June 25, 2008
Rocky Mountain News

The Building Owners and Management Association (BOMA) International and the Clinton Climate Initiative on Monday said they have lined up $5 billion in financing sources to provide one-stop shopping to make commercial buildings throughout the U.S. and the world more energy efficient.

The Energy Performance Contract Model was unveiled at a press conference by BOMA International at its annual meeting being held at the Colorado Convention Center.This is how the deal could work, said Brenna S. Walraven, chairwoman and CEO of BOMA International and managing director of USAA Real Estate Co.

An owner gets a loan to retrofit their building and is guaranteed energy savings of $100,000 per year. In exchange, the owner signs a deal with an energy service contractor for $90,000 per year.  The owner pays the contractor with the energy savings and gets to pocket the extra $10,000 it saves in energy costs. If the saving goals aren't met, the energy service contractor has to write a check to the building owner.

The owner doesn't need a lien against the building to pay for the upgrades, because it is basically leasing the state-of-the-art equipment over a number of years, before the equipment is assigned to the building owner. The new energy assets, such as a chiller, are used as collateral for the loans, not the building itself. And the agreement can be transferred to a buyer, if the property is sold.

Tenants are rewarded with lower energy costs and the owner can eventually sell the building for more money because of the state-of-the art equipment.  "The only risk is that it is not understood," Walraven said.  "It's not like your changing the lightbulbs," she said.

The lenders who initially have agreed to kick in $1 billion each are Deutsche Bank, JPChaseMorgram, Citibank, UBS, AB AMRO. The banks will work with energy finance specialist, Hannon Armstrong.  The agreements are "non-exclusive," so building owners can go work with other banks and energy service providers.