PropertyFit can be used for existing building and new construction project turning what was once a capital expenditure into a cash flow positive investment in improved building performance.
In existing buildings, technically sound building resiliency projects regularly compete for limited resources and are often trumped by projects that build revenue and market share. For some owners, the challenge is compounded by a lack of cash to pay for capital improvements. And, getting bank financing that requires a personal guarantee, direct owner investment, and other onerous conditions might not be the answer. For some property owners, the uncertainty of a how long they intend to own the building, the cost of project capital vs. corporate debt, and the balance sheet impact of borrowed funds present additional barriers to the use of external capital. In new construction projects energy and water conservation improvements are often “value engineered” out of the project for cost savings purposes.
The unique structure of PropertyFit financing removes these barriers, turning what was once a capital expenditure into a capital investment with the potential to generate immediate cash flow and return on investment. PropertyFit minimizes an owner’s up-front investment while lowering operating costs, improving the value and market competitiveness of the asset and helps the property achieve building performance mandates.
Unique Components of PropertyFit Financing
Unique components of PropertyFit Financing include:
Up to 100% Financing
Many owners lack capital to pay for building resiliency improvements. PropertyFit provides up to 100% financing for qualified building upgrades. Audit, construction and financing costs can be wrapped into PropertyFit financing.
Commercial real estate lenders will often amortize their loan over a 20 year period, but will require a balloon payment in five to 10 years. With PropertyFit the maximum term is based on the average weighted life of the improvements being installed. The fully amortized nature of the PropertyFit financing allows property owners to pursue more comprehensive building upgrades.
The PropertyFit financing is secured by a benefit assessment lien filed against the property. This unique lien structure is attractive to investors and may qualify for advantageous accounting treatment*.
No Personal Guarantee
PropertyFit is strictly property-based financing secured by an assessment lien on the property. As a result, the property owner is not personally obligated to repay the assessment.
Transfers upon Sale
A property owner may want to sell the building before the PropertyFit financing is repaid. The PropertyFit benefit assessment lien is attached to the property and the unpaid balance automatically transfers with ownership—no assumption application or credit review required.
Does Not Accelerate
Unlike a traditional mortgage, the principal balance of which can be called due and payable in the event of default (called acceleration), only the annual benefit assessment is considered in-default if not paid when due. The balance of the benefit assessment remains outstanding and is payable under the terms of the original agreement.
PropertyFit may help solve the “split incentive” or misalignment of incentives that arises between owners and tenants. Owners are less likely to undertake comprehensive building resiliency improvements when they pay for the improvements but tenants receive the financial benefits through lower utility bills. Under some leases, the PropertyFit structure may enable an owner to pass the benefit assessment onto the tenants, thus solving the split incentive.
New Construction Treatment
*Note: Property owners are strongly encouraged to conduct their own evaluation and consult with their attorney, accountant or other professionals to determine the appropriate treatment of the benefit assessment.