SBA 504 Green Lending Exceeding the 5 MM

SBA 504 Green Lending: Exceeding the $5 MM Limit How GREEN does your building grow? Tom Wallace www. FLAGGL. org

Legal Basis • Small Business Investment Act of 1958, as amended, Section 502(2)(A)(ii) • 13 CFR 120. 931 • SOP 50 10 5(F), page 273 (Subpart C, Chapter 2, Section III. H. 1. b. 1. c) www. FLAGGL. org

Exact Text • (iv) $5, 500, 000 for each project that reduces the borrower’s energy consumption by at least 10 percent; and • (v) $5, 500, 000 for each project that generates renewable energy or renewable fuels, such as biodiesel or ethanol production www. FLAGGL. org

"Concern" vs. "Project" • "Concern" is the borrowing entity, as subject to affiliation and all other limitations of Lender Benefit • "Project" is the defined 504 eligible costs in a specific application www. FLAGGL. org

What is Green? • Either: • Reduction of Existing Energy Consumption; or • Production of Renewable Energy www. FLAGGL. org

Reduction of Existing Energy Consumption • 10% Reduction is the Standard, measured by square foot comparison of actual usage • "Existing" precludes start‐ups • Geographic location(s) must be consistent, in SBA's view • Independent Professional Documentation is required • All terminology is consistent with LEED www. FLAGGL. org

Meeting the Goal Means Reduction • • • Purely conservation driven HVAC/Heating Insulation & Windows Lighting General Equipment: Hoods www. FLAGGL. org

Production of Renewable Energy • 10% of footprint consumption must be generated from renewable sources: biodiesel, ethanol, solar, geothermal. . . • Start‐ups are eligible, thus proposed footprint • Means of generation must be included in 504 project costs (Waste oil thus excluded) • Independent Professional Documentation is required www. FLAGGL. org

Meeting the Goal Means both Reduction & Production • Conservation is usually cheaper than installation, thus. . . see slide "7", HOWEVER. . . • Generating capacity as a limiting factor • Example: Solar means roof space and load, facing and obstruction www. FLAGGL. org

Costs • Possibly offset by credits: federal*, state, local • Florida Project 1: $86 M* (4. 3 M sq. ft. ; 3. 2%) • Florida Project 2: $182 M or $235 M* (62 M sq. ft. ; 3. 5%) • Florida Project 3: $228 M* (40 M sq. ft. ; 4. 5%) www. FLAGGL. org

Savings • Florida Project 1: $5, 930 • Florida Project 2: $12, 700 or $1, 200 • Florida Project 3: $7, 979 • (All savings quoted per annum, at current energy costs. ) www. FLAGGL. org

Structure • • 504 basic advantages become huge Availability of credit, or costs thereto. . . Specialty properties: 33 -50% less equity Long term fixed rates • THUS, structure, and not savings, is the selling point! www. FLAGGL. org

Who is the target market? • Standardized structures • Capital intensive borrowers www. FLAGGL. org

The "Engineer's" Perspective • John Rockwell SBA 504 Program Director at Partner Energy, Inc. • • • What is needed from the borrower, architect, etc. ? What types of technology are considered renewable? How does project cost vary between different regions? Does the SBA require post‐installation testing? How long does it take to get a third party report? Contact Information: John Rockwell at (310) 765‐ 7302 jrockwell@ptrenergy. com www. FLAGGL. org

Further Information: IDS Corporation Tom Wallace twallace@idscorp. org (239) 652 ‐ 5588 www. FLAGGL. org