Kristina Klimovich of PACENow talks to Mark Pikus, Senior Vice President at Inland Green Capital LLC, and Doug Coward, Executive Director of the Solar and Energy Loan Fund (SELF).
Kristina Klimovich: Thank you both for taking part in this PACE Talk. Congratulations on your recent successful launch of a PACE program in St. Lucie County! First off, I’d like to learn what brought you to the field of sustainability and, specifically, to PACE industry. Doug, you have an extensive experience as clean energy expert, small business owner, and elected official in Florida. What brought you to the PACE universe?
Doug Coward: My passion for clean energy and the lack of state programs in Florida motivated me to create new local clean energy financing options for local property owners. SELF has been lending exclusively in the residential sector for nearly 4 years, closing more than 300 home energy retrofit loans totaling $2.55 million. In order to capture the non-residential market, SELF has worked closely with St. Lucie County to customize a local Property-Assessed Clean Energy (PACE) program. SELF is the only Community Development Financial Institution (CDFI) in America (that we know of) that is also administering a PACE program. SELF is now able to offer more comprehensive clean energy financing options in our service territory through our CDFI and the new PACE program.
KK: Mark, at Inland Green Capital, you have been a voice for promoting sustainability in commercial real estate. Can you tell me a little bit more about your commitment to sustainability and how you learned about PACE financing?
Mark Pikus: We were introduced to PACE in 2012 and immediately saw the value from all sides: adding value to the property for the owner, creating jobs for the local market, lowering investor risk, and helping the environment. We are a provider of capital for PACE projects but we continue to be more involved in PACE at the grass roots level. Whether it is helping administrators starting or expanding PACE programs or purchasing private placement transactions, Inland Green Capital is committed to supporting energy efficient investment throughout the industry.
KK: Let’s turn to St. Lucie’s program structure. Can you provide a brief overview of the program you built for the County?
DC: St. Lucie’s program was customized based on best practices in Sonoma County, CA, and elsewhere. The program finances (1) energy efficiency, (2) renewable energy, (3) wind-hazard mitigation, and (4) water conservation projects. PACE assessments are available on 5, 10, 15, and 20 year terms, and the maximum amount available per project is determined by the net equity in the subject property.
KK: More specifically, do you have a loan to value test and saving to investment ratio or similar test build in as a program requirement?
DC: St. Lucie’s PACE program is built around the net-equity in the subject property, which is the collateral for the PACE assessment. Energy-related improvements need to provide reasonable payback to warrant investment and structural improvements simply need to strengthen and harden the structure against hurricanes.
KK: I heard that you have already closed a couple projects and generated a number of leads. What types of properties are you targeting? And how are you driving your outreach?
DC: Yes, we are pleased to have closed 2 PACE projects in the first 2 weeks of operation. We have another dozen projects pending or under consideration, and we are anxious to fully cultivate the PACE markets in St. Lucie County. We have just begun. So far, we have a small commercial office building that is going “net zero” (i.e., produce all of its own power from the solar panels on its roof), an active cattle ranch that is integrating solar water heaters, LED lights, and solar attic fans into their on-site ranch houses, and a church installing new high-efficiency air conditioners.
KK: Mark, can you describe what kind of arrangement you have with SELF?
MP: We have a commitment to invest in the PACE bonds generated by SELF towards PACE projects in St. Lucie County with the ability to increase as needed. We feel that there is tremendous opportunity in the County of St. Lucie and hope that our commitment is ultimately very substantial.
KK: Mark, Inland has been active in other PACE markets before working with SELF in Florida. What motivated your choice to work with SELF?
MP: Typically, We have been a more behind the scenes capital provider for other PACE programs but we always wanted to establish a long term relationship with a group that had the same enthusiasm we had in regard to PACE. After our first conference call with SELF, I remember getting off the phone and saying to myself we have to make this happen with SELF. We were instantly on the same page on how to go forward with a PACE program in St. Lucie County.
KK: Mark,which other PACE programs selected Inland as a capital provider and which markets are you looking to expand to? Are you planning to get involved with residential PACE as well as commercial?
MP: We have provided capital for several different programs in California and are currently on the verge of being an approved capital provider for several other PACE programs in other states. We have purchased both residential and commercial PACE bonds so we are always looking for opportunities in both segments.
KK: Thank you for taking the time to talk to me and we are looking forward to sharing your successes.