Financing a Solar Self-Storage Project: Options and Opportunities

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Property Assessed Clean Energy

The newest financing vehicle for solar energy is the PACE (Property Assessed Clean Energy) program. PACE financing allows property owners to borrow money from their local government to fund the cost of renewable-energy projects. Under PACE, the amount borrowed is then repaid via a special assessment on property taxes. The major benefit of PACE is the assessment follows the real estate and not the owner, eliminating any complications upon a sale of the property.

As with other forms of solar financing, the first lien holder—generally the lender if the property has an existing mortgage—must approve the additional debt to be incurred under the PACE project. Residential PACE programs face obstacles because Fannie Mae and Freddie Mac refuse to purchase mortgages from homes with PACE assessments, citing priority lien issues. Fortunately, however, this doesn’t apply to non-residential properties.

The commercial PACE program is currently only available in a few communities in California (Palm Desert, San Francisco and Sonoma County) and select communities around the nation. To see if a program exists in area, visit www.dsireusa.org. While PACE is still in its infancy, it’s anticipated the success of these programs will be the catalyst for expansion into communities across the nation.

If all of this seems too complex, it may be worthwhile to engage an advisor who can create a project rate of return based on energy usage, local electricity rates, and state and local incentive programs among other factors. He can present an array of options from local PPA developers, solar lessors and potential bank financiers. As with any business decision, the focus is on profitability and return. For some self-storage operators, an investment in solar just might make good business sense. 

Casey McGrath is an associate vice president with The BSC Group. The Chicago-based firm arranges debt and equity financing for commercial real estate investments nationwide with a focus on self-storage. He’s experienced in renewable-energy financial modeling, solar-policy research  and electricity-rate analysis. To reach him, call 800.605.7880; visit www.thebscgroup.com.

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