When 111 Wall Street was built in 1968, the 24-floor building was a risk, considering subsequent the financial crisis, better known as the recession of 1969 and 1970. But this modernist glass tower — known today as the Citibank Building — has retained its retro vibe with fluorescent strip lighting and office cubicles.
That interior style will soon change. The building is the first to partner with the city of New York’s de Blasio administration, which is helping building owners meet carbon emission targets through low-cost financing for energy upgrades.
It’s called the PACE program; Property-Assessed Clean Energy. This financing tool helps commercial and multifamily building owners. It’s either “C” for Commercial Property-Assessed Clean Energy (C-PACE) or “R” for residential R-PACE.
C-PACE offers buildings long-term, flexible financing for building improvements. Borrowers repay the loan in installments via a charge on the property’s tax bill. The New York City program is authorized under New York City’s Climate Mobilization Act, and helps building owners decrease their utility bills.
“There is something special about being the first C-PACE transaction completed in the big apple,” said Mansoor Ghori, CEO of Petros PACE Finance, who helped make it happen. “The fact that the first transaction shattered the record for the largest C-PACE transaction ever closed is proof of the magnitude of New York City’s potential for C-PACE.”
Petros Pace Finance provided a $89M loan to upgrade 111 Wall Street. The building’s developers, Nightingale Properties and Wafra Capital Partners, have been seeking a $860M loan for a complete redevelopment that includes interior and exterior renovations and an overhaul of its infrastructure.
It’s what the Petros development team called, “transforming the 1.2 million square foot waterfront office tower into a Class-A downtown New York City office.”
The C-PACE financing helps a redevelopment that includes a full exterior renovation and an overhaul of its infrastructure. It also helps fund smart windows from View Smart Windows, a brand that provides energy-efficient artificial intelligence-powered windows to allow office workers to browse the internet on a piece of smart glass like a laptop. The post-laptop era is upon us, thanks to smart windows like this. But smart windows are more than just tech-savvy; they allow for tinting that boosts productivity.
“It’s a key amenity to attract tenants focused on employee wellness in a post-pandemic office environment,” Meyer said. “These smart windows are designed to make buildings healthier, smarter, and more energy efficient, a critical differentiator in asset renovations which ultimately benefits a landlord’s bottom line.”
C-PACE will also fund roofing, lighting and electrical improvements throughout the building, Meyer explained. “The savings achieved from the PACE-financed improvements is in excess of $95 million.”
The renovation will also replace fluorescent strip lighting with LED lights and update the building’s technology, including an innovative smart-glass façade.
“They’ll redo the façade and many different energy efficient upgrades,” Ghori said. “It’s a major rehabilitation with filtration systems in HVAC and an overall, more energy-efficient and upgraded system than before.”
Design firm Studios Architecture, who have created office headquarters for Nike and Microsoft, have been enlisted to upgrade the building as a Class-A office tower. The new building will offer more loft-like spaces for lifestyle amenities, alongside a conference center, event space, bike room cafe and fitness center. There will also be a green space, including a wooden rooftop lounge, floor-to-ceiling windows and new elevators.
C-PACE, a financing innovation first introduced 10 years ago, allows property owners to fund projects without any out-of-pocket costs. It’s helping provide access to capital for “long-lasting energy-efficient systems,” said Fred Lee, the co-CEO of New York City Energy Efficiency Corporation, also known as the NYCEEC, “so the project is part of the city’s pandemic recovery and energy transition.”
This type of financing is approved by local governments because it conserves energy, encourages economic development and has a positive impact on creating more livable neighborhoods.
In addition to New York, the industry is currently working on various PACE financing programs, including a C-PACE program in Oklahoma. C-PACE legislation was approved this year in Maine, Tennessee, Montana, and New Jersey (the administration program is underway before lending is finalized).
Making it happen was no easy feat.
“In New York, we worked with the mayor and the NYCEEC folks to work through what the program would look like, what documentation was necessary, what needs to occur before it gets approved,” said Ghori. “It took months of hard work with all the folks in New York City to close the deal. It was a heavy lift.”
Commercial buildings now have the chance to speed up the process of upgrading their infrastructure.
“Historically when you’re doing energy efficiency upgrades, the payback is typically long, like 10 years minimum and up to 30 years, based on what you put in,” Ghori said.
These loans are typically at a fixed-rate and fully amortizing, non-recourse and non-accelerating.
With C-PACE, financing is three-to-five-years maximum. For sponsors, that’s beneficial. Before, they typically hadn’t seen the potential reward for joining these projects.
C-PACE is also part of a movement that addresses climate change and energy efficiency with more than lip service. Ghori and others helped form the C-PACE Alliance to expand the footprint for this new financial tool across the country.
The members of the alliance are helping get C-PACE in as many states as possible. So far, it has been approved in 34 states and is live in 21 states. It’s all a matter of working directly with municipalities to find out what needs to happen and be put in place. All the major lenders and vendors have to be on board, too.
“We’re seeing large cities open up, after New York City is Chicago, and New Jersey should be opening up soon, too,” said Ghori, who remains optimistic. “With these larger cities on board, it will help expand C-PACE exponentially.”