CHICAGO, IL (June 30, 2011) Transcend Equity, a leader in developing energy efficiency projects in commercial real estate, private higher education, and healthcare, commits to partnering with industry and investors to accelerate the usage of its Managed Energy Services Agreement (“MESA”) structure to facilitate energy efficiency in privately owned buildings.
Transcend expects to invest a minimum of $75 million in energy efficiency improvements over the next 18 months nationwide, projects which will save 25% or more in energy usage.
“We are delighted that the Better Buildings Challenge has focused the nation’s attention on the inefficiency of its aging building stock and challenged the private sector to provide a solution,” said Transcend’s President Steve Gossett Sr. “We are pleased to respond to that challenge.”
Transcend brings to bear a recently signed a joint venture investment with Mitsui USA, the US subsidiary of one of the world’s largest trading companies, as well as a track record of successful development and execution of energy efficiency improvements in more than thirty buildings. In addition, Transcend secured $9 MM in American Reinvestment and Recovery Act (ARRA) funding through the Chicago Metropolitan Agency for Planning to provide credit enhancement for lenders funding Transcend sponsored efficiency projects in the Chicago region.
The Clinton Climate Initiative,, a partner of the C40 Cities Climate Leadership Group (C40), has played a significant role in raising awareness of the innovative approaches to energy efficiency, such as MESA.
"Transcend's approach will bring investment to energy efficiency projects across commercial buildings and private higher education and health care facilities,” said Scott Henderson, Director of Building Energy Efficiency Finance, Clinton Climate Initiative. “It will help overcome one of the biggest and longstanding barriers to energy efficiency – finance - and enable projects that otherwise would simply not get done."
Transcend commits itself to attracting debt providers to leverage its equity commitments while aggressively marketing and financing projects identified by Better Buildings Challenge partners and showcasing projects under the Better Building Challenge to help stimulate additional demand.
Mitsui USA and Transcend Equity Development Agree to Form Innovative Joint Venture in Energy Efficiency
"Transcend Equity takes the pain and mystery out of efficiency retrofits for commercial buildings."
On average, Transcend can lower utility costs by around 30 percent. In some cases, like the 1025 Elm Street building in Dallas, utility bills dropped by 40 percent with about $10 million in capital improvements. If you are in New York, go check out 125 Maiden Lane, where Transcend will replace the building controls system, ancient electric motors and other equipment.
Read the full WSJ article here.
Several local and national efforts are underway to collect pre- and post-performance data on energy efficiency retrofits, some focused on multifamily buildings, others on commercial, others encompassing multiple property types.
The best of these projects are targeted at creating a dataset that can ultimately be used to backstop underwriting.
It would be ideal if data collected across these various projects could be combined – many of the organizations involved have commitments to transparency and data sharing. Combining the data raises the question of compatibility, however. Indeed, one wonders whether the data in any one of these efforts is internally consistent. The process brings light on questions like:
- Was the pre- and post-usage data complete?
- Does the dataset include actual installation costs by measure?
- Does the post-usage data account for changes in weather and occupancy? If so, how?
To be of any use at all in underwriting, it is imperative that the methodologies applied to one project in a dataset apply to the others as well – that the “fields” in the data set and the method for generating the data in that field is the same for each building. If that were true not only within each data-gathering project but across each of them, the contribution to underwriting energy efficiency could be significant.
We recommend this blog post by David Levy (professor) mainly because he does a good job of laying the groundwork for the need in LEED EB. There are several big thoughts to consider when reading his blog post:
- LEED EB projects are up 35% since last year
- NYC has over 5,000 buildings that are classified as skyscrapers, and over 900,000 buildings in total
- 80% of NYC's greenhouse emissions are created from these skyscrapers
- In the United States as a whole, 38% of greenhouse emissions are created by commercial buildings
- 85% of the buildings in NYC by 2030 already exist today
So, in summary, LEED EB is growing rapidly and it won't slow down anytime soon. This also means the financial modeling of how to pay for all these projects will continue to expand and innovate the industry.
It would help to advance the debate around energy efficiency investing to eliminate or at least to temper this unhelpful fiction. The guarantee is not, in fact, a financial structure or an element of a financial structure. The guarantee is a legal agreement that aims to limit, to the maximum extent possible, the circumstances under which the guarantee can be called and establishes a framework for resolving disputes through engineering methodologies over which the ESCos have vastly greater mastery than their typical clients. Even if successfully called, compensation would materialize after engineering analysis, modeling, and verification -- and still later in the case of litigation. There is no financial reserve backing an ESCo guarantee. It is not in any sense a first loss or other credit enhancement to an energy efficiency project. In very important ways, therefore, there is no difference between performance risk and "host risk" -- the guarantee does not offer any bankable way to distinguish whether cash flow problems that jeopardize a property's financial stability are the result of the host's challenges or the failure to achieve savings.
• Breaking down the costs of green improvements and designs and how to get them financed.
• How improvements can add resale value to an asset.
• How long-term cost savings can be realized via building features including alternate energy generation, HVAC systems, lighting and construction materials.
• How brokers can position themselves to gain new agency or tenant rep assignments through understanding this issue.
• New reconnaissance on LEED ratings.
Is the recent article by The New York Times titled "Loan Giants Opt to Block Energy Programs" just one layer of the onion?
More REITS are getting in the act of repositioning the very office space they actually office out of, but they are also repositioning the buildings in their major markets in order to get corporate LEED EB leases. Wells REIT is obviously repositioning a chunk of their portfolio not just for themselves but because that is what the market is demanding. This is a trend we are seeing across all major markets. Commercial property owners can't move fast enough to renovate their buildings for the ever demanding energy efficiency market.
If you have not downloaded this free online book by Scott Muldavin "Value Beyond Cost Savings - How to Underwrite Sustainable Properties" then do it today and enjoy an in-depth analysis by Scott.
Q: Why wouldn't the owner make the energy retrofit investments if they generate returns MESA's investors?
Q: What about triple net leased buildings? How does MESA work?
Q: What about buildings with full service gross leases (where the landlord pays all operating costs)?
Q: When would it make sense to use our own capital?
Q&A about MESA and Transcend's Financial Solution for EE Projects
Transcend 1025 Elm Project Profile
In it's most recent issue the NYInc Magazine covered the subject of "How Green Are We?"
This report released back in February of 2010 is one of the better ones written in the last year or two. Bob Hinkle and David Kenny do a good job of covering everything from the basics to the major hurdles facing large commercial (and others) energy efficiency projects.