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Maximizing ROI while Minimizing Carbon: CPACE Financing Elevates Commercial Property Performance
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Aug 21, 2023, 2:33 AM ET
Balancing Profit and Sustainability: How CPACE Financing Enhances Commercial Property Performance
Compared to conventional finance, CPACE financing has many benefits, including:
1: Low-cost, Long-Term Financing - Most C-PACE financing programs nationwide accept little or no down payment. Financing options are available for hard and soft charges, significantly reducing out-of-pocket expenses. Typically, it is offered for lengths of up to 20 years. It even goes up to 25 years in some states! The equipment being installed and its anticipated useful lives determine the financing period, which is negotiated between you and the private capital lender.
2: Tax-Exempt Financing - The benefits of CPACE financing are tax-exempt, which lowers borrowing rates. Property owners can use this technique to finance environmentally friendly improvements, improving energy efficiency while lowering costs thanks to favorable tax treatment. This tax-exempt designation supports eco-friendly initiatives in commercial real estate and provides an attractive ROI.
3: No Up-Front Cost - By forgoing up-front fees like down payments and closing charges, CPACE financing accelerates energy efficiency projects. This easily available financing solution enables property owners to engage in sustainable improvements quickly, hastening the shift to greener, more effective commercial properties.
4: Transferable Financing - A clean energy loan known as C-PACE is secured by the property rather than the owner. This implies that the debt will remain in place even if the property is sold. As a result, the loan must be repaid by the next owner, who also gains from the energy savings the upgrades produce.
In addition to financial gains, CPACE financing helps property owners reduce their carbon footprint and improve building performance. Energy-saving improvements reduce energy expenses, while on-site renewable energy installations produce clean power. These improvements also improve the comfort and well-being of the residents.
The impact of CPACE is shown by recent research by the National Renewable Energy Laboratory, which estimates that it can save 30% more energy and reduce carbon emissions by 25%. Such results highlight CPACE's comprehensive sustainability contribution, which encompasses financial gains, environmental responsibility, and occupant welfare.
The study showed that CPACE Commercial Solar Financing was cost-effective, with projects having an average payback period of 7 years. This quick return on investment demonstrates how effective it is in improving the performance of commercial properties.
What Benefits Government provides for Energy-Efficient Businesses (Real-Life example)
The US government provides tax breaks to companies that use less energy, including the 179D tax deduction. Commercial property owners and qualified designers of newly built or renovated buildings are eligible for the 179D deduction, which enables them to deduct up to $1.88 of taxable income per square foot of property if they reduce energy usage to specific target levels. Get a free evaluation from the specialty tax professionals at the National Tax Group to see if the 179D tax deduction is appropriate for your commercial real estate business.
Also, commercial real estate firms should be ready for the possibility of steep fines for excessive energy consumption as some local governments look towards laws to meet their carbon-reduction targets. For instance, Local Law 97 of New York City mandates the majority
Below are a few instances of how CPACE financing is being applied to raise the performance of commercial real estate:
A Texas school district upgraded its HVAC system using CPACE HVAC financing, which is anticipated to save the district $500,000 in energy costs over the following ten years.
LED lighting was installed in a California retail center with the help of CPACE financing, which is predicted to save the mall $1 million in energy expenditures over the following ten years.
Solar panels were installed at a Florida hotel with the help of CPACE funding, and it is anticipated that they will produce enough electricity to compensate for the hotel's energy usage.
These are only a handful of instances of how CPACE financing is being applied to boost the efficiency of commercial properties. CPACE financing is a financing choice that commercial property owners and developers ought to think about.
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