A set of synergies make PACE a good fit for the nonprofit sector. Nonprofits often have limited access to capital, aversion to debt, and unconventional cash flows.
PACE can help engineer financially profitable retrofits for these properties.
Urban Ingenuity is working on developing the PACE pipeline in the DC area and assisting with technical support elsewhere according to their CEO, Bracken Hendricks. He described two case studies from his company’s experience.
There is a strong interest in using PACE in the context of nonprofit properties. These projects tend to be very high-returning projects. Property owners are frequently paying inflated energy bills due to having old appliances.
Phyllis Wheatley YWCA Project
This particular project involved redoing the HVAC, heat-recovery lighting, and water conservation at the Phyllis Wheatley YWCA, a house for homeless women.
The project froze of $73,000 in utility savings annually. It reduced the rent for the women living in the facility.
They structured a PACE payment that went close to that utility savings number and allowed a modest free cash flow. Phyllis Wheatley YWCA reaped $7,000 per year in savings and had a $66,00 annual PACE payment.
The project ran into some logistical challenges that led developers to create a “simple, clean inter-creditor agreement,” Hendricks said. This agreement met with approval from the United States Department of Housing and Urban Development.
Second Case Study
Hendricks said a large church improved its credit by accessing PACE, which simplified its underwriting and eliminated the need for personal guarantees.
Due to the church having somewhat unusual cash flows, Hendricks and his team ended up working with a local, somewhat regional tax-equity investor. They initially declined to offer a power-purchase agreement. Capital was made available through the PACE financing.
According to Hendricks, “the results were better than a blue-chip investment. This was very helpful at the corporate level for their overall credit profile.”