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January 2017 — Health Care Properties Quarterly — Page 11
Sustainability
C olorado has gained a well-
deserved reputation for its
commitment to green build-
ings. Business owners who
are motivated by corporate
responsibility have invested in
green buildings and enjoyed mar-
keting, recruiting and other repu-
tational benefits. LEED certification
has been the hallmark of the most
environmentally friendly buildings.
For these owners, the reputational
benefits can outweigh the lack of an
immediate financial return of invest-
ing in energy upgrades. Yet there
are real, quantifiable returns for
energy upgrade investments as part
of the bottom line of operational
costs.
Many commercial building own-
ers are unable to self-fund capital-
intensive energy improvements.
Health care providers might rank
energy improvements as lower prior-
ity over other pressing facility needs,
especially when facing the barrier
of the perception that the upgrades
will require an upfront investment,
potentially taking money away from
another project or require financing.
Many typical bank loans require a
down payment of 10 to 20 percent
of the project cost and may also
require a personal guarantee. Loan
repayment terms are usually five
to seven years. These typical bank
loan terms generally result in nega-
tive cash flow, which leads building
owners to postpone projects until
equipment fails and/or ongoing
maintenance and repairs are no lon-
ger feasible.
Colorado’s Commercial Property
Assessed Clean Energy program,
known as C-PACE,
solves this vex-
ing problem by
offering building
owners “no down
payment,” long-
term, 100 percent
project financ-
ing. The financing
is secured by an
assessment on the
property (similar
to a sewer assess-
ment) and the
repayment obliga-
tion transfers to a
new owner when
a property is sold.
The building owner has no personal
liability.
While C-PACE is a statewide initia-
tive, projects can be implemented
only after the county in which the
property is located has opted into
the program.
Launched last year, eight counties
already have opted in to C-PACE.
These include Adams, Arapahoe,
Boulder, Broomfield, Denver, Eagle,
Jefferson and Pitkin counties. Ten
other counties are actively review-
ing the benefits of C-PACE and are
expected to join the program in the
coming months. For more informa-
tion, visit
• Existing buildings. C-PACE will
finance up to 100 percent of energy-
efficiency, renewable energy and
water conservation-eligible projects.
Financing is provided by private
capital providers at competitive
rates with repayment terms up to
20 years. The program also provides
financing for new construction.
For health care providers operat-
ing facilities that consume energy
24/7 and require redundancy to
ensure uninterrupted operations, the
great news is that they can utilize
C-PACE to fund facility upgrades that
will vastly improve performance,
reduce operating costs and increase
immediate cash flow by leveraging
programs such as the federal PATH
bonus depreciation option. What can
be most exciting for a health care
facility manager is that there is no
upfront out-of-pocket expense!
Eligible energy projects include
HVAC and plumbing upgrades, new
energy-efficient lighting and build-
ing envelope efficiency upgrades,
including solar and roofing
upgrades. Water saving measures
such the installation of permanent
low-flow fixtures are also eligible.
A complete list of eligible proj-
ects is available on the Colorado
C-PACE’s website (http://copace.
com/resources/#eligible_prop). The
financing approval process requires
the mortgage holder’s consent (if
applicable) and involves submitting
a prequalification report, which can
be facilitated by a C-PACE registered
contractor or by the program admin-
istrator. A contractor experienced
in sustainable construction and
who understands the demands and
operations of a health care cam-
pus environment adds value to a
project team embarking on energy
upgrades because he can test out
how the proposed improvements
rank on constructability and cost.
This ensures better decision-making
for the right equipment or systems,
and proper phasing or bundling that
will provide the most optimal energy
efficiency or renewable energy mea-
sures.
The C-PACE program administrator
will work with the owner, designer
and contractor team as appropriate
to confirm a final project scope and
cost. The owner can use a preferred
capital provider or, alternatively, the
program administrator can request
quotes from multiple capital provid-
ers that have been prequalified to
finance C-PACE projects.
• New construction. New construc-
tion project financing is also avail-
able. C-PACE guidelines require new
construction projects be designed
to exceed a county’s existing build-
ing energy code. Projects deemed
eligible can finance up to 20 per-
cent of the total new construc-
tion cost via C-PACE. This unique
application of the C-PACE financing
mechanism will open the door for
innovative design features that are
typically “value engineered” out of
a project due to construction bud-
get constraints. Renewable energy
projects can be key component of
new construction projects, which
may include solar photovoltaic pan-
els, energy storage, ground-coupled
systems and small wind systems,
among others.
Energy efficiency and renewable
energy projects have long been
accepted as providing significant
tenant/facility benefits. C-PACE
provides a financing tool that not
only achieves these goals but also
improves the financial health of the
business by creating positive build-
ing cash flow.s
Brandon
Bergholz
Construction
executive and
health care market
leader, Mortenson,
Denver