking and problem solving for a growing universe of PACE market participants. We’re here to help! Please reach out to us at www.PACENation.us or info@pacenow.org