PACE Assessment Consent Request
And Project Overview:
[Property Name /
Address]
The owners of the [Property Name] at [Address], are requesting lender consent to
establish a special tax assessment on this property under the Property Assessed
Clean Energy (PACE) program of the District of Columbia. This PACE agreement will
finance energy saving infrastructure upgrades at the site through a special Real
Estate Tax assessment administered by the District Office of Tax and Revenue
(OTR).
DC PACE Commercial is made available to all commercial, multi-family, and
institutional real estate owners within Washington, DC. The DC PACE Commercial
program is privately administered by Urban Ingenuity (an Urban Atlantic company)
under contract to the Government of the District of Columbia. PACE underwriting
requires that building upgrades generate net savings from utility bills, maintenance
costs, or future capital replacements, which equal or exceed the cost of debt service.
As a result, PACE projects improve cash flows, enhance asset value, and are
accretive to the property’s bottom-line. With an extended (up-to twenty-year)
amortization period, PACE is an attractive solution for financing large capital
improvements that pay for themselves over time.
This guidance document provides an overview of PACE and outlines terms and
conditions for a proposed PACE financing for the [Property Name] to be originated
by Urban Ingenuity. Consent from the current primary lender is hereby requested
for the application of a PACE Assessment to the title of the property in order to
finance a suite of building improvements that meet the following technical
specifications and financial underwriting terms. A separate Lender Consent Form is
attached, to certify approval.
Background on PACE Assessments:
Commercial Property Assessed Clean Energy (PACE) financing is a tool for
capitalizing upgrades to building systems that save energy and water and improve a
building’s value by reducing operating costs, enhancing cash flows, and addressing
deferred maintenance needs in commercial and multifamily properties. A PACE
agreement establishes a special assessment similar in its administration and
structure to many other common tax assessments that repay the installation of
infrastructure upgrades, including gas mains, sewer lines, and curb improvements
through a “Front Foot Benefits Charge” attached to real estate taxes.
The special PACE assessment is administered by the DC OTR, through the identical
administrative mechanism with which they manage repayment of Tax Increment
Financing (or TIF) notes. The billing and management of the PACE program is also
modeled directly on the implementation of Business Improvement District (or BID)
taxes. An additional corollary for the PACE note can be found in Payment In Lieu of
Taxes (or PILOT) agreements, which were used as the precedent structure for
establishing the legal documents establishing this PACE note.
The District of Columbia’s PACE assessment is recorded as an “agreement” in the tax
record, and does not establish a tax lien on the property. Like a TIF note, PILOT
agreement, or Front Foot Benefits Charge, in the event of any default in payment,
only the outstanding payments are deemed to be delinquent. The remaining PACE
assessment does not accelerate, and instead transfers with the title to subsequent
property owners as an ongoing tax obligation.
Overview of the [Property] PACE Assessment:
The PACE investment is cash flow positive, yielding improved net operating income
from the asset after all project costs. The PACE assessment for the [Property] is
proposed at $XX, and will result in an annual PACE Assessment payment of
approximately $XX. The total Loan to Value (including all mortgage debt as well as
the PACE Assessment) will be XX%, based on the [date] Appraisal. The Debt Service
Coverage Ratio after the PACE Assessment provides for a XX DSCR. These numbers
fall well within the DC PACE program’s underwriting guidelines, which require a
maximum 80% LTV, and a minimum 1.20 DSCR. The tables below provide an
overview of the current financing structure and PACE project financial details.
Current Loan and Property Financial Analysis:
Existing Lender Consent:
Lender name
Existing Debt on Property:
(Amount, Term, Interest Rate)

Value of the Property:
$XX (Year of assessment)
Loan-to-Value:
(Existing Debt to Value)
XX%
Projected NOI:
$XX
Debt Service:
$XX / year
Capital Reserve Fund
If applicable
Project Financial Details with PACE Assessment:
Total PACE Note
$XX
Annual PACE Assessment
$XX
Current Annual Utility Bill
$XX
Description of PACE funded
Energy-Saving Equipment to
be installed/ Savings Estimate:



Measure 1
Measure 2
…
Expected Annual Energy,
Water, and Maintenance
Savings
$XX
Net Property Benefit (Energy
Savings – PACE Assessment):
$XX
Debt Service Coverage
XX
PACE Lien-to-Value
PACE to Appraised Value:
Overview of DC PACE Security Structure & Collections:
The following flow charts provide a schematic description of the PACE assessment
structure within the District of Columbia.
The property owner pays the PACE assessment in conjunction with District of
Columbia real estate taxes. Payment is collected and enforced as a tax bill, by the
District Office of Tax and Revenue (OTR).
The mortgage lender may achieve added security by establishing an escrow of PACE
assessment payments along with property taxes, and the lender retains the right to
pay any outstanding balance of these obligations, to avoid tax delinquency.
In the event that the property owner fails to make timely PACE assessment
payments, but funds are advanced by the mortgage lender, the lender will then have
access to the same remedies as in a failure to make real estate tax payments, and
could declare a default on their existing mortgage agreement.
In the event that both the property owner and mortgage lender do not make timely
payment of the PACE assessment, a tax certificate will then be established by the
District OTR. This tax certificate can be assigned to the mortgage lender in exchange
for agreement to make payment on any outstanding PACE assessments.
In the event of delinquency in payment of the PACE tax assessment amount, the
enforcement mirrors real estate tax collection procedures, with the exception that
the tax certificate can be assigned to the lender (or other party) agreeing to make
payment of delinquent PACE assessments, without requiring a tax auction.
A PACE assessment in Washington DC, is secured by four key transaction
documents, issued by the District Government. These legal agreements establish the
security and repayment mechanisms underlying the PACE Assessment, and are
based on the structure of a PILOT (or Payment in Lieu of Taxes) agreement.
Attachments:

[Attachments]