Dividend Finance closed two Commercial PACE bonds in March 2018, totaling $1,066,882. Each bond funds the installation of carport-mounted solar PV arrays on neighboring Department of Housing and Urban Development (HUD)-regulated seniors apartment complexes in Fontana, CA
The apartment complexes, Piazza Apartments and Dino Papavero Senior Centre, are the first two HUD properties in the country to have solar installed utilizing PACE financing. The power of the arrays totals 478.3kW DC, with an installed cost of $2.85/kW. Both projects include the demolition of existing carports, replacing them with upgraded steel canopies. Additional covered parking will be created as a result of the solar panel installations, a tenant amenity.
Solar Gain West designed, engineered, and constructed the Dino Papavero Senior Centre while John Wood from Sunfolio was the developer on the projects.
The combined utility savings over the 25-year term of each PACE assessment total over $2 million, which will directly increase each property’s cash flow.
Each project qualified for a California Multifamily Affordable Solar Housing (MASH) Program grant. The Program provides solar incentives on qualifying affordable housing multifamily dwellings. Its objectives are to:
- Stimulate the adoption of solar power in the affordable housing sector
- Improve energy utilization and overall quality of affordable housing through the application of solar and energy efficiency technologies; and
- Decrease electricity use and costs without increasing monthly household expenses for affordable housing building occupants.
The MASH grants account for 26% of the projects’ combined cost, reducing the PACE financing amounts and corresponding annual assessments.
The properties’ sponsor owns over 50 seniors housing complexes in 15 states. These two solar projects are its initial forays into going solar, and it anticipates converting other projects to solar with PACE financing provided by Dividend.
HUD has embraced solar as a means of reducing housing project utility costs and improving property cash flow. HUD typically limits annual rent increases to no more than 1.5%; utility expenses rising 3% or more per year potentially lead to a negative cash flow. By converting a variable and increasing utility expense to a fixed payment through funding the solar installation with PACE financing, a HUD property’s sponsor can more readily stabilize project cash flow and reduce long-term utility spend.
HUD undertook a months-long review of Dividend’s PACE program to confirm that it complies with HUD’s required Assessment Procedures, involving regional HUD officials in California and senior departmental officials in Washington, DC. HUD also underwrote each project’s proposed solar PV merits as a means of reducing utility spend. HUD’s approval signifies a significant milestone for Dividend Finance, since this approval covers all future clean energy projects on HUD properties within the State of California that receive PACE financing through Dividend.
Dividend is the PACE Program Administrator for the California Enterprise Development Authority, which issues PACE bonds in California to bring capital to clean energy, water conservation and seismic retrofit projects. Dividend is also a Qualified Capital Provider for commercial PACE projects in Colorado and Missouri.