State House Square

$ 8m PACE Funding with Special Servicer Approval

Project –  State House Square (SHS) is a 900,000 square foot office complex in Downtown Hartford. SHS recently came to the end of a 20 year contract with Hartford Steam to provide hot and cold water to the facility.  SHS realized that they could now construct their own on-site boiler and chiller to reduce their overall energy costs, instead of contracting for new services from Hartford Steam, an unregulated utility.  The $8M Project calls for the installation of a new Central Heating & Cooling Plant.  Upon completion of the Project, SHS reduced their annual utility expenses by over $2.2m per year. The net increased cash flow from the project is over $1.8m/year.

Challenge – Vireo Energy was retained to secure equipment lease finance for SHS, but ran into a problem with mortgage approval.  Their mortgage is held in a collateralized mortgage pool managed by CW Financial, a special servicer.  The servicer would not allow for SHS to lease the equipment as it potentially could negatively impact their available cash flow to meet debt service.  Vireo contacted CW Financial in order to explain the benefits of financing through PACE.  CW had no previous experience with PACE finance, but we were able to prove that the energy improvements from the new equipment would increase cash available for debt service by over $1.3M/yr.  After months of negotiation, CW approved the PACE loan.

Results – SHS was able to build the system utilizing PACE financing to dramatically increasing their property value by over $21m, and reduced the loan to value by over 10%.  SHS property owners used the off-balance sheet, PACE loan to replace the $8M equity contribution the owners would have otherwise had to provide.  SHS will soon re-finance their mortgage and are now in a much stronger position to negotiate more favorable terms.  This project is one of the largest PACE financing to date.