NYC Property Assessed Clean Energy (PACE) Financing can be an option for condos. It offers long-term, fixed-rate financing, covering up to 100% of project costs with no cash up-front from the owner. PACE Financing is unique in that it provides long-term financing and is repaid on the tax bill, making it easily transferable upon sale of the building. Plus, projects can be retroactively financed for up to three years after improvements are completed.
Based on the ownership structure of condominiums, the condo building cannot get a mortgage loan. Instead, condo homeowner associations (HOA) can get loans secured by the condo association fees. These loans or lines of credit can have similar terms as mortgage loans and can be accessed to pay for building energy retrofit projects.
Equipment loans are offered by lenders, vendors, and contractors to purchase equipment. For emergency repairs or when mortgage refinancing is not an option, equipment loans offer a simple and quick process. Equipment loans typically have short terms with limited upfront fees. These lenders can also offer equipment leases allowing building owners to use energy-related equipment without purchasing it. Upfront expenses or maintenance fees are not required, and an option to purchase the equipment at the end of the lease term is offered.
Predevelopment loans provide short-term financing for energy studies, architectural and engineering services, and other soft costs incurred while planning and developing a green project. These loans enable projects to start and reduce out-of-pocket expenses prior to long-term financing approval but pose a potential risk to borrowers if a project doesn’t proceed.
Non-debt solutions offer a consolidated, simplified "turnkey" option that requires no upfront cost to the owner. The service contract which is often paid using energy savings and sometimes includes guarantees on savings from the provider. Energy Service Agreements or "as-a-service" agreements are forms of non-debt financing solutions where providers finance, install, construct, maintain and manage energy retrofits and get paid over a long-term service contract. The service provider funds the project costs so the owner does not need financing. This is best suited for owners with projects larger than $1,000,000 or multiple buildings but are available for smaller projects.
Power purchase agreements (PPAs) are another non-debt solution used for on-site power generation project such as rooftop solar and useful for building owners who can’t take advantage of tax benefits. Instead of a service contract, building owners must purchase the solar energy produced usually at an attractive rate.
Offered by a variety of specialty finance companies including green banks, nonprofits, mission-driven lenders, and CDFIs, these loan products are typically limited to energy efficiency or clean energy projects and are usually subordinate to existing mortgage debt. Lenders may consider the savings of eligible energy-related building upgrades in their underwriting process. Borrowers can be multifamily rental or coops/condos (market rate or affordable housing), commercial and industrial buildings, or special use (nonprofit owners).
