New York, NY – September 30, 2009 – (RealEstateRama) — The Community Preservation Corporation (CPC), a non-profit affordable housing lender, today announced a new public/private partnership to provide $1 billion in construction and mortgage loans to multifamily housing owners for energy efficient upgrades and property retrofits. CPC announced the program together with government chartered mortgage investor Freddie Mac, City and State public employee pension funds, several private financial institutions with Deutsche Bank acting as agent bank, State and City government agencies and utility companies.
The $1 billion includes $500 million available from Freddie Mac, $300 million from the New York State and New York City public employee pension funds, $150 million from private lenders — with initial investments of $15 million from Deutsche Bank, $10 million from HSBC, plus additional investments from other major institutions, including up to $10 million from Morgan Stanley — plus $50 million from CPC participating lending institutions. The State of New York Mortgage Agency (SONYMA) is providing critical mortgage insurance for the pension funds, and the New York City Department of Housing Preservation and Development will also be supporting the initiative through its Participation Loan Program (PLP).
“Our realistic goal is to increase fuel and electrical efficiency of existing apartment buildings by 20% or more, reducing a prime source of greenhouse gas emissions in our cities,” said Michael Lappin, CPC President and CEO. “We anticipate financing retrofits for up to 15,000 apartments over the next few years. But to change the urban landscape we will also need to adjust the financing landscape.”
The CPC Green Initiative will demonstrate how the mortgage finance system can be adapted to make energy efficient retrofitting a fundamental part of the multifamily lending process. As part of CPC’s refinancing, acquisition and renovation of older apartment buildings in New York State, CPC will incorporate a program of energy retrofitting in the loan. This will include:
identifying individual building energy efficiency improvements through an energy audit,
adding these measures to other plans to upgrade the building(s) involved, and
providing the financing and public supports to make the retrofits feasible and affordable
It will also entail the long term monitoring of such retrofits to measure their efficacy in conserving heating fuel and electrical usage, providing a reliable base for calculating future savings and efficiencies. While the program’s focus is local, it is designed to be replicable in other areas across the country. The program can also open new markets for suppliers and providers of energy efficient products and services, creating green jobs and enhancing the potential for new technologies.
”This is a unique program that gives borrowers the ability to receive funds for energy efficient retrofit costs on apartment buildings,” said Michael Edelman, managing regional director of Freddie Mac. “We are also excited that CPC will share the results of their energy audit, since it could be useful for future product development.”
New York State Comptroller Thomas P. DiNapoli said, “This is an important evolution in the New York State Common Retirement Fund’s long-standing partnership with the CPC. It is encouraging to see the CPC carrying its vital lending programs into sustainable green construction and rehabilitation. These investments are helping to make affordable housing projects more energy efficient. They also make good sense as pension fund investments.”
New York City Comptroller William C. Thompson, Jr. said, “Environmental sustainability is now broadly understood as not only good public policy, but also a sound strategy for investors. The Pension Funds have had a long-standing and successful relationship working with CPC to preserve and create affordable housing for New Yorkers through the Pension Funds’ existing affordable multifamily investment program in which CPC is a key lender. CPC’s Green Initiative will add the important element of sustainability to many of the projects we finance with CPC. In addition, this innovative program is certain to set new standards for green affordable housing across the country and further exemplifies our mutual commitment to affordable housing and making New York City a greener place.”
Many of the public and private funding sources for retrofitting already exist. The CPC Green Financing initiative ties these programs together, fills in the gaps and provides an inviting one-stop resource. Owners with limited experience and resources can find financing, expert advice on retrofitting, and guidance in the use of public programs in one place.
Reducing the complexity of this process will make the program more accessible to lower income buildings where the ownership may not have the sophistication or resources to deal with multiple funding sources. The program will target low-, moderate- and middle-income multifamily buildings, including cooperatives. This financing will be available for the purchase and/or refinancing of existing occupied apartment buildings, together with funds for their physical and retrofit upgrades. The total cost of renovation and financing per apartment is anticipated to be from $80,000 to $100,000, including $5,000 to $50,000 for energy retrofit and other improvements. To keep these loans both feasible and affordable, particularly in lower income communities, the private financing will be enhanced by a variety of subsidy programs. These include real estate tax abatement and exemptions; government provided grants and low cost secondary loans; low cost energy star appliances; other cost saving public and private programs.
“Deutsche Bank’s global commitment to carbon reduction includes helping our cities develop innovative models to finance building energy efficiency upgrades. By arranging private capital for CPC’s comprehensive building retrofit initiative, New York City achieves a commercially sustainable system to lower fuel costs and reduce carbon emissions while bringing jobs and economic vitality to our neighborhoods,” said Seth Waugh, CEO Deutsche Bank Americas.
“Morgan Stanley is proud to invest in this unique integration of community development and green technology reflected in CPC’s Green Financing Initiative. By improving the health, safety and energy efficiency of these older apartment buildings, CPC continues its crucial work of helping to stabilize low-to-moderate-income neighborhoods, while promoting new economic opportunities through green job creation for local residents,” said Audrey Choi, Managing Director and Head of Morgan Stanley’s Environment, Social Finance and Community Reinvestment Group.”
“The green mortgage financing initiative is a solid investment that promises to pay dividends for our tenants, property owners and neighborhoods for years to come,” said New York City Commissioner of Housing Preservation and Development Rafael E. Cestero. “When we make it easier to finance the retrofitting of residential buildings to reduce our carbon output we are not only increasing the long-term sustainability and efficiency of the properties, we are making a key commitment to the health and quality of life of the hardworking people who live in these buildings. I applaud CPC, Freddie Mac, and Deutsche Bank for their leadership, and I share their hope that the green mortgage financing plan can serve as a model for similar initiatives around the country.”
Priscilla Almodovar, President and Chief Executive Officer of the State of New York Mortgage Agency, said, “CPC’s Green Initiative will make New York State’s existing buildings more energy efficient while improving their overall quality. This furthers Governor Paterson’s dual goals of investing in our State’s affordable housing stock and conserving energy. With credit enhancement from SONYMA’s “Aa1″ rated Mortgage Insurance Fund, CPC is able to tap resources that make this important financial tool a reality. We congratulate CPC for its leadership in creating this innovative public-private partnership with so many impressive partners.”
Deborah VanAmerongen, New York State Commissioner of the Division of Housing and Community Renewal said, “The Community Preservation Corporation’s Green Financing initiative will help reduce the energy bills of low and moderate-income families and the impact that multi-family apartment buildings have on the environment. This innovative program goes hand-in-hand with the goals of DHCR’s Green Building Initiative. Together, these programs will make New York a cleaner, healthier, and more affordable place to live.”
How the financing works.
For buildings needing extensive rehabilitation (generally with 20% or more of the financing being used for retrofits and other needed upgrades) a separate construction loan will be provided. It will come from a $150 million revolving line of credit from the New York Building Retrofit Program. Long term financing to take out the construction loans will be provided by the City and State Pension Funds, with their mortgages insured by SONYMA. The pension funds will provide up to $300 million of mortgages through their investment agreements with CPC. Another $50 million will come from CPC’s sponsoring banks. The $150 million revolving credit line will be funded initially by Deutsche Bank (acting as agent for the program) with additional investments from HSBC, Morgan Stanley, CPC and CPC member institutions.
For buildings that do not require extensive renovation other than the required retrofits, permanent financing will be provided by Freddie Mac through CPC. Freddie Mac and CPC have shared a long history of successfully financing affordable housing in the northeast region. Freddie Mac will support the CPC Green Initiative with an enhanced multifamily loan product with attractive competitive financing. Working with CPC, Freddie Mac will purchase up to $500 million of loan volume through this program.
Other providers are expected to join in this initiative and offer incentives and subsidies to support the retrofit efforts. These include government housing agencies including the New York State Division of Housing and Community Renewal (DHCR); New York City Department of Housing, Preservation and Development (HPD), the New York State Energy Research and Development Authority (NYSERDA) and utility companies such as Con Edison and National Grid.
The law firm of White & Case provided pro bono legal support to the CPC Green Financing Initiative. The CPC Green Financing Initiative is also endorsed by the New York League of Conservation Voters and the Natural Resources Defense Council.
CPC pioneered the in-place rehabilitation of existing buildings and has financed the development and preservation of more than 136,000 low- moderate- and middle-income apartments. This initiative builds on the company’s 35-year record of success and integrates this added energy component.
CPC was founded in 1974 and is sponsored by New York State’s major commercial and savings banks as well as major life insurance companies.
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Anticipated retrofit work scopes with demonstrated savings could include:
Air sealing and fire stopping, $100-$200 per apartment.
Efficient and properly sized heating and hot water boilers, cost typically the same as a larger inefficient system.
Efficient heating and hot water controls, $1,200 – $5,000 per building.
Better showerheads, aerators and water saving toilets, cost typically the same as standard specifications;
Upgrade ventilation systems, $500-$1,000 per apartment line.
Building-wide lighting retrofits, $200 – $300 per apartment, $150 per common area fixture, (replacing incandescent lights or upgrading fluorescents that are on 24/7);
Replacing apartment appliances with ENERGY STAR® appliances, cost typically the same or less than standard specifications
Better specifications for windows and walls and roof insulation, upgrades can cost 50% more than original installations.
Training for building personnel in energy conservation
NYSERDA: “It will take successful collaborations like this, collaborations that leverage the resources from the public, private, and non-profit sectors, to meet Governor Paterson’s aggressive energy goals for New York State,” said NYSERDA President and CEO Francis J. Murray Jr. “I applaud the Community Preservation Corporation for its leadership and drive to bring this lending program to fruition. With more than 3.3 million multifamily units in the State, this housing stock represents a significant opportunity to save energy for millions of New Yorkers. Energy efficiency improvements are now recognized as a cost-effective, long-term investment and we look forward to our involvement with this effort, which could serve as a model for the financing and managing of efficiency projects nationwide.”
Con Edison: “Con Edison supports these public private initiatives to promote energy efficiency in the New York City area,” said Rebecca Craft, director of Energy Efficiency Programs at Con Edison. “This program will compliment the efforts we are making to reduce energy use in apartment buildings, such as our Refrigerator Replacement Plus program recently approved by the state Public Service Commission. Con Edison is pleased to work with organizations like the CPC to implement energy efficiency programs in neighborhoods where multi-family buildings are common.”
NRDC: “Retrofitting existing buildings will be the key to achieving our climate stabilization goals and achieving that at the scale necessary and in a timely fashion will no doubt require private sector financing. The CPC Initiative is a great advancement and demonstration of what needs to happen and NRDC looks forward to working with CPC to see that this is replicated both in New York and around the country,” said Ashok Gupta, Senior Energy Economist at the Natural Resources Defense Council.