And _____ _____ we learned that HUD had and I'll reference in a few slides for with the best of intentions, I believe, had placed some requirements on being able to use PACE financing in a HUD project that proved to be quite logistically quite large obstacles, the first one being that they not surprisingly required that there be enabling legislation that permitted this transaction. Next slide? Peter Adamczyk: I would just add this is I guess a more general comment but I think it applies to the spirit of the question, and that is that as with any new idea or an idea that doesn't have a long track record, somebody has to want it to happen. And so they required it to behave like a property tax. Peter, are you on mute? So here's a summary of self-funding versus PACE, and the again PACE increases the tax equity basis, which provides an opportunity to leverage additional low-income housing investment tax credits, a great example of the fact that while PACE financing is complicated, so is multifamily affordable housing financing. What we want to accomplish today in particular is to better understand the challenges and opportunities associated with financing efficiency upgrades in affordable and market rate family housing, as well as to understand some trends, successful models, and case studies for using C-PACE in the multifamily housing market segment, including existing properties and new construction. But we have had a new construction in our area where a property owner has actually used it it's not multifamily, but just as a quick example but has had PACE layered into a net zero energy building for building enveloped. And I am at this point gonna turn it over to Peter to talk about the financing side. And _____ a PACE program and they said, "All they have is money," I thought was really funny because everyone's saying, "We need money; we're looking for money." Elizabeth is a managing consultant at Optimal Energy with more than 25 years of experience in low-income sustainable energy policy and programming. The value proposition of PACE is that it's structured to recoup savings through avoided energy costs, and that that is presumed to be the means by which the cashflow will arise to repay the financing. Well, let's start by taking all of those barriers and then load a whole 'nother set on top, and that's what you see on the screen. Kieran. They required that there be no accelerated payment, which is obviously very important. There are not the sorts of regulatory requirements that subsidies entail. It really is a simple, you know, mathematical gain here from the standpoint of the traditional capital stack, is as we're showing on this slide in blue where you do have the traditional debt at those percentages. In the lesson students talk about the communities they belong to, find out what they share with their classmates, watch and discuss a video about what a community shares. So let's get to the introduction of our speakers. What you're gonna be hearing about was completed in 2018 and so some of the data we tried to update a few data points here and there, but some of the data are from that point in time because that was sort of the _____ point of the data in the report. SPEAKER 9: And its very clear that Palo Alto Networks is very, very invested in their employees.

And that's the way this owner/developer kind of looked at using PACE, was that they could use PACE rather than kind of be beholden, so to speak, certainly at a higher rate, to the development. We'd like to start by saying that there are many, many barriers that have nothing to do with renting, with multifamily, and with affordable housing. In closing, Elizabeth earlier mentioned that $68 million figure from PACENation, which is an excellent organization I also would recommend to you. I'm aware of some states that define it as five or more. What we're looking at here is a not-atypical project where there's a variety of costs, acquisition, hard costs that will be necessary for the energy conservation measures, soft costs likewise unavoidable, in this example for a total of $52 million. It is one of the most commonly used mechanisms for affordable housing finance now, and those are structured as 15-year deals. So EEFA approached us at VEIC and said, "We see C-PACE as a potentially useful tool for multifamily housing but we're not we want to understand better the barriers, and we want to understand better the opportunity." A couple of other things, again more kind of what I would consider kind of market rate in the multifamily housing, again just making sure that everybody understands, is that on what we're showing here is on the left actually or kind of _____ got switched over on this one. And the reason for that again, a quote was that one of the bankers said that they loved owing money to themselves basically 'cause they were comfortable with the credit risk. Can you hear me now? They comprised both deals in assisted housing and another acronym naturally occurring affordable housing, and I'm gonna get to that in a minute and define that and give you a sense of what the scale of that market is. SPEAKER 1: The best thing about working here is really the camaraderie. And then last, the owners just struggle in this affordable housing world owners are struggling with so many competing priorities that it's just sometimes very difficult to get their attention. Love this lesson and the video thanks once again, Kieran! I watched this video a couple of months ago. Next slide, please. So still in that scenario on that graphic we have lenders that will go up to 30 percent to go up to an 80 percent with PACE at 30 percent, plus the 50 percent debt on the property. SPEAKER 6: Is be included in the team and be able to work with the best support. The high earners. This first one is for policies and programs. But I'm always happy to field any questions at any time, either via the phone or e-mail. Thank you. Today's agenda: I'm gonna start with a bit of brief background and level setting. There were of the 15 deals that we looked at, there were 7 that were in assisted affordable housing transactions, and this slide shows where those deals were taking place: California, Connecticut, Florida, New York, Michigan, and DC. And so it ended up being an actually pretty complex deal just from the straight transaction. Those comprise about a million units, which is seriously down from four to five years ago, but there are about a million units of public housing in the US. What does that mean? I've got another question here, and I think this kind of refers to some slides that Chris shared. And I would say that certainly every _____ project that I'm personally aware of, including the subset of the multifamily affordable housing, there was a champion there, or somebody who said, "I think it's a good idea, or at least I think this is something we should be considering. This is as distinct from the expense reports, which shows incomes and expenses for a period of time. SPEAKER 12: Engaging in a way that is collaborative and drives value towards meeting the mission and vision of the company. So in all of our work in energy efficiency we see many, many barriers to anyone taking action. Next slide, please. Next slide. But both were factors for the multifamily affordable housing sector. And those who've always been here. Peter Adamczyk was a principle consultant at the Vermont Energy Investment Corporation for ten years until his retirement in October 2018. And if that utility allowance is able to be reduced, then became what the resident pays is maximized at 80 percent of their income, if the utility allowance can be reduced, there actually is a mechanism for more of the resident monthly payment to end up in the owner pocket. So the first one there we told you about closed back in 2017. Subscribe to Film English to receive notifications of new lesson plans and viewing guides. How long had the legislation been in place? Chris Jones: Not owner's equity. I see we've already got a number of questions rolling in here, so go ahead and type those right into the chat box. And so on, so that line really stuck with me, that to say all they have is money, and it's a reminder that although we're focusing today on the financial aspect of PACE, it really only works _____ considered in the larger context of understanding the project, having the right technical support, and so on. PACE's eligibility is based on a different set of criteria and there are frequently cases where PACE a project can be eligible for PACE financing when it has exhausted all existing financing opportunities. And they're all basically looking at who are the developers and multifamily unit owners and decision makers who need to know about Commercial PACE, who they can reach out to and kind of share insights that they've learned from today's webinar with? And were all different. The approach we took was really to start if you're not familiar with PACENation, it is a wonderful resource that anyone interested in Residential or Commercial PACE should be accessing on a regular basis. SPEAKER 7: We learn every day. So we've got some fantastic speakers lined up for today to share their experience on how to make Commercial PACE programs better serve this market segment. So 20 percent of an as-completed or as-stabilized value different PACE vendors have different underwriting requirements, but essentially the PACE capital provider in general is around that 20 percent number. So of the 2,000 deals that we collected some information on or were at least querying program administrators on, only 15 of those were in the multifamily affordable range. So for me that would be, like, the prime connection to make. That picture right there is the Phyllis Wheatley YWCA, which is an actual PACE financed project. And when you spend other people's money and get any benefit from it, you're dividing by zero. Then the other type of housing is subsidized affordable housing. So we're always kind of happy and thinking about that. - Who in this room was the class clown? All the best, And, yeah, I'd say properties that are not master-metered face a much steeper uphill climb. The third one is one of my absolute favorite euphemisms in the energy world, value engineering, which simply means leaving things off the table that are _____ out. She was part of the team that launched the DC Sustainable Energy Utility in 2011, and she served as the first low-income multifamily program manager. Chris will present this case study and other experience to take away from Ohio on his remarks today. Elizabeth Chant: Thank you, Sean. Hi Luminita, This is just one example of the types of outputs the LEAD tool can generate. And so that is really kind of the hook, so to speak, on where new construction projects have really incorporated PACE. We're gonna give probably another three to four minutes for folks to get their visuals and audio up and get situated and we'll get started soon. Chris, we'll give you the last word if you have anything to add on how to do outreach with prospective developers to originate projects. And there's our contact information. In their role of looking out for the existing financial institutions and their involvement in financing, they required that any existing mortgagees have sufficient notice and time to in the event that there was a problem that they could step in. It is an annually-occurring tax liability, which appears each year when you get your tax bill. I will also I guess say that I think the city of Covington, once we were done with this project, also kind of saw with a different perspective how PACE from a capital stack layer was beneficial. Parking in this urban area was very much at a premium, so they did add a subservice parking garage to this development. And so one of the things can be that there could be someone who says, "I just don't want this to happen until such and such a date in the future," and so they're not gonna actively sabotage you but they have no incentive at all no economic incentive, I should stress, to participate in any financing midstream.

Touch a word or the button for sound, Click on a word or on the button for sound, Click on a word or on the red button for sound. And to learn from different types of people, who might not be stereotypical business people, is really powerful. Peter Adamczyk: I'm sure Elizabeth has something to say about this as well but I'll just make the one point that is the next recapitalization date known to the day on the calendar? They encouraged us to tell people to seek out their local HUD contacts and to work with them to try to overcome obstacles. And if you don't have somebody that is central to the development of the project who wants it to happen, boy, is it a tough slog. There are other cycles with other types of properties. That's it for me and for my slides. And finally, and this was at the onset one of the most important obstacles, they required that the state attorney general issue a written opinion. They were very interested in PACE being an additional source of financing. And so for most of the programs that we have seen across both of those states, there is not a target of, you know, five percent above code or ten percent above code. Ive been using this the video in my classes for some time now. Hi Liana, There is a lead-time between legislation, program implementation, and as we'll see through this webinar today, really getting the market up and running and understanding how to approach these financial transactions. And subsidized affordable housing can really be broken into two broad areas: assisted and public. Its a great video. So let's say at seven or eight years there was a way to structure the financing so that the payments would occur over the next seven or eight years, and then the PACE financing would be part of the next recapitalization. But EEFA was interested and can you hit advance, 'cause I think there might be one thing about EEFA _____ on that slide? Prior to that he worked for 23 years in senior investment and finance positions in San Francisco, London, and New York. And it lowered the operating expense of the building and thus improved the underlying economics of the borrower. So even within metered structures when it seems like there's a split incentive, in subsidized affordable housing it can get even more loop-the-loop and it can turn around and be a non-split incentive, just to make it really complicated. So what we found was, as we all know, Commercial PACE started with the first enabling legislation in 2009, and by 2018 we had 37 states that had enabling legislation in place, and we had more than 2,000 deals that had happened. Beneath the surface, we have more in common with each other than what our outward appearances might suggest Its easy to put people in boxes. I know for a fact that it the first actually new construction in the state of Kentucky, but it just happened to be in the multifamily sector as well. We are the leader. Sean Williamson: Got it, thank you. Peter Adamczyk: Okay, sorry about that. All the best, We were quite surprised I was certainly that a government entity was so enthused about something that hadn't been done before. It was a as you can see, a new construction, senior living housing unit. And so I think on this particular one I think they did increase some of the energy efficiency numbers to once PACE got involved. Chris Jones from Bricker and Eckler will walk us through a case study from one of the first projects meeting this definition and he'll share some experiences and some lessons learned as well as pitfalls to avoid from his experience in Ohio. There were 15 deals that we were able to get some information on. And another thing I would just add quickly to it from an efficiency standpoint and a benefit, you know, those higher efficiency building envelopes do come with also non-energy benefits such as significant sound dampening, soundproofing, which is really kind of crucial we understand kind of in the kind of hospitality space, you know, hotels in particular. As I said, the complexity of the financing and the deal structure, just trying to get even something as simple as trying to get approval of all those different financial partners and Peter will talk a little bit about that. So a lot of the subsidized affordable housing now really thinks and plans their capital improvements on a 15-year cycle. And if we look at those units on the whole, we've got about 2.6 million that are voucher-based and about 1.5 million units across the country that are project-based. So the point I want to highlight here is as you look down in the bottom-right corner where it says, "The infinite eternal rate of return," that sounds like hyperbole but it's actually literally true, and that's through the magic of a term that I learned in my many years working on Wall Street, which is OPM, other people's money. So what are the unique challenges facing energy efficiency upgrades in multifamily properties? We've got three expert presenters on today's call, each talking approximately 20 minutes, and I will introduce them independently shortly. So the rationale for that clause is which is called due upon further encumbrance is to notify the lienholder that they may wish to look more closely at that their borrower. Thanks. What were the characteristics of those? And Elizabeth and Peter will get into the details of this in just a bit. We're gonna give folks another minute or two to log on and get situated and we'll get started soon. I encourage folks to check out the LEAD tool and explore it on your own time, but it can be a fantastic tool to help inform these decisions. All right, next slide? But it's definitely a long-term you know, I think there was some interest there, but some of the realities kind of took over and the fact that there was some turnover of the folks that we spoke with, and it was just kind of hard to gauge back to the transition, which the conversation which also went to Peter's note of just struggling with competing priorities, just daily activities. Everyone, stay healthy, stay safe, and enjoy the rest of your day. As I stated at the outset, there's a great deal of demand by state and local sponsors to ensure that their Commercial PACE programs are serving all segments of the market, including multifamily housing where that is defined as an eligible property type. Public housing is what we're very familiar most of us are very familiar with our state housing authorities or local housing authorities that own and operate public housing that own and operate public housing units. Tax-exempt pace displaces the equity, and that's a key point. Next slide. And what best practices and case studies are available? Kieran. Certainly from some of the underwriting requirements, as Peter and Elizabeth mentioned, there is mortgage lender consent that is required. It seems kind of counterintuitive, but they absolutely were. Prioritizing PACE projects at minor financing points, _____ capitalizations to minimize what the jargon is brain damage. And that permission to make mistakes really promotes this growth-oriented culture that allows you to become the best worker. So while we looked across the country, we did pay attention to those states where EEFA had advocacy resources on the ground and was working with opportunities that might be more immediate than other opportunities. And one of the interesting things that we found in this project and also in some others was that the bank that had the existing financing or that had some of the existing financing on the building expressed a great deal of interest, and in at least one case actually did provide the financing for the PACE super-senior tax assessment. Today's webinar is recorded. Sean Williamson: Great, thank you. We who are madly in love. So I do have just a couple of case studies to share. So why today's topic? There are enough projects in the pipeline that you can look to the next major refinancing event and incorporate PACE planning in that. Beautiful lesson. It can get even more complex than that, than a simple split incentive, and the metering can actually in some subsidized housing structures become immaterial or even an incentive in that in some instances residents may pay utilities, but they then receive a utility allowance. Elizabeth Chant: This is Elizabeth and I don't know the answer to that question of the deals that we looked at. Sean Williamson: Gotcha, okay. Often it means buying a cheaper piece of equipment that's going to have a higher operating expense, and what you're doing is you're locking in higher operating costs for many years to come, and that's the exact antithesis of what we're trying to do here with energy financing and with improving the quality of the energy fitness of these buildings. We who are bisexual. And there are an increasing number of PACE providers that are that recognize that the success of any participant at this stage in market development is a success for all, and we encourage all to share their successes and let others know. Again, this is discussed in greater detail in the report. Buy any 3 Lesson Plans, Viewing Guides or Teaching Resources, and get the cheapest free. It's a very thorny issue. You know, so I think it's incumbent at the end of the day to have programs really kind of promoting more high efficiency, if that is what they're wanting to see. Attendees are in listen-only mode and are encouraged to type questions or feedback in the webinar interface throughout the webinar. So it is possible, but generally that would probably be reverse-engineered. How can Commercial PACE address those challenges? Rural development, same thing, it could be a very long-term mortgage. So back to the slide here. And properties that are not master-metered are just _____ into that buzz saw, where the cost of the financing is not going to turn into reduced operating expenses for the person spending that money. I am going to ask you some questions today. Sean Williamson: Good afternoon and welcome, everyone, to the webinar. The religious and the self-confident. And if you dont like it, thats OK. SPEAKER 9: Be your best doesnt necessarily mean perfectionism. Chris Jones: Yeah. EEFA's long-term vision is that really to catalyze equitable access to clean energy resources for everyone. Two of the parcels were actually city-owned, and so what happened there was that the city actually acquired the third parcel and then ended up doing a ground lease to the developer. So the link to the resource is on the slide here. Now in some localities that is not a legislative requirement but it is best practice, and I would state again that the rationale is that the avoided energy costs are where the cashflow's gonna come from to repay this assessment. You know, we'll kind of walk through each of these, but Covington, Kentucky, for those that don't know, is literally right on the Ohio River across from Cincinnati, downtown Cincinnati, so kind of the extreme northern Kentucky area. It just simply says above code, and so like I said, for the most part we do see those improvements get more than just a little bit above code. The report that you see on the screen was written while Peter and I were both at VEIC, the Vermont Energy Investment Corporation. And maybe this is more appropriate for Elizabeth and Peter, if you saw any example of that in your research. People ask me this I do a lot of interviewing, people who want to come and join. I'm trying to think of any other highlights to this one, other than I can just say it did take a little longer, which I think probably for the most part multifamilies do take a little longer, especially I think when you get into the affordable kind of housing. So, Chris, take it away. Hi Linda, Forrestal Building1000 Independence Avenue, SWWashington, DC 20585, Principal Deputy Assistant Secretary's Office, Weatherization and Intergovernmental Programs Office, About Office of Energy Efficiency & Renewable Energy, Transcript for Commercial PACE for Underserved Market Segments: Multifamily Housing. SPEAKER 11: Think unthinkable, and dont, basically, hesitate to challenge the status quo. Again generally what we see is five to ten percent remaining. As this statistic here shows, the energy expenditure per square foot in multifamily rental housing is on average 37 percent higher compared to owner-occupied multifamily, 76 percent higher compared to owner-occupied single family homes. And all of us who love to dance. And the multifamily property owners may have said, "Well, actually, we can get money for a much longer period of time," because a lot of their subsidized housing money does work in 30, 40, even 50-year terms, or they could get lower rates. And we who've bullied others. I thought that was an interesting anecdote. Just happy you like the lesson and video. But so I just wanted to kind of show this so everybody's kind of familiar with what we're doing, in case you hadn't seen this one. So in Ohio we have villages, townships, and cities. Thanks very much for commenting. Great idea for a lesson! All right, so two quick slides about our recommendations from the report of best practices. That's the traditional and very thorny issue of split incentive. But basically the left vertical building is the existing building, and the new construction or major gut rehab is the building on the right. Kieran. Elizabeth, anything to add to that? Very few of those deals, 15 so you can do the math; that's a quick calculation; it's a really a small number involved the multifamily affordable housing sector. Next slide, please. Those four nonprofit organizations have been principally funded in their EEFA work by the JPB Foundation. It's a part of the technical webinar series under the US Department of Energy's Commercial PACE working group. Did they arrive at that amount based on what they needed or are there limitations in place? And so from an energy efficiency standpoint, the PACE funds went to multiple improvements through controls, through heating/cooling systems, through building envelope, just to name a few there. Cheers, Unfortunately I cannot use it in class because I teach young learners. I'm not sure if we had the metering data. So if we look at affordable housing in its entirely, we can break it first into naturally occurring affordable housing on the right, which is basically market-rate housing that by virtue of rent level and by virtue of income levels in the local area is affordable, is considered affordable by HUD standards, by standards used by the US Department of Housing and Urban Development. Due to such , I call, experiments in their positiveness, of course, lots of deepest hidden secrets of humans can be revealed. SPEAKER 3: I dont think you could really put it into words, but its the fact that all of us love to work together.