1. Smart Rehab for MF Properties at No Cost
Ravi Malhotra / Matt Naughton / /

2. ICAST Services Planning Design Construction Management Reporting
Assessment of portfolio or property
Planning
Architect & engineer coordination
Design
General Contractor
Optimizing Building Performance
Property Rehab
Construction Management
Measurement & verification, and certification requirements
Reporting
Grants, rebates, government incentives, off-balance sheet financing, conventional debt, etc.
Financing
ResourceSmart
November 11, 2018

3. Multifamily Properties
ICAST
November 11, 2018

4. Unlocking Potential Savings
“$46 billion invested in MF residential buildings ………… will provide NPV of $80 billion in energy savings.”
– McKinsey and Company
So let’s dig in – First of all - there is Money to be made by investing in efficiency. According to McKinsey, there’s a lot of money waiting to be saved. Keep this in mind for later in the presentation…
What kind of projects are we talking about - How can we do this – start with Low Hanging Fruit, equipment replacement at end of useful life, upgrades for code compliance, utility driven incentives, LIHTC requirements…
And finally – through innovative energy financing programs – either at the time of purchase, refinancing, or possibly even mid-stream (STAND ALONE) in a development’s lifecycle

5. Affordability of Rental Housing
A = R + U + H + T Affordability = Rent + Utilities + Health + Transportation
ICAST
November 11, 2018

6. Why Go Green? Reduce operating costs Increase value of property
Energy, Water, O&M cost savings
Increase value of property
Increase comfort, health and safety
Increase NOI
Lower turn-over rates
Higher occupancy rates
Higher rents
Create local jobs
Environmental benefits from reduced waste
Reduced GHG, Hg, SOx, NOx,…
Why Go Green?
Whole is Greater than Sum of Parts
ICAST
November 11, 2018

7. Use it or Lose it Pay utility company OR Pay for green renovation
Current Annual Utility Cost
$100,000
Typical Waste/Inefficiencies
25%
Annual Waste / Cost of doing nothing
$25,000
Inflation Rate for Energy 5%
Life of Green upgrades (in years) 10
Money you will pay to your Utility Company
$314,447
NPV: $ available for Green upgrades Now
$265,000
ICAST
November 11, 2018

8. Cost of Doing Nothing $100,000 $25,000 $9,000 $6,000 $40,000 5%
Current annual utility cost
$100,000
25% utility savings due to Smart Rehab
$25,000
Reductions in O&M costs from green rehab
$9,000
Increase in profits due to higher occupancy & lower turnover due to smart rehab
$6,000
Total Savings/Year i.e. Increase in NOI
$40,000
Cost of Capital 5%
Increase in value of property
$800,000
Lifetime of Smart Rehab (in years) 15
Total Savings from Smart Rehab
$600,000

9. Trends in MF Green Financing Strategies
Unlock the Savings

10. Basics of Energy Financing
Financing allows someone else to pay for Capital expenses
Boilers
Lighting
insulation
Solar, etc.
Requires repayment from future sources over agreed upon terms
Future savings
Requires evaluation of Risks, Liability and Security
Complex risk management
Energy Financing is basically the same thing, you’re looking to pay for work that will save energy and those energy savings will be the source of repayment.
Unfortunately - underwriting energy projects is very complex and not standardized.

11. Complexities of Energy Financing
How to accurately forecast savings?
Is there data for similar projects proving it will work?
What % of savings will be underwritten?
What % savings benefits building owner?
Is there a need for Guaranteed savings?
Unique O&M responsibilities to ensure savings persist over time?
Qualifications & Responsibilities of owners, financer, and contractor?
What if utility rates change over time?

12. Funding Sources Off-Balance Sheet Incentives Owner Reserves
11/11/2018
Funding Sources
Owner Reserves
Debt: Banks, CDFIs, Credit Unions, State HFA, Private Investors
Banks/Credit Unions –
Require 1st position
Prefer large multi $mm project size
Agencies (HUD/FHA/State HFAs) and CDFIs –
Green rehab loans;
Consider all sizes of projects;
Typically below-market rate
Incentives
MACRS
Tax Credits/Deductions – ITC, PTC, 179-D, LIHTC
Grants
Utility Rebates
Off-Balance Sheet
Energy Performance Contracts (EPC)
Power Purchase Agreement (PPA) for Renewables
Property Assessed Clean Energy (PACE)
On-Bill Financing (Utilities)

13. Incentive Programs FHA – MIP Reduction + 85% LTV
Freddie /Fannie Green Loan Program
Solar – 30% ITC + MACRS
Grants e.g .WAP , LiHEAP, HOME, CDBG, HTF
Utility rebates
179-D federal tax credit,45-L tax deduction
LIHTC

14. Pay-out-of-savings Model

15. EPC / PFS / PACE Energy Performance Contracts (EPC)
ALL – PHAs / USDA-RD / Market Rate Properties
Pay-For-Success (PFS)
HUD PRAC and Property Based Section 8
Property Assessed Clean Energy (PACE)
Only for Solar projects in NM

16. Summary Smart Rehab is:
Financially viable, irrespective of size or location
Incentives, Rebates and Grants available as Leverage
Having cash reserves is not necessary
Eliminates waste to garner savings
Non Green Rehab can be funded from Savings
Comprehensive, hassle-free, and cost-effective service providers available
ICAST
November 11, 2018

17. Questions? Ravi Malhotra / Matt Naughton/ /