Survey goals included gauging lenders’ awareness and understanding of PACE, educating them, addressing their concerns, and developing insights that will enhance efforts to gain their support for individual PACE projects.
Metrics interesting for lenders include anticipated vs. actual energy savings, anticipated vs. actual dollar savings, benefit to NOI, payback periods, financing costs, financing rates, default rates, and number of projects with PACE financings.
- Surveyed lenders generally expressed no blanket opposition to PACE. Their right to consent to projects is of paramount importance to them, but they appear open to approving projects that benefit their customers and improve the value of their collateral. Lender partnership and education from the start is the key in improving probability of lender consent.
- Lenders support energy efficiency and renewable energy projects in concept, but have little firsthand experience financing them and are wary of underwriting the resulting projected savings and benefits. Education based on standard industry data and results from comparable projects is necessary to increase ease of approvals and create streamlined the processes.
- Lenders understand property taxes and assessments and factor them into underwriting models decisions. There was broad acceptance of PACE as an assessment, which limits lien exposure only to unpaid assessments, distinguishing it from a loan.
- Complexity in applications contributes to increased costs and may make some projects economically unfeasible. The size and scope of a PACE assessment should determine the degree of supporting documentation. A simple, streamlined approval process for small projects (representing less than 3% of building value) should be developed with the lender community.
- Consistency of programs across states and the nation, standardization of data sources, and creation of project related insurance policies will improve the consent process as lenders (and PACE finance providers/investors) can create national approval platforms and review projects with fewer resources.
- Existing commercial mortgage lenders have only an indirect revenue benefit from providing consent. As such, applicants have the onus of making the approval process easier for lenders until revenue streams across banks are properly aligned or existing mortgage lenders begin to provide PACE financing.
Click here to download the study that summarizes the findings of interviews conducted with 35 individuals representing 25 different lending institutions.