Working with PACE administrator Lean & Green Michigan, PACE Equity funded the project that is notably the first Cambria hotel to enter the Detroit market, the first new construction PACE project in Michigan and the largest PACE project in the state of Michigan to date.
The $49 million mixed-use new construction and redevelopment project utilized a $25 million construction loan, an economic development loan, developer equity and equity from the opportunity zone program, while PACE Equity funded the remaining 14 percent of the capital stack. Local developers for Detroit Cambria Hotel include Koucar Management and Means Group, Inc., collectively, 600 Ventures II, LLC.
“PACE Equity funding is a great tool for developers to bring in additional, low-cost funding to revitalize communities by either preserving functionally obsolete buildings, adaptively re-using existing buildings or constructing new buildings in an environment where capital resources are scarce,” said Sonya Delley, Michigan Managing Director with PACE Equity. “Our capital replaces more expensive funding such as short-term loans or mezzanine, and outside or joint venture equity that developers do not have to raise or source. In this case, PACE Equity also worked alongside state incentives while filling a gap in the capital stack for a project that will continue to make downtown Detroit more walkable and refurbished.”
Beyond contributing capital, PACE Equity acted as a one-stop shop by providing the developer a turnkey service for the entire public/private partnership process, making the funding easy to integrate into the financing. These services included the Lean & Green Michigan approvals, capital stack consent, weekly closing call participation, document management and PACE Equity’s proprietary energy engineering study. Through the energy study, PACE Equity confirmed the amount of funding that was committed to upfront, complied with all Lean & Green Michigan requirements, exceeded the state savings to investment ratio and provided the energy savings guarantee.
“PACE Equity really stepped up for us simplifying the process through their turnkey services, and by funding the maximum amount of funding possible to fill the capital stack alongside state and local incentives,” said 600 Ventures II, LLC as project developer. “Through PACE Equity’s creative structure, we were able to achieve an extremely favorable effective cost of capital. We hope to always leverage PACE Equity in future real estate deals.”
Funding provided by PACE Equity also contributed to financing high energy efficient equipment that reduces utility costs and results in energy savings. Partnership with PACE Equity on the new construction and redevelopment was made possible due to Lean & Green Michigan’s approval and close collaboration. Lean & Green Michigan works with multiple participating counties, cities and non-profit partners across Michigan and serves as an independent party, reviewing projects, state statute compliance and country requirements to approve project funding.
“PACE Equity has been a great partner through the process of bringing this new construction PACE project to life here in Detroit,” said Bali Kumar, CEO of Lean & Green Michigan. “We are thrilled that PACE financing is proving that when building beyond the minimum baseline of code, you don’t have to choose between cost-effectiveness and energy efficiency.”
The Cambria Hotel, through a combination of plumbing and domestic hot water improvements, lighting and electrical system improvements, HVAC and building envelope improvements including roofing, windows, masonry and air barrier protections, will be an energy efficient and water efficient hotel. Over 20 years, the property owner is expected to save $6.5 million in utility and operational savings, together with nearly $3.5 million in tax benefits, resulting in a savings of nearly $10 million.
The new 154-room Cambria hotel will bring an upscale, stylish and modern lodging option to Detroit with locally inspired menus and design elements. The mixed-use new construction and redevelopment will also include an onsite restaurant featuring celebrity chef Fabio Viviani, a rooftop lounge and office and retail space. The restaurant and hotel are expected to appeal to emerging Detroit crowds and business professionals and will be located near many national corporate headquarter offices, the TCF Center and nearby sporting attractions. Construction is expected to be completed in 2020.
“Wayne County continues to lead Michigan in PACE projects, helping our business community achieve increased energy efficiency at no expense to taxpayers,” said Wayne County Executive Warren C. Evans. “We are pleased to see PACE continue to grow here. This effort ultimately helps businesses invest in themselves reducing their environmental impact while improving property values.”
About PACE Equity
PACE Equity is the leading Property Assessed Clean Energy (PACE) funder of commercial real estate development projects in the U.S. PACE Equity is a resourceful addition to the capital stack to boost return on investment while making commercial buildings more sustainable through clean energy efficiencies. PACE Equity has a local presence in 20 markets and can fund projects on a national basis.
For more information on PACE Equity, visit www.pace-equity.com.
About Lean & Green Michigan
Lean & Green Michigan is the statewide public-private partnership that serves as the administrator of the PACE program, helping commercial, industrial, multifamily and nonprofit property owners finance energy efficiency, water efficiency and renewable energy projects that are cash-flow positive for property owners.
For more information on Lean & Green Michigan, visit www.leanandgreenmi.com.
What is PACE?
PACE, which stands for Property Assessed Clean Energy, is a simple and effective way to finance energy efficiency, renewable energy, and water conservation upgrades to commercial buildings. PACE can pay for new heating and cooling systems, lighting improvements, solar panels, water pumps, insulation, and more. It can be used for almost any property – commercial, industrial, multifamily, non-profit and agricultural.
PACE facilitates building improvements that result in utility savings to be funded by private capital and repaid via a long-term tax assessment. The program is designed to break down longstanding barriers to energy efficiency and to promote job creation through economic development.
SOURCE PACE Equity LLC