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FOR IMMEDIATE RELEASE
CONTACT: Ryan Ahearn, Dividend Solar
Direct: (858) 771-0896
Company plans to accelerate commercial and residential PACE in California and new markets
SAN FRANCISCO–(BUSINESS WIRE)–Dividend Solar (“Dividend”) announced today that it has grown its executive team, adding several leaders with deep experience from the consumer finance and solar industries. The new additions are expected to play pivotal roles in the growth of the company, which is expanding from its base as a residential solar financing company into home energy, PACE, and commercial solar financing.
Following an announcement earlier this summer, Dividend Solar and Figtree Financing have completed their merger, including a $200 million commitment from LL Funds. Dividend currently operates in 28 states across the U.S., and is now launching its PACE financing platform which allows homeowners to finance a range of home energy and efficiency improvements. Figtree Financing will continue to offer commercial PACE financing. As part of the merger, consumer finance veteran Raj Mundy joined as the Executive Chairman of the combined company.
Chet McGensy has joined Dividend as General Counsel and Chief Compliance Officer. McGensy previously held several senior positions including Director of Policy & Electricity Markets and Regulatory Counsel as well as Compliance Counsel at SolarCity. He earlier served as Vice President and Counsel at Rabobank N.A. and Associate at Bingham McCutchen, LLP.
Vinay Gupta has joined Dividend as the Chief Product Officer. Gupta joins Dividend from Credit Karma, where he was the Vice President of Decision Science. Prior to Credit Karma, he spent nearly 15 years at Capital One in leadership roles across multiple consumer lending businesses, overseeing marketing, product and credit functions. Gupta started his career as a management consultant with Accenture.
On the technology side, Christian Steiner has taken over the role of Chief Technology Officer. Prior to Dividend, Christian led the PayPal Data Technology Business Operations, Shared Services Organization. In this role, he was responsible for the program management, training, and financial planning teams, after leading the Bill Me Later Corporate Systems team during the acquisition by PayPal. Before Bill Me Later, Christian served as Chief Technology Officer of iSKY.
“We are very excited to bring on Chet and Vinay, and are thrilled to have Christian lead our technology team,” added Mundy, Dividend’s Executive Chairman. “Our core leadership team is now in place to help drive Dividend’s evolution from a solar lender to a national leader in home energy financing.”
The company is focused on geographic and product expansion with an increased focus on home energy in addition to solar. Dividend currently operates in 28 states through its network of quality-driven solar installation partners, and will now offer homeowners and home energy partners access to expanded loan options and PACE financing on one platform.
“We are building a world-class technology and financing platform that will help usher in the next era of home energy upgrades,” said Eric White, the CEO of Dividend. “As homeowners continue to better understand their energy usage, efficiency upgrades alongside solar are the next frontier in home energy investments.”
With the fundraise and merger finalized, the core leadership team in place, and the addition of different loan product options including PACE financing, Dividend is accelerating its growth and is positioned to lead the next chapter in solar and home energy financing nationally.
About Dividend Solar:
Dividend Solar offers $0-down financing which enables homeowners to maximize the benefits of going solar while also enjoying hassle-free performance guarantees and warranty management. Founded in 2013, the company has led the shift towards the direct ownership model in solar. In 2016 the company expanded into home energy financing options to include the next frontier of energy saving upgrades. Dividend Solar’s technology platform has streamlined the credit approval and installation process, thereby lowering the cost of installing solar panels and energy efficiency upgrades for its customers and partners. Learn more by visiting www.dividendsolar.com.
# # #
By Terri Steele
Principal, SolarSavvy Communications
State and local governments embrace PACE because of its ability to create jobs, promote economic development, meet sustainability standards and improve local building stock using no public monies. According to PACENation, 32 states and the District of Columbia have enabled PACE financing in the U.S. in their respective jurisdictions.
Now operating in over 155 California jurisdictions, Figtree Financing was the first in California to successfully aggregate projects among multiple markets and finance them in a single bond issue. Figtree finances projects ranging from $5,000 to those in the millions of dollars (all contingent upon qualified property values).
HVAC, solar PV, boilers, chillers, roofs, new windows and doors — even xeriscaping — are among the money-saving improvements financed. Clients run the gamut from owners of Class A office structures to hotels-motels, apartment complexes, REITs and agricultural interests.
Figtree was also the first commercial PACE provider to receive state-wide judicial validation — a California ruling that legally vetted Figtree’s financing model, providing cities and their legal counsel confidence in the operational integrity of its financing model while saving municipalities the unwelcome expense of devoting staff time to vet what was then a virtually unknown (and misunderstood) economic development tool.
Despite successful assurances and financing successes, commercial PACE providers simply haven’t realized the runaway growth that residential firms like HERO have trail-blazed. Across the U.S., PACENation estimates the value of commercial PACE projects at 12 percent the valuation of its residential PACE counterparts.
Seeking an uptick in interest and investment, Figtree has again broken new ground — this time by diversifying its product menu outside the PACE space. Last month, Figtree announced a definitive merger agreement with Dividend Solar, whose self-described sweet spot is providing $0-down loan financing for credit-worthy homeowners interested in the benefits of solar ownership (and the healthy 30 percent investment tax credit solar ownership provides). Dividend Solar is a consumer finance company specializing in unsecured solar financing; they lend money based on FICO scores.
The yin to this sustainable yang is that Figtree Financing specializes in commercial PACE, offering property owners a unique, $0-down, off-balance sheet financing solution that frees them to enjoy the economic benefits of energy efficiency, renewable energy and water frugal improvements without encumbering their credit capacity.
“This is a merger of complementary products and talents that gives us remarkable marketplace traction while providing a more complete solution set to businesses and consumers,” Figtree Financing CEO Mahesh Shah said.
Figtree operates in California and has developed a national PACE platform that it has been eager to roll into other PACE friendly states for over a year. Dividend Solar is a sustainability-focused consumer finance company that operates in 28 states. Dividend’s footprint will come in handy for Figtree as it works to expand its commercial and residential PACE offerings across the U.S. Dividend itself offers a ready-made contractor network eager for financing options for prospects who want to realize the value proposition of solar ownership regardless of their credit capacity.
And Figtree’s PACE expertise, distribution network and market acumen will afford the merged entity a valuable platform from which to launch its residential PACE (and non-PACE) offerings in California before expanding into the company’s broader 28-state footprint.
LL Funds Committment
The merger comes with yet another ‘dividend’: a commitment of up to $200 million from LL Funds.
“Figtree’s experience in non-solar energy efficiency products presents an adjacent expansion opportunity for Dividend,” Shivraj (Raj) Mundy, Operating Partner for LL Funds, said. “The merger establishes product diversity that is not only more attractive for customers, but lessens reliance on factors beyond the company’s control, such as government and regulatory policy.”
So how will this new company position itself? Shah said that that decision is not final, but the newly merged company is leaning toward retaining the Figtree brand for its commercial PACE offerings and maintaining the Dividend name for its unsecured and residential PACE offerings. And unlike most mergers, the company is hiring. Plans are underway to expand Figtree’s offices in San Diego — and Dividend’s San Francisco and Austin locations.
Whether in the Commercial or Residential Space, the PACE Momentum Inspired by HERO and FIGTREE Deliver Extraordinary Reach — and Ubiquitous Rewards.
On a macro level, an econometric study conducted by the ECONorthwest found that $4 million in PACE funding generates $10 million in gross revenue, $1 million in combined federal, state, and local tax revenue, and 60 clean, green jobs.
And if that weren’t enough, the IRS has just ruled that PACE interest falls within its mortgage deductibility guidelines, i.e., the interest portion of a PACE payment can be treated as a deduction to personal income taxes.
According to PACE Nation’s Mike Centore, “The guidance solidifies PACE’s position as one of the most economically competitive financing tools for home energy and water upgrades — interest rates comparable to and often better than home equity loan rates, repayment terms aligned with the useful life of eligible measures, and the possibility of interest payments being tax deductible.”
With a simple vote of approval by a local municipality, PACE’s unique financing architecture allows property owners to reap the energy savings, federal, state and local tax incentives of energy improvements on demand.
It’s a deal-closer for contractors, an economic win for property owners, a catalyst for clean energy job creation and a boon for investors — or municipalities looking to improve aging building stock as they work to meet regional, state and federal water conservation and clean energy mandates using (can we really say this enough?) no public monies.
And as the Figtree and Dividend partnership suggest, tilling new industry soil can bring a bountiful harvest of choice, savings and sustainable economies of scale.
SAN FRANCISCO, June 23, 2016 – Dividend Solar, Inc. (“Dividend Solar” or “Dividend”) and Figtree Financing (“Figtree”) announced a definitive merger agreement today, including a commitment of up to $200 million from LL Funds to fuel the growth of the combined entity. Dividend Solar is an innovative solar financing company whose loans include solar performance guarantees and warranty management for an easy path to solar ownership. Figtree is a leading provider of Property Assessed Clean Energy (PACE) financing for energy efficiency improvements, including solar energy. The merger represents the first ever combination of a residential solar lender and PACE financing provider.
“We are excited to announce our partnership with LL Funds and with Figtree, which will allow our company to expand its financing program to include PACE and to accelerate our nationwide growth,” says Eric White, Dividend Solar’s President. “We can now offer a suite of products to our customers, creating a ‘one-stop shop’ where commercial and residential property owners can secure the upfront financing they need for renewable energy and efficiency upgrades.”
Dividend Solar currently operates in 28 states through its network of quality-driven solar installation partners. The Company’s solar loan enables customers across the U.S. to enjoy hassle-free ownership, with a package including performance guarantees, system monitoring and warranty management. Dividend will now also offer PACE financing, which allows property owners to access long-term financing that is repaid through their property taxes and does not carry the personal or business credit requirements of traditional loans.
“PACE is a unique offering that enables energy projects at an affordable price for customers who might otherwise not have had access to longer term financing,” says Mahesh Shah, CEO of Figtree. “It is one of the fastest growing financing products in the space, and we are excited to be joining forces with Dividend Solar to launch a complete solution for all property owners.”
“The combination of Dividend and Figtree allows our combined company to bring industry-leading financing products to a much broader group of home and business owners for solar and energy efficiency,” says Steve Michella, CEO of Dividend Solar. “From day one, we have focused on providing homeowners with a better experience when going solar, and this partnership accelerates our reach to help more customers save money with renewable energy.”
LL Funds’ investment in Dividend Solar and Figtree – along with LL Funds’ commitment of additional capital to the combined company – is part of its commitment to the renewable energy space. LL Funds is a special situations investment manager that takes a deep quantitative approach and value-investment philosophy to target opportunities with asymmetric positive returns. The firm was founded in 2009 by Roberto Sella, former co-head of U.S. Fixed Income for Morgan Stanley’s Investment Management Division, and Fabio Terlevich, former Portfolio Manager of Morgan Stanley Alternative Investment Partners.
As part of the transaction, Shivraj (Raj) Mundy, Operating Partner with LL Funds, will join Dividend as its Executive Chairman. Mr. Mundy is a former McKinsey consultant and has over 17 years of consumer finance experience, including as President of Mass Affluent Cards at JPMorgan Chase and EVP, Head of Bankcards for HSBC USA. Dividend Solar and Figtree senior management will remain as senior operating executives.
“The two companies are a very complementary fit, and together can achieve traction in the marketplace faster than either could on its own. Dividend will now launch a residential PACE program shortly in California before expanding it into the Company’s broader footprint. Figtree’s experience in non-solar energy efficiency products presents an adjacent expansion opportunity for Dividend Solar. The merger also establishes product diversity that is not only more attractive for customers, but lessens reliance on factors beyond the Company’s control such as government and regulatory policy,” says Mundy. “LL Funds is the perfect partner – the principals are bringing their significant experience in specialty finance and capital markets to help us build a financing platform that can endure all market cycles.”
“The combination of Dividend Solar and Figtree, along with LL Funds’ credit experience and Raj’s career in regulated consumer finance, positions Dividend as the reliable, responsible lender to serve consumers, business owners and installation professionals alike,” says Roberto Sella, Managing Partner of LL Funds. “The addition of a PACE product to Dividend Solar’s technology platform allows homeowners and commercial property owners, who previously could not access low-cost financing, to lead the transition towards energy independence and save money without coming out of pocket upfront.”
Bryant Park Capital acted as financial advisor to Dividend Solar in this transaction.
About Dividend Solar
Dividend Solar offers $0-down loan financing which enables homeowners to maximize the benefits of going solar while also enjoying hassle-free performance guarantees and warranty management. Founded in 2013, the Company has led the shift towards the direct ownership model in solar with a focus on providing low-cost loan financing for creditworthy borrowers. Dividend Solar’s technology platform has streamlined the credit approval and installation process, thereby lowering the cost of installing solar panels and energy efficiency upgrades for its customers and installation partners. Learn more by visiting www.dividendsolar.com.
About Figtree Financing
Figtree Financing provides innovative financing to accelerate the adoption of environmentally friendly products and services. The Company’s unique Property Assessed Clean Energy (PACE) financing provides property owners with funds to install energy efficiency, renewable energy and water conservation upgrades that is repaid on their property tax bills. Nationally, PACE has surpassed $1 Billion in funding in just five years, and is expected to double in 2016. Learn more by visiting www.figtreefinancing.com.
About LL Funds
Founded in 2009, LL Funds, LLC is an independent investment manager focused on identifying opportunistic investments with substantial positive return asymmetry, focusing primarily on the mortgage market. Currently LL Funds manages $1.4 billion for endowments, foundations, individuals and family offices through multiple private-equity and fixed-income investment vehicles.
By Mike Mendelsohn
Property-assessed clean energy is becoming more important for commercial PV
Commercial real estate remains an area of unfulfilled solar potential. Most deployment in this sector has been constrained to properties where large, creditworthy entities own or have long-term leases and sufficient control of the property to support the credit requirements of solar project developers and their financiers.
Luckily, a range of financing innovations has recently evolved to open untapped solar sectors. One of the most promising is property-assessed clean energy (PACE), via which a loan on a solar system can be repaid via a property tax assessment. A PACE loan stays with the property, not the tenant, and offers the ability to underwrite a project with a short-term tenant or other unrated offtaker.
According to PACENation, an association dedicated to opening PACE financing, PACE financiers invested $252 million in 734 commercial buildings across 14 states. More than half of those projects have included renewable energy improvements. GTM wrote in December 2015 that over $1 billion has been invested in entities that finance commercial PACE, or C-PACE, projects, so there should be ample investment capital for good projects in PACE-friendly locations.
PACE must be enabled with state legislation and then generally undergo a county or municipal opt-in process. While 32 states plus Washington, D.C. have such legislation, only 16 states have active C-PACE programs.
Traditional financing structures — third-party-owned power-purchase agreements (PPAs) and leases — often don’t meet the differing needs of property owners and tenants, where capital improvements are paid by property owners and energy bills are paid by tenants, thus negating any incentive for property owners to invest in energy-saving technologies. This incongruity is frequently referred to as the “split incentive.”
PACE works particularly well in commercial real estate because it leverages the general alignment of energy and property taxes: property owners pay both in owner-occupied buildings and under gross lease structures, and pay neither under commonly applied “triple net lease” structures where property taxes and similar assessments, insurance, and other utility and maintenance costs are the responsibility of the tenant.
A cost-effective solar installation combined with a PACE loan could provide immediate benefit to building owners and/or their energy and tax-paying tenants. By doing so, PACE could help open a new swath of the commercial building stock for solar deployment, not unlike how zero-down leases have transformed the residential solar market.
Nonprofits in particular are benefiting from the emergence of C-PACE. Nonprofits cannot monetize the tax benefits of solar and have a hard time meeting the credit requirements of traditional PPA structures. A leading provider of C-PACE in California recently funded a 292-kilowatt installation at a San Diego-based house of worship that will save an estimated $1.1 million over 20 years and $2.1 million over 25 years. The project includes third-party responsibility for providing solar production guarantees and managing the system O&M.
“Every dollar that a mission-based nonprofit saves on utility costs by going solar is a dollar that can be used to further advance the organization’s goals of helping the local community,” said Mahesh Shah, CEO of Figtree Financing, which led in arranging the financing. PACE Financing has helped houses of worship, private universities, assisted living facilities, and other nonprofits go solar.
Small and medium-sized for-profit businesses could also benefit significantly from PACE. These entities often own their real estate, operate local businesses, and may have the ability to monetize tax credits. However, they may not have the investment-grade credit and stable financials that other financing options have traditionally required. Small commercial buildings (less than 50,000 square feet) make up the vast majority of all building stock in the U.S., both by number of units and total square footage. Fully 94 percent of all commercial buildings are classified as small commercial — and as a group they account for 47 percent of energy use in that sector.
PACE-financed “prepaid PPAs” are a variant of the innovation that combines PACE with the third-party ownership benefits of power-purchase agreements, the most common contract form between solar developers and commercial offtakers. Demeter Power Group was the first to pioneer this innovative combination through a PACE Lease andPACE PPA products. Prepaid PPAs enable PACE to tap the growing market for tax-equity finance and combine it with the secured underwriting consistent with property tax assessment. Demeter Power was a 2013 recipient of a Department of Energy SunShot Incubator Award.
Whether monetizing the investment tax credit (ITC) benefits through a third-party ownership structure or directly as the property owner, the returns can be extremely attractive with essentially no direct investment. PACE offers myriad other benefits as well:
- PACE loans are non-recourse (do not impact the creditworthiness of the current tenant)
- PACE loans are transferable upon sale of the property
- PACE loans do not accelerate (which would require the asset to be paid in full if there is a foreclosure or bankruptcy)
- PACE interest payments are tax-deductible
- PACE loans offer a cost of capital well below a real estate owners’ blended cost of capital considering equity hurdle rates prevalent in the industry
- Depending on the accounting treatment applied, the PACE loan may also be considered an off-balance-sheet form of financing for the property owner.
In sum, C-PACE offers an extraordinary opportunity to invest in solar and other property improvements, earn a highly profitable return, minimize the impact on a real estate owner’s balance sheet, and as well as on the ability to raise capital and reduce a tenant’s electricity cost.
The largest barrier to C-PACE for solar deployment remains with education of lenders, real estate owners, and the solar industry itself. Lenders are a critical target audience for two reasons: 1) as a source of PACE loans that are repaid through the property tax assessment; and 2) convincing the existing mortgage holder on the property to allow a lien senior to their position, referred to as “lender consent,” is a key issue in the industry.
Although some states do not require lender consent (California and Florida, for example), many of the institutional capital providers that are active in C-PACE and many property owners do require it. And Colorado’s new C-PACE program requiring lender consent appears to indicate states are heading in this direction.
Mortgage lenders are concerned that the PACE lien could jeopardize recovery of principal and interest on their asset should the tenants fall behind on payments, the real estate go vacant, or other stressed scenarios transpire. However, the solar project or other retrofit paid for by the PACE loan has a number of mitigating aspects that mortgage holders should consider.
“PACE improves the collateral quality of the property, improves the cash flow strength of the borrower by reducing their energy costs, reduces mortgage default rates (because properties are self-selected and screened to meet high-quality underwriting standards) and increases resale value,” said Stacey Lawson, president and CEO of Ygrene, one of the largest PACE providers.
Despite the exciting potential of PACE, education, consistency and best practices in underwriting would facilitate the critical trust necessary to scale the model broadly. Such best practices would include “providing a comprehensive package to each lender with PACE educational materials, an overall project summary for proposed energy production and savings, and a thorough analysis of other key elements that will impact building owners,” said Matthew Dawson, VP of market development for SolarCity. “Helping lenders understand the benefits of PACE and working to standardized PACE underwriting guidelines will be very important as we scale.”
In 2015, SolarCity, the market leader in residential installations and a top competitor in commercial installations, partnered with Renew Financial to offer PACE financing to small and medium-sized businesses that were difficult to otherwise underwrite.
Last year, SEIA launched the SEIA Finance Initiative, designed to open several untapped sectors for solar deployment, which identified C-PACE as one of the best mechanisms to open commercial markets — and we’re now working on outreach to the PACE financing, real estate and lending industries.
FOR IMMEDIATE RELEASE
CONTACT: Ryan Ahearn, Figtree Financing
Direct: (858) 771-0896
Company plans to accelerate commercial and residential PACE in California and new markets
(San Diego: March 28, 2016) – Figtree Financing announced today that it has raised $30 million from an institutional investor to expand its fast-growing PACE clean energy financing business. This Series A capital round will fund the launch of a residential PACE financing program and accelerate its commercial PACE financing platform within and outside of California.
“This is an incredibly exciting time for PACE and our company, thanks to renewed focus from the federal government on establishing residential guidelines and the emergence of new commercial programs in Colorado, Virginia, Maryland, Missouri, and elsewhere,” said Mahesh Shah, CEO of Figtree Financing. “PACE and Figtree Financing are a terrific example of a public-private partnership creating an innovative lending product to address a gap in energy financing for homes and businesses.”
PACE financing allows property owners to access long-term financing that they repay through their property taxes. PACE was created by the state of California as an alternative financing option so that home or business owners no longer have to use their own personal or business credit to implement energy- and water-saving upgrades. It offers a unique credit profile, fast underwriting, and requires no down payment or cash outlay. Figtree Financing’s new technology platform approves homeowners for financing instantly online and integrates seamlessly into its partners’ systems.
FOR IMMEDIATE RELEASE
CONTACT: Ryan Ahearn, Figtree Financing
Direct: (858) 771-0896
More than 80,000 nonprofits and houses of worship have a new path to reduce utility bills using PACE financing with third-party ownership
SAN DIEGO, Feb. 29, 2016 Figtree Financing recently funded a PACE-financed prepaid Power Purchase Agreement (PPA) for a large San Diego church solar project that will serve as the model to generate millions of dollars in savings for nonprofits and houses of worship across California. Figtree is an emerging leader in offering innovative solar financing that lets nonprofits monetize tax credits and depreciation that they cannot utilize.
A prepaid PPA financed through the PACE program is a new product enabled by California Assembly Bill 1883 that Figtree helped get legislated. Using this option, the California church’s 292 kW installation will save an estimated $2 million over the life of the system. Much of this savings is attributable to this new financing that enables nonprofits to save up to 30 percent of system costs by having Figtree bring in a third-party owner that can take advantage of tax credits combined with the simple underwriting criteria of Figtree’s PACE program.
“Every dollar that a mission-based nonprofit saves on utility costs by going solar is a dollar that can be used to further advance the organization’s goals of helping the local community. This is just one of the reasons we are thrilled to introduce this option for nonprofits and houses of worship throughout California,” said Mahesh Shah, CEO, Figtree Financing. “This low-cost method of saving on monthly utility bills also provides a path to ownership through innovative solar financing. We are experiencing growing interest in commercial PACE and are moving the industry in new directions.”
According to the National Center for Charitable Statistics, there are more than 80,000 nonprofits and houses of worship in California alone. Since nonprofits typically cannot monetize tax credits, they can potentially benefit from this new financing. Small businesses, Real Estate Investment Trusts, and private schools and universities are also eligible for PACE-financed prepaid PPAs. Figtree can finance projects as small as $100,000 up to $10 million through this program. It also includes third-party responsibility for providing solar production guarantees and managing the operations and maintenance of the system throughout the life of the prepaid PPA.
Figtree Financing is a platinum sponsor and speaking at the PACENation Summit 2016, the first annual PACE industry gathering taking place in Denver today. The summit will bring together legislators, PACE program administrators, financiers, and others to network and share best practices in more than 20 informational sessions and interactive workshops.
About Figtree Financing:
Figtree Financing provides innovative financing to accelerate the adoption of environmentally friendly products and services. We believe every home and commercial property should have the latest energy saving improvements to reduce our carbon footprint. Our unique Property Assessed Clean Energy (PACE) financing provides property owners with funds to install energy efficiency, renewable energy and water conservation upgrades that are repaid on their property tax bills. PACE features no-money-down, long-term, fixed rate financing. Nationally, PACE has surpassed $1 billion in funding in just five years, and is expected to double in 2016. Learn more by calling 1-877-577-7373 or visit www.figtreefinancing.com.
# # #
The Orange County Register
By Tomoya Shimura
Mission Viejo residents now have access to three property-assessed clean-energy programs, commonly known as PACE programs.
Residents now have access to a wider range of lending options if they want to go green.
The City Council on Tuesday approved requests to join CaliforniaFirst and FigTree Financing, property-assesed clean-energy programs, commonly known as PACE programs. The proposal by Councilman Frank Ury came after the council, in the previous meeting, approved the similar California HERO program.
Residents and businesses within cities that are PACE members can get a long-term loan – typically 15 to 20 years – for energy-efficient or renewable improvements, such as installing rooftop solar panels or drought-tolerant landscaping.
What makes the PACE program unique is that loans are attached to the property rather than an individual. The City Council needs to approve the program for residents to get the loans because payments will be collected through property taxes.
Proponents say the PACE program allows residents to defer the upfront costs of energy-efficient upgrades while enjoying savings from low energy costs. They can pass on the remaining loans if they decide to sell the property.
The program, however, suffered a setback in 2010 when mortgage giants Fannie Mae and Freddie Mac announced they would refuse to buy loans for homes that have PACE liens attached. Orange County Association of Realtors representatives said the loan could become an issue when people try to sell their house.
Ury said the city’s role is not to decide how good PACE programs are but to give residents an option.
The council voted 4-1 in favor of the joining CaliforniaFirst and FigTree Financing, with Mayor Cathy Schlicht opposing it.
In addition, the council decided to create an ad-hoc committee and come up with an educational message about PACE programs to be posted online.
PACENow’s Kristina Klimovich talks with Ryan Ahearn, VP of Marketing for Figtree Financing
July 24, 2015
It does not come as a surprise that small commercial buildings (less than 50,000 square feet) comprise the vast majority of all building stock in the U.S., both by number and square footage. In fact, 94% of all buildings are classified as small commercial and all together they consume 47% of energy in the building sector, according to Preservation GreenLab and New Building Institute. While the opportunity for the energy efficiency and renewable energy market is enormous, investments in making the small commercial sector more sustainable lag behind.
As the commercial PACE market grows and matures, project size trends upward. In 2015 alone, more than half of all completed projects was larger than $500,000 and most projects involved buildings larger than 50,000 square feet. Many programs across the country prefer to finance larger projects. Some go as far as setting the effective minimum project size at $250,000. Let’s backtrack to 2010, when the commercial PACE market was just beginning to expand and programs, in Sonoma County, Palm Desert, Boulder, CO, and a few others, were successfully marketing PACE to the so-called “main street” businesses. Projects ranged from $2,000 to $400,000 (with an exception of 2 projects larger than $1.5M). Over the last five years, project size has grown as programs have learned that commercial PACE projects can involve significant transaction costs. These generally include legal fees, programmatic fees, project developer, and financing services provider fees. Overall, a PACE project should make good business sense to a property owner, which generally means that after fees and interest rate calculations, a building owner expects to save or make money. Therefore, creating a streamlined approval and underwriting process that would keep the various fees under control is imperative to continue making PACE funded projects appealing to small commercial property owners.
In fact, several programs from New York to California are making small commercial projects possible through aggregation, which minimizes legal fees, by having a dedicated funding source, and a streamlined underwriting process. For instance, Energize NY Finance recently completed a $70,000 solar project on a cheese-making farm in the Hudson Valley. The program has a warehouse line of funding available on demand and sourced the project directly. The City of Ann Arbor aggregated four small projects into a single $500,000 bond which was privately placed with Ann Arbor State Bank. In California, Figtree Financing continues to grow its portfolio of completed small to medium commercial projects ranging from $20,000 to $1.5M. To date, the Program has funded more than 30 projects across northern and southern California, which include improvements to private universities, offices, industrial buildings, golf courses, healthcare facilities and houses of worship.
KK: Ryan, Figtree is clearly filling a key gap in small to medium commercial PACE financing. What is it that you are doing right?
RA: There are several things that Figtree has in place to unlock the small commercial market:
Dedicated capital is critical for financing small projects. First and foremost the dedicated capital streamlines paperwork and provides uniform underwriting for both small and large projects. Ultimately this makes our operations more efficient and able to support any size project. The Federal Reserve Bank of New York finds that small business borrowers often spend almost 25 hours of their time on paperwork for bank loans and approach multiple banks during the application process. We are committed to a financing process that makes it easier on small and medium businesses to get capital for money saving energy and water property upgrades.
With our streamlined process and underwriting, the committed capital allows for easy grouping of small projects, as small as $5,000. It also provides the flexibility to quote terms and pricing for small projects. All of this stems from a uniform capital and legal infrastructure to bring an efficient and easy backend to enable small projects.
Our uniform underwriting and small project flexibility ultimately translates into broad availability for a variety of business types: franchise hotels, gas stations, restaurants, houses of worship, and other small commercial properties that often rely on specialty lenders or may have difficulties accessing other types of financing.
Efficient sales cycle
Commercial projects can take a while to develop. It’s very critical to find the right financing early on to make sure the project can be executed. Figtree Financing has made it easy to quickly identify if PACE financing is a good fit for the property early in the sales cycle; we provide quick turnaround on pricing and project analysis. We recognize that contractors, installers, and finance companies all need to be efficient and it’s not possible to dedicate the same number of hours to a $50,000 project as to a $1,000,000 project. As a result more often than not, smaller projects are being ignored in the marketplace. However, we are able to service this market segment efficiently.
KK: Ryan, is it possible to compare a PACE project approval process with a small business loan process? I would imagine that banks are facing similar constraints when it comes to traditional small loans.
RA: That is true. Historically, it’s been challenging for a traditional bank to finance projects that are less than $250,000. The underwriting costs for banks are high relative to the loan sizes and the process is still a lengthy one. Plus, traditional small business loans can be riskier than PACE financing. The small commercial market is underserved, not just in energy financing. We recognize that and have created a program that makes PACE financing an attractive solution for small businesses even for projects less than $250,000 by having reasonable interest rates and fees that scale with project size. In addition, PACE funded projects do not require a personal guarantee, automatic loan payments from bank accounts, or other restrictions that can make lending difficult for customers in this market. Personal guarantees and heavy debt payments can lead to projects being stalled. Property owners have to ask themselves if they want to take on a long term payback project with a personal guarantee and additional debt burden. This can derail even the best of projects. As a result PACE can step in and offer a no personal guarantee option that can alleviate these concerns and keep the focus on projects that are cash flow positive and make money for business owners
KK: It is my sense that the majority of recent projects completed by Figtree were solar. Is that right? If so, what is so attractive about PACE that these property owners can’t get through other forms of financing?
RA: Recently we have completed a number of solar projects, which reflects a growing demand for commercial solar motivated by the expiration of tax credits and increasing utility rates. There are very few programs that allow long-term financing for energy upgrades to properties, which makes 20-year fixed-interest PACE financing extremely unique in the commercial market. PACE financing allows the energy savings to offset the payments, creating projects that are cash flow positive from day one through year 20. This is attractive to small businesses for which large debt payments can cause uncertainty and stress. An additional feature that makes PACE financed solar deals attractive is the option to monetize tax credits and depreciation. Combine that with the energy savings offsetting the financing payments and you have a project that’s a must do for property owners.
Figtree has also recently introduced a Prepaid PPA with PACE Financing. This product allows us to bring in a third party to monetize tax credits on behalf of the business. This can be helpful for non-profits, but also small businesses that don’t have certainty of income to plan for tax credits or may not have huge tax liabilities. This new product is going to expand the market for small commercial PACE financing even further.
KK: Ryan, transaction costs have been a challenge as these may involve bond counsel fees and third party fees. Can you tell me a bit more about Figtree’s model and how you overcame this obstacle?
RA: Our fees are percentage based as opposed to fixed fees, and they scale with project size. As a result Figtree makes smaller projects possible. In addition, we aggregate small projects to minimize overall burden on a single project. Project aggregation can be challenging when a program is just getting started, but with a standardized statewide legal and cost infrastructure we have been able to overcome this obstacle. The standardization is key to make it possible to keep multiple projects on the same timeline. If the program is not standardized simple details like moving a closing date or funding the project are not able to happen quickly and efficiently. With volume and steady project flow, the timelines are smoothed out. In our experience, a program needs to reach only a modest amount of volume to start making project aggregation efficient.
KK: Who can take advantage of Figtree’s financing?
RA: Figtree Commercial PACE Financing is available to all private commercial properties statewide in California. This includes non-profits, hotels, industrial, multi-family, and commercial properties. PACE is a great vehicle for a variety of property owners. PACE is a long term financing option at very reasonable rates, allowing energy projects to be cash flow positive. As a result it’s a very elegant product that is potentially off balance sheet with no personal guarantees. Small or large we recommend that every commercial property owner look at PACE Financing before moving forward.
 (Federal Reserve Bank of New York. “Fall 2013 Small Business Credit Survey”, September 2013)
FOR IMMEDIATE RELEASE
CONTACT: Ryan Ahearn, Figtree Financing
Direct: (858) 771-0896
Innovative Financing Program to Support Energy Efficiency, Renewable Energy, Water Conservation, and Earthquake Safety and Seismic Retrofits
SAN DIEGO, CA–(Marketwired – July 09, 2015) - With the goal of making Los Angeles cleaner, greener and safer, Figtree Financing’s PACE (Property Assessed Clean Energy) Program was recently approved unanimously by the L.A. City Council to support the city’s sustainability initiatives. This approval comes on the heels of nearly $4.5 million in recent commercial PACE projects successfully funded by the company. The L.A. City Council approval means Figtree’s financing will be available to more than 40 percent of California commercial property owners and homeowners by fall.
“We applaud the leadership of the second largest city in the U.S. for approving our financing option and making such a wise investment in Los Angeles’ long-term sustainability,” said Mahesh Shah, CEO, Figtree Financing. “Our PACE Program is a great option for commercial solar, energy efficiency, and seismic improvements in the area, and we look forward to supporting the property owners who are interested in investing in their properties for attractive long term paybacks.”
The June 30 City Council vote provides accessible financing for seismic retrofits, energy efficiency projects, renewable energy installations and water conservation to proactively update the building stock in Los Angeles. Figtree already has several projects in Los Angeles that it can now fund.
PACE financing allows property owners to access long-term financing that they pay back through their property taxes. Further, Figtree can finance projects as small as $5,000, including nonprofits, houses of worship, and small and medium businesses as well as properties without investment-grade credit. The company has already funded projects ranging in size from $20,000 to more than $1.5 million; fee structures vary based on project cost making it an attractive option for small or large projects.
“I’m very pleased that the City Council has passed a critical tool that will help Los Angeles implement my earthquake and sustainability plans,” said Mayor Eric Garcetti. “With this lending tool, property owners will have access to financing for energy efficiency, water conservation, renewable energy and seismic retrofits that will help spur economic growth while increasing the long-term resiliency of the City’s building stock.”
Los Angeles has more than 80,000 commercial properties worth more than $150 billion, providing a significant opportunity for economic and environmental impact. In addition, these property improvements create local construction jobs and stimulate the local economy. Other cities in California concerned about seismic issues can also look to Figtree Financing’s PACE Program to make it easier for property owners to upgrade a buildings seismic and structural safety, in addition to reducing consumption of energy and water.
Commercial PACE from Figtree Financing is now available in more than 120 cities and counties throughout California, resulting in a 10-fold increase in project activity in 2015. There is more information on Mayor Garcetti’s earthquake plan at www.lamayor.org/earthquake and sustainability plan at www.lamayor.org/sustainability.
About Figtree Financing: Figtree Financing is a San Diego-based clean energy financing company providing innovative programs to enable capital for environmentally friendly products and services. The Figtree Commercial PACE Program provides PACE (Property Assessed Clean Energy) Financing to help commercial property owners improve their properties and lower their utility bills with energy efficiency, renewable energy, and water conservation upgrades. The program is available throughout California. Figtree Financing has successfully funded millions of dollars of property improvements with commercial PACE Financing. Learn more by calling 1-877-577-7373 or visit us atwww.figtreefinancing.com.
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FOR IMMEDIATE RELEASE
CONTACT: Ryan Ahearn, Figtree Financing
Direct: (858) 771-0896
Company provides innovative program to broad market to accelerate energy upgrades
(San Diego, June 17, 2015) – Figtree Financing has funded nearly $4.5 million in commercial PACE (Property Assessed Clean Energy) projects in the last 45 days alone, evidence of the continued interest in smart investments, energy savings and emissions reductions for property owners. The projects were funded under Figtree Financing’s Commercial PACE Program using $60 million in committed capital for energy upgrades. Launched in 2014, the program has proven to be very successful at reducing the cost of financing and increasing the speed of funding for commercial projects.
“Launching this new financing last year was a game-changer. We were pleased to see such a wealth of interest statewide, and this recent funding activity is the result of that interest turning into real funding,” said Mahesh Shah, CEO, Figtree Financing. “As we help to improve property values and reduce emissions, Figtree continues to grow because we provide property owners and contractors a single-source, consistent experience from application to funding.”
These projects are evidence of the unique benefits of PACE, since the businesses and nonprofits funded did not have investment-grade credit and had limited options for energy and water conservation financing. The projects, located across northern and southern California, include improvements to private universities, offices, industrial buildings, golf courses, healthcare facilities and houses of worship, ranging in size from $50,000 to $1.5 million. These projects deliver substantial savings on utility bills, creating positive cash flow from year one, and they support state, county, and city goals of emissions reduction, resulting in more than 1,200 metric tons of carbon emissions offset annually. The first cities and counties to adopt Figtree PACE are starting to realize benefits for their leadership and their commitment to fostering innovative ways to reduce carbon emissions.
In its Q1 2015 U.S. Solar Market Insight, GTM Research reported a 6% decline in U.S. commercial solar MW to come online. Even more alarming, the share of small U.S. commercial solar less than 1 MW has been declining since 2010, according to GTM Research and supporting data from the U.S. Solar Market Insight Q2 2014 report. Figtree Commercial PACE Financing is boosting the small commercial market that has struggled to keep pace with the linear growth of residential solar. The streamlined underwriting and security of commercial PACE financing make it uniquely suited for small and medium commercial spaces that have limited sources of capital for improvements; these are sound projects that deliver excellent ROI for property owners. Figtree’s Commercial PACE Program has uniform underwriting and creates a streamlined approach to complex transactions that can be difficult to underwrite with traditional, PPA and lease financing products.
“With our committed capital, we can fund projects as small as $5,000 as well as large projects including nonprofits, small businesses, houses of worship and more. Figtree Financing is the only private commercial PACE program that serves this broad market,” added Ryan Ahearn, Vice President of Marketing, Figtree Financing. “And since 2016 is the targeted expiration and reduction of key solar incentives, now is the perfect time to take a closer look at renewable project opportunities.”
Figtree Commercial PACE Financing provides property owners with no-money-down, long term, low interest rate financing to improve properties with energy efficiency, renewable energy and water conservation upgrades. Commercial PACE from Figtree Financing is now available in more than 120 cities and counties throughout California, doubling the company’s contractor partner network and resulting in a 10-fold increase in project activity in 2015.
About Figtree: Figtree Financing is a San Diego-based clean energy financing company providing innovative programs to enable capital for environmentally friendly products and services. The Figtree Commercial PACE Program provides PACE (Property Assessed Clean Energy) Financing to help commercial property owners improve their properties and lower their utility bills with energy efficiency, renewable energy, and water conservation upgrades. The Program is available throughout California. Figtree Financing has successfully funded millions of dollars of property improvements with Commercial PACE Financing. Learn more by calling 1-877-577-7373 or visit us at www.figtreefinancing.com.
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