125 Maiden Lane gets free greening -Texas outfit will do the $1.4 million job and pocket the 24% cost savings over the first decade, with aid of some financial backing from the city

http://sallan.org/pdf-docs/NYCEEC_125MaidenLane.pdf 

A downtown office building will get a free energy-saving retrofit worth $1.4 million. The gift comes from a company that assumes financial risk for such renovations and a New York City agency.

The retrofit project utilizes a structure for funding energy efficiency called a Managed Energy Services Agreement (MESA), offered to property owners by Transcend Equity and its joint venture partner, Mitsui & Co (USA), Inc (Mitsui USA). Under the MESA structure, project costs are repaid only through energy cost savings generated by the retrofits. The New York City Energy Efficiency Corporation's (NYCEEC) participation, backstopping the projected energy savings, helped enable Transcend Equity to close the funding necessary for the retrofit project. The retrofit measures will include installation of a state of the art direct digital controls backbone, an automated building management system, high efficiency motors with variable speeds, new steam valves and other upgrades. An energy audit, required as a condition of financing, indicated the project will save 24 percent in total energy usage at 125 Maiden Lane.

125 Maiden Lane is a 320,000 square foot commercial condominium office building. Most of the building’s energy systems date to the time of its construction in 1958. It is home to several local and international non-profits.  MESA does not place debt on a building and does not violate tenant leases, allowing a building’s occupants a greener, more efficient building at no additional cost to its owners. The 125 Maiden Lane retrofit is the first MESA transaction in a New York City building. NYCEEC expects to play a similar
enabling role in many other comprehensive retrofit projects in the future.
...
“We evaluated a variety of retrofit funding options before selecting MESA,” said Rick Recny, Director of Asset Management for Time Equities, Managing Agent for both the Condominium and the Sponsor. “It shifts the performance risk and funding responsibility away from the office condominium unit owners....

“NYCEEC played a critical role in this transaction and really showed it has the capacity to help bring the energy efficiency market to scale,” said Steve Gossett Jr, Vice President of Transcend Equity. “We are already preparing a series of additional, much larger transactions in New York City for which we’ll seek the same catalytic NYCEEC participation....

...

Transcend Equity will pay for the work, and then hope to make its money by pocketing the energy-cost savings the retrofit generates over a set period of time. The attraction for building owners is that they reap the cost savings after the contract with Transcend Equity expires. In the case of 125 Maiden Lane, the contract runs for ten years.

“We take on a huge amount of risk,” said Sean Patrick Neill, managing director of Transcend. “It's good for the owners, because we pay for things they were thinking about fixing any way.”

This is the eight-year-old company's first project in New York City. Most of Transcend Equity's projects range from $2 million to $10 million.
...
To help foster the project, the city's Energy Efficiency Corp. agreed to back up 20% of the loan—about $190,000 worth—that Transcend Equity is taking out to finance the renovations.  The lender, BB&T Bank, wanted the additional security, said Fred Lee, director of legal affairs and finance at the city's Energy Efficiency Corp. The city monies are coming from a $37.5 million federal grant designed to promote retrofitting and sustainability in the city.
Time Equities had long wanted to renovate the building, but the condo owners ... didn't want to spend the money.

 

New York City established the NYCEEC earlier this year in an effort to achieve the ambitious energy goals included in Mayor Bloomberg's long-term planning effort, PlaNYC.  NYCEEC, which was initially capitalized with $37.5 million in funding under the American Reinvestment and Recovery Act (ARRA), is scrambling to spark a modest revolution in the market for energy-efficiency retrofit financing for private building owners. In particular, NYCEEC aims to support a portfolio of energy-efficiency financing products to drive energy efficiency investment in the Big Apple.

 

Neill believes the MESA model will solve a problem that does not yet technically exist, but almost certainly will by the end of 2012. That problem is a consequence of the so-called accounting convergence in the works at the Financial Accounting Standards Board in Norwalk, Conn.  The convergence is likely to make it very difficult (but not impossible according to Neill) to secure off balance-sheet financing for investments in energy-efficiency building retrofits. 

 

http://sallan.org/pdf-docs/NYCEEC_125MaidenLane.pdf December 15, 2011

"125 Maiden Lane gets free greening -Texas outfit will do the $1.4 million job and pocket the 24% cost savings over the first decade, with aid of some financial backing from the city" By Theresa Agovino 

Crains New York www.crainsnewyork.com December 23, 2011http://www.crainsnewyork.com/article/20111223/REAL_ESTATE/111229922

Green-Energy Finance Guru: 'We've cracked the code.' By William Pentland; Forbes via Yahoo Finance http://news.yahoo.com, December 15, 2011 http://news.yahoo.com/green-energy-finance-guru-weve-cracked-code-021259132.html