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20 States Now Have Similar Legislation
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Hawaii and Florida are believed to have pre-existing authority
but have introduced HB2643 (HI) and HB 7179 (FL) just in case.
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LA Program Summary
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Why Existing Buildings?
20%
15%
10%
5%
0%
1990-1995 1980-1989 1970-1979 1960-1969 1946-1959 1920-1945 Earlier
Year Built
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Why Existing Buildings?
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Why Commercial Buildings?
! Huge Potential Market Impact
! 179,465 commercial buildings in Los Angeles
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Financial Returns
1 2 3 4 5 6 7 8 9 10 15 20
*Source: CCI Analysis, Confidential Client IGA, 600k SF, Office Campus - Tampa FL Simple Payback
(yr)
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Commercial Retrofit Challenge
! Challenges
! Limited access to capital
! Buildings owned by unrated, limited liability “shell entities”
! Collateral fully pledged under a mortgage and potentially
mezzanine investment
! Retrofit lenders have no security or dedicated repayment
source for their investment
! “Split Incentives” between owners and tenants
! Energy efficiency is still “new”
! Elevated hurdle rates…
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How Municipal Financing Can Help
! Enhanced marketability
! Enhanced NOI
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Risk Management
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“Do Nothing” vs. Retrofit Scenario
Do nothing Retrofit
Absolute cash flow Debt service Cumulative cash flow
Utility cost + O&M Annual cash flow
*Source: CCI Analysis, USAA Real Estate IGA, 400k SF Office Building – Sacramento, CA
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Potential Benefits for the City
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Los Angeles Program Design
! “Private Placement” Model
! City acts as a conduit for private investment
! Individual property owners negotiate financing terms with
investors of their own choice
! Owner-negotiated terms are reflected in a loan agreement,
funded through issuance of a bond by LA County
! Bond is sold to the investor that underwrote the deal in a
“Private Placement”
! Existing mortgagee may elect to underwrite and purchase
the bond itself
! Repayment is secured through a contractual assessment in
first position on the building’s property tax bill (subject to
mortgagee consent)
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Program Application Process
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Program Mechanics
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Leveraging Funds
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Key Stakeholders/Partners
! Existing mortgage lien holders
! Retrofit lenders
! Building owners
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Next Steps
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How to Get Involved
! PACE Now.org
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Contact Us
Jina Yoon
Email: jyoon@cra.lacity.org
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