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How PACE Funding Will Reshape Houston's Sustainability Efforts

When people think of Houston, they don't think of sustainability. That will soon change. A new financing tool is coming to our great city, Property Assessed For Clean Energy Funding. PACE will enable property owners to obtain long-term non-recourse fixed-rate financing for up to 100% of the cost of energy improvements to their properties.

Senior adviser in the Mayor's Office of Sustainability Marina Badoian-Kriticos (here with CoStar's Ryan Dame and Kim Eoff at Bisnow's real estate tech and sustainability event yesterday) said the goal of the city is to make it more than the energy capital of the world. Houston can also be the efficiency capital of the world. The key to achieving that is through improvements in construction, renovation and property management. That's where PACE comes in. 

PACE Houston president Tim Crockett broke it down for us. Sustainability and business are inconsistent. Capital improvements and investment decisions often work against each other. PACE is a new financing concept to solve that problem. Started about eight years ago, fairly new to Texas, and brand-new to Houston, the program allows property owners to access 100%, fixed-rate, long-term non-recourse financing on building improvements that conserve energy or water. The loans require the savings be greater than the cost of implementation, so they're actually self-funding. This effort isn't about being green, it’s not about decreasing electricity or saving water. It’s about increasing NOI. Economics is the primary driver, but sustainability and efficiency are the primary benefits. Think this sounds like a great idea? So do others. Harvard named PACE one of the top five breakthrough ideas and Scientific American named PACE one of the 20 best ideas in the world.

Texas was actually already at the forefront of green building, so this push could make us one of the leaders in the space. The US Green Building Council ranked Texas eighth in the country (to many's surprise, we're sure) largely due to sustainability efforts in Houston. As a country, we've made great strides. Skanska chief sustainability officer Elizabeth Heider (with the mic) shared the stats: In 2005, Doge (at the time, McGraw-Hill), found only 2% of real estate was green. By next year, between 48% and 54% of the market will be green. She says sustainability is no longer a fad, it is a trend.

JLL EVP of sustainability, energy and safety Robert Best (speaking above) knows firsthand that the property management industry is changing. It’s not just about keeping things operating anymore. You have to make the tenants happier, healthier, more productive. That burden is falling on building managers.  

Robert spoke about some astounding findings in the scientific community. Not only does sustainability help your bottom line and the environment, but it can also improve productivity. All nine cognitive aspects that make up productivity (like memory, mental acuity and math ability) are improved by sustainable efforts, according to research. A study about kids taking the SAT found they do consistently better when they take the test in a room filled with daylight. Minimizing CO2 in the workplace is another focus of the USGBC. A study by three Harvard professors found a stunning correlation in how people perform across the nine cognitive area while in the presence of varying levels of C02.

These can have a major impact on your bottom line. Energy savings at best are a few dollars per SF, but if you can improve productivity, it blows energy savings out of the water. That's the potential building owners and managers are dealing with. 

Concrete is of huge concern in the sustainability movement because the industry is one of the biggest polluters. TrueGrid CEO Barry Stiles (above with colleague Nathan Wood and Boxer Property president Justin Segal) shared his company's unique approach to solving an often overlooked problem—parking lots. True Grid is a form of permeable pavement made from a unique design of plastic and gravel that not only saves concrete, but also functions as stormwater retention. Businesses all around Houston have seen the benefit, and True Grid is in talks to work with the largest building in the world, the 13.1M SF Tesla factory. Because of potential cost savings on land required for stormwater retention, True Grid is a prime candidate for PACE funding.

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