By Mackey Dykes, Vice President, Commercial and Industrial Programs, Connecticut Green Bank
What do a former Phillips Milk of Magnesia factory, an unused warehouse and an outdated engineering plant in Southern Connecticut have in common? All three properties were given a new lease on life thanks to a savvy developer, a solar company and a unique clean energy financing tool.
The repurposing of properties, otherwise known as “adaptive reuse,” is on the rise as buildings become obsolete. A 2018 report from the Certified Commercial Investment Member (CCIM) Institute estimated that the number of adaptive reuse projects in the U.S. will double over the next five years — thanks in part to the growing inventory of properties left behind by outmoded business. These properties are often unique spaces full of character, situated in desirable locations where redevelopment can be cheaper than a new build. It is no surprise that many are now being transformed into mixed-use spaces, apartments, retail establishments, manufacturing facilities and other integral pieces of vibrant communities.
Repurposed buildings do present challenges though, such as higher energy usage and older infrastructure. Failure to address these challenges can result in burgeoning energy costs, and with tenants increasingly sensitive to these costs while also demanding greener, more sustainable buildings, it can also mean a less competitive property.
The declining cost of solar photovoltaic systems for commercial and industrial buildings makes the technology one of the most cost-effective ways for repurposed buildings to take control of their energy usage and reduce costs. As a result, commercial developers and property owners are looking to incorporate solar systems into these properties.
C-PACE financing solutions
Updating the energy profile of older buildings can tie up capital and reduce a property’s short-term return on investment.
An innovative financing program for clean energy projects called Commercial Property Assessed Clean Energy (C-PACE) can help developers navigate these capital issues. Spinnaker Real Estate Partners, a Norwalk, Connecticut-based real estate developer, is already realizing the ROI and environmental benefits of financing solar projects with C-PACE. A privately owned real estate company, Spinnaker has been engaged in the acquisition, development, ownership, and management of commercial properties and multi-unit housing communities for almost 70 years. Spinnaker focuses on building places of value, not only for the business, but for its investors and commercial and residential tenants. The company is also dedicated to incorporating resilient and sustainable building practices into the older properties it redevelops.
By partnering with 64 Solar, specialists in designing energy-saving solar systems for commercial real estate, and securing C-PACE financing through the Connecticut Green Bank, Spinnaker was able to add rooftop solar PV to three repurposed buildings: an old factory turned into a makerspace; a former warehouse turned industrial facility; and a former engineering plant turned state-of-the-art sports facility.
Spinnaker’s first C-PACE solar project was at Glenbrook Industrial Park, an old Phillips Milk of Magnesia factory that’s now a makerspace for artisans from cabinet makers to photographers. 64 Solar installed a 135-kW solar PV rooftop system that produces significant energy cost savings for tenants and owners — estimated at more than $1 million over the lifetime of the building.
Across Spinnaker’s portfolio of three solar PV projects financed with C-PACE, the company will realize more than $4 million in total estimated energy savings over the financing term. Not only have the projects lowered the overall energy costs of the buildings, they have enabled Spinnaker to go above and beyond standards for commercial property owners.
C-PACE overcomes barriers
C-PACE allows property owners to overcome the prohibitive costs of investing in older properties and make necessary improvements to modernize older buildings, making them more affordable to operate. Repayments are made through a tax assessment placed on the property (similar to a sewer assessment). While building owners may also be able to access financing through traditional loans, C-PACE financing is secured through the property, which allows longer, low rates with terms up to 25 years.
These favorable rates and longer financing terms, combined with energy savings, result in projects that require no out-of-pocket costs and immediately deliver positive cash flow. C-PACE becomes an even more valuable tool when repositioning or repurposing existing buildings because savings opportunities are often abundant — especially when solar PV is combined with other energy saving measures. Related renovations, like a new roof, can also be financed over the life of a C-PACE loan, eliminating the upfront investment on an older building that needs additional work before solar can be installed.
C-PACE saves energy and money both for property owners and tenants — in addition to doing what’s right for the environment. These solar projects have also raised the profile of the properties in the cities where they are located, making them more attractive to tenants who prioritize sustainability and can also benefit from the lower operating costs. Today, Spinnaker considers the use of C-PACE financing for many of its new projects in development.
As more and more property owners discover the value of repurposing existing properties and updating their energy profiles to make them “green,” C-PACE financing can help developers immediately capitalize on the ROI and environmental benefits of these projects.