How much will Local Law 97 compliance cost? And now you wear your scarlet letter

[David Goldsmith]

Getting Started with Benchmarking Energy Data - The Real Deal

In this second report of a three-part series, National Grid shows how a property can link its energy-use data to the ENERGYSTAR® Portfolio Manager® benchmarking tool—an essential building block to creating an energy-conservation roadmap. Local Law 97 Compliance for Landlords and Management...

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Getting Started with Benchmarking Energy Data​

Owners and managers of many New York City multifamily buildings have an urgent task to address: compliance with Local Law 97, the city’s pioneering effort to achieve a 40 percent reduction in the city’s greenhouse gas emissions by 2030.​

Local Law 97 Compliance for Landlords and Management Companies: How to Benchmark Your Building’s Energy Usage​

An efficient, one-time data connection sets your compliance journey up for success.
New Yorkers are addicted to ratings and scores, well beyond those of their many sports teams. Take restaurants’ sanitation grades, for example. Anything lower than an A or a B can be the downfall of even the most beloved pizzeria or sushi bar.
Now, with the inception of New York City’s Local Law 97, the city is assessing multifamily rental apartments, co-ops and condominiums with more than 25,000 square feet of total space on their energy usage and greenhouse gas emissions, and buildings must post their grade at their entrance. The next citywide assessment is set for October.
Grading is just part of an evolving municipal enforcement process to battle climate change by including specific energy-efficiency targets and fines for noncompliance.

Are you making the grade?​

If you’ve been graded and you’re not happy with the result, you’re not alone. In 2021, only 20 percent of multifamily properties 25,000 square feet or larger scored an A. The most popular grade? 39 percent earned a lackluster D. Meanwhile, one out of 10 buildings received an F, given for failure to file the required grading data.[1]
“Many customers ask us what they can do to improve their grade,” says Anthony Rondinelli, customer solutions, at National Grid. “First, they’ll want to understand what benchmarking is, and how to best tackle it. Our Benchmarking Program enables them to dive into their grade, understand how they’re using energy in their building, and then develop a roadmap to raise their grade.”

Why grades matter.​

Scoring high is much more than a green status symbol. When a building scores a low grade, it’s signaling that it’s not energy efficient. As a result, potential renters or buyers who place a high priority on environmental stewardship may be less likely to do business with you—not to mention it may also indicate higher utility bills.

Benchmarking helps properties with their homework.​

Using benchmarking, you can measure your building’s current energy usage against past consumption, and compare it to a designated performance level and/or similar buildings in your portfolio (if applicable). In 2009, New York City became the first city to mandate benchmarking, with the implementation of the Greener, Greater Buildings Plan.
Aiding this process, the Environmental Protection Agency’s ENERGY STAR® Portfolio Manager® benchmarking tool can help you get—and make sense of—the data you need to make the grade. Portfolio Manager works with your building’s aggregated energy-usage data, as supplied by your energy provider. National Grid fully supports this linkage.

Making the ENERGY STAR® connection.​

To get started on gathering energy data for grading, you’ll need to create a link between the EPA Portfolio Manager’s evaluative tools and your building’s energy-usage data, as provided by your utility:
Step 1:

• Set up an account at the EPA Portfolio Manager site.
• Link your EPA account with your utility provider’s records. For example, National Grid customers will choose “National Grid Web Services” when asked to identify their utility provider.
• Grant permission to share your energy-use data. For this evaluation process, you need only share a building’s aggregate energy-usage statistics.

Step 2:

• Once you’ve completed the Property Share procedure within the EPA Portfolio Manager, click on the link for the EPA Portfolio Manager Online Form to complete the registration with your provider (e.g., National Grid).

National Grid’s benchmarking program sign-up site provides detailed, step-by-step directions for making this connection with its Benchmarking Portal. Once you’re signed up, the Portfolio Manager will provide up to four years of quarterly energy analysis and grading.

Leverage your data to create an action plan.​

Nearly 25 percent of commercial building space nationwide already benchmarks in Portfolio Manager. Using the tool, you can generate ENERGYSTAR performance documents for each building, share your performance data and run custom reports to get performance insights. Portfolio Manager gives you the ability to:

• Identify underperforming properties.
• Duplicate the energy-management best practices of your portfolio’s more efficient buildings.
• Set investment priorities—allocating capital and projecting financial returns—for energy-reduction projects.
• Implement a comprehensive management program—a roadmap—for achieving energy-management success.

A roadmap gets your closer to your energy-efficient destination.​

“Landlords and managers can take short-term measures that don’t require a lot of capital. Things like boiler tune-ups, changing steam traps and valves on heating units, looking at HVAC and other system controls to achieve greater efficiencies,” says Laura McNeill, lead channel energy efficiency salesperson at National Grid. “Our Direct Install program provides simple equipment upgrades, such as showerhead, aerator and spray valve replacements.”
We’ve explained here how to meet the city’s grading requirements—and how National Grid can help. In our next report, we’ll dive into how National Grid works with Leidos, its energy-management solutions partner, to build energy-efficiency roadmaps and how they can navigate a path to reducing energy consumption and greenhouse gas emissions. While the process requires some careful attention, it will help you get a higher grade and move to the head of the property management class.

 

[David Goldsmith]

A New Tool to Help Co-ops and Condos to Cut Carbon Emissions

A new tool to help co-ops and condos to cut carbon emissions to satisfy Local Law 97.

www.habitatmag.com

A New Tool to Help Co-ops and Condos Cut Carbon Emissions​

The calculus of Local Law 97, a centerpiece of the city’s ambitious Climate Mobilization Act, is mystifying — and terrifying — to many co-op and condo boards. The questions seem endless. Does the law apply to our building? If so, how much carbon are we emitting? What are our carbon emission caps in 2024 — and during the second round in 2030, and beyond? How big will the fines be if we don’t act?
Boards can breathe a little easier. A new tool is available to help them answer these questions — and it’s free. It’s called The LL97 Carbon Emissions Calculator, and it’s the brainchild of the nonprofit Building Energy Exchange (BE-Ex) working in tandem with the engineering firm AKF Group.
“This is something we started back in 2020, the year after the Climate Mobilization Act passed,” says Will DiMaggio, a senior associate at BE-Ex, who worked on the project with Michael Sweeney of AKF. “We wanted to create an interactive tool that allows people to search by entering their address. They’ll get data based on water and energy usage benchmarking information they’re required to deliver to the city every year under Local Law 84.”
The data that comes back is divided by the compliance periods set out in the law: 2024-2029; 2030-2034; 2035-2039; 2040-2049; 2050 and beyond. The data includes the building’s carbon emissions (based on the type and amount of energy it uses), its carbon emission thresholds, and the estimated penalties if no improvements are made to the building. It’s color-coded and easy to read. To use it, click here. (When entering the address of 312 W. 45th St., for example, enter 312 West 45.)

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“It was a matter of putting into code what was in the law — building use type and square footage, plus utility usage, including electricity, steam, #2 or #4 oil, natural gas, solar or cogen,” DiMaggio says. “For example, the law states that X amount of electricity usage produces X amount of carbon.”
DiMaggio points out that many buildings’ “carbon emissions below the threshold” number will decline during each compliance period, even if they make no energy-efficiency retrofits. That’s because the formula for calculating emissions takes into account the promise that the city’s electric grid will become increasingly green in coming years — that is, it will rely less on fossil fuels and more on renewable energy sources for its power.
The calculator takes into account the draft rules on Local Law 97 compliance that were recently released by the city’s Department of Buildings (DOB) but are still not finalized. After intense lobbying by co-op and condo activists, the rule makers agreed to expand the categories of building use types from the original 10 to the 61 types in the federal Energy Star program, which range from high-rise Manhattan co-ops to campus-like garden apartments in the outer boroughs.
“Our goal,” DiMaggio says, “was to give co-op and condo boards and other building owners a convenient way to see where their building stands. It’s a starting point from which they can think about long-term planning on how to reduce carbon emissions. We’re trying to increase literacy about Local Law 97 and other climate policies. And we’re hoping to stimulate action.”
To pursue courses of action, DiMaggio urges boards to get in touch with the Building Energy Exchange and one or more of the following agencies: the NYC Accelerator, the DOB, CUNY’s Building Performance Lab, the New York State Energy Research and Development Authority, and the New York City Energy Efficiency Corp.

 

[David Goldsmith]

REBNY Estimates Potential Fines Under Local Law 97

REBNY estimates potential fines under Local Law 97.

www.habitatmag.com

REBNY ESTIMATES POTENTIAL FINES UNDER LOCAL LAW 97

Local Law 97, greenhouse gas emissions, co-op and condo boards, fines, Renewable Energy Credits.
Jan. 26, 2023 — Co-ops and condos that don’t add retrofits could get swamped by penalties.

To hear the Real Estate Board of New York tell it, the sky is about to fall on the city’s co-ops and condos. REBNY recently commissioned the engineering consultancy Level Infrastructure to estimate the fines building owners, including co-op and condo boards, will face if they fail to meet the carbon-emission caps for their buildings under Local Law 97, which goes into effect next year.

The study’s findings, based on energy benchmarking data from 2019, are enough to scare the feathers off Chicken Little: in 2024, 3,780 buildings that do not add any energy-efficiency retrofits could face fines up to $213 million; in 2030, 13,544 such buildings could face fines up to $902 million; and in 2040, 15,832 such buildings could face fines up to $1.3 billion.

“This study shows that compliance with Local Law 97 is not going to be easy,” Daniel Avery, REBNY’s director of policy, tells Habitat. “And the residential side is going to get hit a lot harder than the commercial side because it does heating and cooling and domestic hot water onsite.” More than 60% of all buildings out of compliance in 2024 are projected to be residential. The number will climb to nearly 66% in 2030.

The study neglects to mention that few co-op or condo boards are sitting idly and doing nothing in the face of looming carbon caps and fines. Nor does the study mention estimates by the city’s Department of Buildings (DOB) that roughly 80% of buildings will be in compliance with 2024 carbon caps without any retrofits. That number is expected to flip by 2030, when only 20% of buildings will be in compliance without any retrofits.

“I think it’s still pretty astounding when you look at the pure numbers,” Avery says. “If a building cuts its emissions by 30% — which is very ambitious — it’s still going to be fined in 2030.” According to the study, even if every building were to reduce its energy consumption by 30% by 2030, more than 8,000 buildings will be facing penalties totaling in excess of $300 million each year.

The DOB released its “final” rules on possible roads to compliance with Local Law 97 late last year — rules that will be tweaked in the course of 2023. One rule states that a valued compliance tool, Renewable Energy Credits (RECs), can be used only to reduce fines incurred from electricity.

“Co-op and condo boards are going to need as many tools as possible,” Avery says, “and we don’t want further limits on RECs. Beyond that, at the state level, we’re supporting a bill before the state Senate that would tie property tax abatements to reductions in greenhouse gas emissions.” Another push by REBNY is to change the destination of the money collected in fines under Local Law 97. It’s now earmarked to go into the city’s general fund; Avery says REBNY is pushing to redirect that money into energy-efficiency programs.

Buildings are by far the city’s largest producer of greenhouse gas emissions, accounting for about two-thirds of the city total. Local Law 97’s goal is to reduce those emissions 40% by 2030 and 80% by 2050.

One highly touted method to reach those goals is electrification — getting rid of fossil fuels and powering buildings, transportation and other infrastructure with electricity from renewable sources, including wind, solar and geothermal. But the greening of the electric grid is a work in progress with an unknown completion date.

“Electrification is going to take a tremendous effort to get there,” Avery says. “What we’re pushing back against is the idea that all of this is going to be easy.”

 

[Noah Rosenblatt]

 

[David Goldsmith]

I think it's ironic that we are going to outlaw gas stoves but not even doing calculations as to the carbon footprint involved in just the cement/concrete involved in the building and/or demolition of these structures.

RXR to Surrender Two Office Buildings to Lenders

Scott Rechler’s RXR plans to hand over two of its office buildings back to lenders as it confronts reality in the sector.

therealdeal.com

RXR in talks to surrender two office buildings to lenders​

Firm to “give the keys back to the bank” in narrowed focus: Scott Rechler​

Scott Rechler’s RXR is confronting the impact of remote work and rising interest rates by parting ways with a slice of its office portfolio.
The developer is preparing to hand some of his office buildings back to lenders, the Financial Times reported. The chairman didn’t specify to the publication which buildings or how many would be turned over, but likened about 10 percent of the firm’s office portfolio to Kodak film, implying they were outdated. In a follow-up interview with The Real Deal Thursday, however, Rechler specified that he was in talks with lenders over just two properties, out of an overall $20 billion portfolio.

The decision comes after Rechler tasked his team in December to create metrics ranking the firm’s office properties to identify the low-performing assets to which the company would cut off investment.

“In my opinion, we can’t do anything with some of them,” Rechler told the FT. He added that he was ready to “give the keys back to the bank,” meaning the company would stop debt payments and relinquish control of the assets.

The announcement comes as RXR holds steady in its bets on a flight to quality. The firm secured City Council approval for hotel and office space at 175 Park, which is expected to become one of the city’s tallest towers, and scored a $1.3 billion financing package for its renovation of 5 Times Square.

Rechler said he is willing to seek alternatives for the buildings he’s ready to hand over, but expects few if any apartment conversions to come out of them because of extensive logistical difficulties, such as the long and expensive process of clearing out tenants.
The firm is in good company among office landlords coming to grips with the hybrid work era.
Vornado Realty Trust earlier this week wrote down its real estate portfolio by $600 million, including $480 million on office and retail properties in Midtown. The REIT also recently slashed its dividend and was booted from the S&P 500.

 

[David Goldsmith]

https://www.habitatmag.com/layout/s...ks-to-Push-Local-Law-97-Fines-Back-by-7-Years

Bill Seeks to Push Local Law 97 Fines Back by 7 Years​

Vickie Paladino, a Republican who represents northeastern Queens on the New York City Council, has introduced a bill that seeks to push next year’s fines under Local Law 97 back by seven years. Beginning in 2024, buildings that fail to reduce their carbon emissions to prescribed levels are scheduled to face stiff fines. The carbon limits get stricter in 2030, which will likely drive fines higher.
A press conference announcing Paladino’s bill attracted leaders of the Presidents Co-op and Condo Council (PCCC), who have filed a lawsuit to block Local Law 97, as well as city council members Ari Kagan, a Republican from southern Brooklyn, and one of the bill's cosponsors, Linda Lee, a Democrat from eastern Queens.
“There’s no reason this bill should not be bipartisan,” Paladino tells Habitat in an exclusive interview. “It affects every person in New York City. When I first heard about Local Law 97 back in 2019, I knew it was going to be a disaster for the middle class. Pushing the fines back by seven years was my idea, and when I consulted with the Presidents Co-op and Condo Council, they loved the idea.”
Citing figures recently released by the Real Estate Board of New York, Paladino notes that if they make no energy-efficiency retrofits, 31 building owners in her district, including six co-ops and condos, will face up to $4.2 million in fines in 2024. When the caps get tighter in 2030, a total of 153 buildings in the district will face fines up to $9 million.
“The PCCC lawsuit seeks to kill Local Law 97 dead,” Paladino adds. “My bill seeks to buy time. Yes, I’m opposed to the law, but if it has to happen, we have to do it wisely. If we’re going to push these drastic climate bills, it would be nice if there was a J-51 type of tax break. This was pushed through by the administration of Mayor Bill de Blasio without any real thought behind it.”
The J-51 tax abatement and exemption program, first instituted in the 1950s, has allowed owners of older residential buildings, including co-op and condo boards, to get a break in property taxes in exchange for conducting significant renovation work or converting a commercial building to a residential one. State Sen. Kevin Parker (D-Brooklyn) recently introduced a bill in the state Senate, S9603, that would provide relief from real property taxes for capital improvements that reduce building carbon emissions.
Warren Schreiber, a co-president of the PCCC and a plaintiff in the lawsuit to overturn Local Law 97, is also president of the co-op board at 200-unit Bay Terrace Cooperative Section 1 in Queens. Schreiber attended the recent press conference when Paladino unveiled her bill, and he says he welcomes the measure as one more weapon in the longshot fight against the city’s ambitious climate bill.
“The PCCC supports (Paladino’s) bill 100%,” Schreiber says. “The idea is that during the seven-year period, people will discuss the problems and figure out ways to make it easier for us to comply with the law without bankrupting our corporations. I think most city council members understand our problems, but they don’t know how to fix this bill. I think they’re either reluctant to touch it or they’ve closed their minds. They don’t care about the consequences for co-ops like ours.”
Schreiber poses a rhetorical question: “If we fix the planet’s climate but people don’t have affordable housing, what have we fixed?”

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[David Goldsmith]

One Vanderbilt Behind Latest Environmental Laws

SL Green’s trophy office tower One Vanderbilt may need to be retrofitted because of its natural gas burning turbines.

therealdeal.com

NYC environment update left SL Green’s One Vanderbilt behind​

Climate-aware tower may have to be retrofitted down the road
SL Green built One Vanderbilt to be a high-flying environmental beacon for a future of the office market could look like. And yet, New York City environmental rules have already rendered some parts outdated.
Design work was completed on the building in 2016, before the city’s latest environmental law passed. At the time, SL Green’s building seemed like a masterclass in climate change-aware design and much of the property still boasts energy-efficient features.

The trophy property has turbines that burn natural gas, which could be a problem as New York City aims to eliminate fossil fuels in its buildings. SL Green’s director of engineering admitted to the New York Times the turbines may need to be replaced in the future.
One Vanderbilt has a self-contained power plant that can generate as much energy as six football fields of solar panels. The design also allows the building to harness rainwater and reuse the runoff to heat or cool those in the building.

Sustainability and energy efficiency are at the core of the building’s design, but natural gas is not part of the city’s desired future. Natural gas contains methane and its burning produces carbon dioxide. The city has instead been pushing for hydropower, wind and solar energy use.
Under Local Law 97, greenhouse gas emissions are supposed to be cut across city buildings by 40 percent by 2030 and 80 percent by 2050. The penalty phase of the law begins next year, though, and many buildings aren’t ready to meet the environmental standards, which the Real Estate Board of New York estimated could result in $900 million in cumulative fines by 2030.

​

SL Green’s danger of being dinged by an environmental law hasn’t hurt its appeal with office tenants.
GFL Environmental last year signed a deal for 9,900 square feet at the property’s top rentable office floor, directly below the Summit observatory. The asking rent on the space was $322 per square foot, which means SL Green may be commanding the highest office rent in city history.

 

[David Goldsmith]

A New Source of Money for Co-op and Condo Energy Projects

A new source of money for co-op and condo energy projects

www.habitatmag.com

A New Source of Money for Co-op and Condo Energy Projects​

Bill Morris in Bricks & Bucks on February 22, 2023

New York City​

Feb. 22, 2023 — Multifamily Express Green Loans can help boards comply with Local Law 97.
For many New York City co-op and condo boards scrambling to reduce their buildings’ carbon emissions to comply with Local Law 97, there is one gnawing question: How will we pay for the necessary retrofits?
The New York City Energy Efficiency Corp. (NYCEEC), a nonprofit source of funds for clean-energy and energy-efficiency projects, has a new answer to this question. It’s called a Multifamily Express Green Loan, and it has reduced the application process for clean-energy projects to as little as six weeks. And co-op and condo boards that act before March 31 will avoid the closing fee, which equals 1% of the loan amount.
“What’s new is that it’s a concerted effort to streamline the loan process,” says Jay Merves, the director of business development at NYCEEC. “With Local Law 97 going into effect next year, we’re seeing increasing borrowing activity by co-ops and condos, as well as by rental landlords and commercial buildings. We asked ourselves how we could focus a product for the co-op and condo market. How could we streamline the loan application process enough to bring down upfront costs?”
Multifamily Express Green Loans can help pay for projects with environmental benefits, including solar panels, roof and building envelope upgrades, electrification, battery storage, windows and other retrofits that will help bring New York City buildings into compliance with Local Law 97. (The loans are also available statewide.) There is a $2,500 legal fee. The interest rate is 7%, and after March 31 there will be a 1% closing fee. The loans start at $200,000 and cover up to 90% of eligible projects. Their term is the construction period plus a 10-year amortization period.

“If a board is working with the NYC Accelerator or Solar One, the interest rate is reduced to 6.5%,” Merves says. “If a board is not already working with either group, we’ll be happy to put them in touch.”
NYC Accelerator is a city agency that provides free consultation on energy retrofits, while the nonprofit Solar One, as its name implies, helps building owners launch solar energy projects.
Multifamily Express Green Loans carry a couple of other benefits. No energy audit is required, and there is no prepayment penalty if the borrower chooses to pay off the loan before the term expires.
These loans are not to be confused with PACE (Property Assessed Clean Energy) Loans, which are administered by NYCEEC. Based on an energy audit, a PACE loan finances improvements that reduce a co-op’s energy costs. (The loans are not available to condos.) But instead of repaying the lender directly, the co-op makes payments through an assessment on its property taxes — with a corresponding tax lien on the property. The term of a PACE loan is tied to the useful life of the improvement. The theory is that the energy savings realized from the improvements will more than cover the repayment costs. One hitch: co-op boards must get written consent from their underlying mortgage holder before they can qualify for a PACE loan.
To begin the Multifamily Express Green Loan process, co-op and condo boards can send an email to greenloans@nyceec.com. For more information, visit the corporation’s website at https://nyceec.com/
“We’re just getting started with Multifamily Express Green Loans,” Merves says. “We have applications out. The main thing co-op and condo boards need to know is that they can fill out the application and begin the process right now.”

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[David Goldsmith]

C-PACE Real Estate Financing Stymied in New York City

New York City’s C-PACE initiative has been a dud. Only two deals have been reached since the green financing program went live in 2021.

therealdeal.com

C-PACE financing slows to a crawl in NYC​

Delays, restrictions, banks stymie green-lending program

FEB 24, 2023, 8:00 AM
By

• Keith Larsen

For decades, real estate’s masters of the universe have found increasingly obscure ways to score cheap debt.

Bundled mortgages were once all the rage, then the EB-5 “cash for visas” program and later the Israeli bond market.
The next hot thing was supposed to be Commercial Property Assessed Clean Energy. C-PACE allows building owners to borrow at low rates to make energy upgrades. Rising interest rates only heightened interest in the green financing program.

But so far, C-PACE in New York City has been a dud.
Only two deals have happened since the program went live in 2021. One was $89 million for Nightingale Properties and Wafra Capital Partners to upgrade an office building at 111 Wall Street. The other was a loan from a Nuveen subsidiary for 730 Third Avenue, which is co-owned by Nuveen, a leading C-PACE provider.
Industry experts say deals are getting done across the country. But New York City’s green financing initiative has been plagued by bureaucratic delays and senior lenders’ reluctance to accept C-PACE in the capital stack.
Office woes aren’t helping either as cash-strapped owners are wary of throwing more money at a slumping asset.
“No one has come through saying, ‘I need five C-PACE loans yesterday,’” said Matthew Swerdlow, a debt broker at Ariel Property Advisors.

Origin story​

C-PACE differs from other types of alternative financing. It provides the upfront costs to a property owner for both big and small energy-efficiency improvements — from new windows to retrofits to gut renovations. C-PACE is not technically a loan, but a property tax assessment at a fixed rate and paid back over time.
Because of that structure, the program requires legislation by state and local governments. At least 37 states, including New York, have passed enabling legislation, as has Washington, D.C.
“CPACE really mirrors other ways to finance long-term public infrastructure projects,” said Genevieve Sherman, who heads Nuveen’s program.

New York City’s version was enabled by the Climate Mobilization Act of 2019. The centerpiece of the legislative package was Local Law 97, which requires building owners larger than 25,000 square feet to meet greenhouse gas emission limits starting in 2024. C-PACE was seen as a key tool to help landlords avoid fines for exceeding the caps.


But for two years the program was stuck in bureaucratic purgatory as the city finalized rules. Eventually it was made available to existing buildings, but not new development.
Not until June 2021 did Nightingale and Wafra finally close the first C-PACE financing deal as part of a $500 million refinancing of 111 Wall Street, a 25-story office building.

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The deal was met with fanfare from industry proponents and even then-Mayor Bill de Blasio.
“Today, I want to send a clear message to all building owners in our five boroughs — you have a critical financial tool to redesign your properties for energy efficiency and sustainability,” de Blasio said in a statement.

If the message got through, it certainly didn’t resonate. After the second deal, at 730 Third Avenue, the city suspended the program. It relaunched in the fall of 2022, but remained unavailable for new construction. Firms that control buildings through ground leases — a common arrangement in the city — were also excluded.
“New construction C-PACE is what everyone is really excited about,” said YuhTyng Patka, co-chair of Adler & Stachenfeld’s NYC PACE finance group and Climate Mobilization Act task force.
Financing large-scale projects in New York City is complex. Capital raisers scour the globe for investors, adding layer upon layer of debt and equity with varying stakes and seniority. Organization charts for the equity piece alone can look like a Russian nesting doll or John Nash’s notebook in “A Beautiful Mind.”
The allure of C-PACE is financing at 6 or 7 percent, which is much cheaper than mezzanine or even senior loans today. EB-5 and other sources of capital used to fill financing holes have dried up, so although only two C-PACE assessments were made in the city, a fair number of building owners facing Local Law 97 penalties were counting on it.
Another pressing issue is that senior lenders, often banks or debt funds, are concerned about C-PACE’s seniority in the capital stack. Because it is recorded as a tax assessment, C-PACE jumps ahead of the senior loan in the event of a default. Without the senior lender’s sign-off, a developer can’t include C-PACE in the stack.


“There is not one lender in the market that I know of that’s like, ‘Bring all the C-PACE deals to me,”’ Swerdlow said.
But experts say lenders can protect themselves in the event of default. Senior lenders can create reserves to pay for the C-PACE piece. Also, C-PACE does not accelerate like default interest does, and a lender can pay off C-PACE to prevent foreclosure.
“The concerns that the senior lenders have with the PACE program are usually unfounded,” said Patka.
To be sure, deals are happening, just not in New York City. More than $2 billion in projects have been financed with C-PACE, according to the U.S. Department of Energy. Last year, Reef Capital Partners secured $153 million in C-PACE financing from Petros PACE for a 580-acre Utah resort near Zion National Park. And HB Capital snagged $42 million to upgrade a 1960s beachfront hotel in Sunny Isles Beach, Florida.
The lodging sector became a natural suitor for C-PACE as hoteliers used the program as rescue capital during the pandemic. Hotels can also charge fees to pass on some of the costs to guests, according to one source.

In New York, C-PACE can even be used by real estate owners to pay for already completed energy improvements. Insiders call it “retroactive PACE.”

“The longer new construction rulemaking takes in New York, you will see a little more volume on the retro stuff,” said Sandeep Srinath, a director of the global securitization group at ING, which provides financing for C-PACE lenders.

Many expect the city to become one of the top destinations for C-PACE because of its vast, aging building stock. But first real estate owners and lenders need to get more comfortable with the program.
“Someday we are going to wake up and the loans will all start closing, one by one,” said Swerdlow. “Unfortunately, that day is not today.”

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