The Benefits and Imperative of CapEx
C-PACE was designed to facilitate energy efficient retrofits of commercial property. After deploying over $780 million across dozens of states, it is clear that property owners are using C-PACE to protect asset value by using long-term, fixed-rate capital to improve their property’s major infrastructure.
Historically, property owners have been forced to:
Delay capital expenditure and run the risk of catastrophic failure of equipment
Finance capital expenditure using short-term finance mechanisms that undermine the building owner’s debt service coverage ratio (DSCR) and deplete cash reserves
Settle for the purchase of cheap equipment that results in higher maintenance costs and erodes asset value
Pay for capital expenditure that has a useful life of decades, even though they may own the property for a shorter hold period
In addition to increasing risk to the owner’s business, the result is usually a significant missed opportunity to reduce a property's carbon footprint and use the energy savings to offset the cost of the necessary capital improvements.
Impending, or overdue, capital expenditure can present an opportunity to fully reposition a property with a comprehensive energy efficient retrofit that passes the cost through to tenants because the additional assessment is offset by utility bill savings. Additionally, the C-PACE structure ensures that you are not investing capital, which you may not receive the benefit of, if you sell the property before the depreciation period is up.
If you are interested in learning how to preserve your balance sheet, we can expertly show you how to finance capital expenditure through energy savings. To learn more, contact us for an overview.