The Green Property Condition Assessment (PCA), also known as a Green Physical Needs Assessment, offers the user advice on how to optimally run the asset that he or she is buying. A Green Property Condition Assessment essentially combines a standard PCA and an Energy Audit to provide in-depth information on the building condition and increasing operational efficiency.
A standard PCA provides the user with Immediate Repairs and Replacement Reserves over a given term. All of these costs are provided under two assumptions: 1) replace like with like; 2) replace equipment at the end of its useful life. The Green PCA takes a much more real world approach—replace equipment when it is costing more to run than makes sense and replace equipment with new equipment that will maximize return on investment (ROI). The “green” could just as easily symbolize more money as the environment.
My sister company, Partner Energy, does hundreds of energy audits per year on commercial buildings. The energy audits identify Energy Efficiency Measures (EEMs). Many of these EEMs amount to replacing old, but functioning, HVAC equipment with newer higher SEER rated HVAC equipment (Seasonal Energy Efficiency Ratio). These capital events have a very measurable ROI. The Energy Audit might identify 6 to 18 EEMs and we will rank these in terms of ROI. Most clients consider ROIs greater than 30% an obvious opportunity, and it is not uncommon for EEMs to result in such high ROIs.
What is a Green PCA?
Combining the energy audit with the PCA has obvious advantages. We can provide more real world advice on the equipment replacement. Replace the equipment either: 1) when it reaches the end of its useful life; or 2) when the energy saving associated with replacing the equipment meets the client’s ROI requirement.
There are other financial incentives for conducting Green PCAs or implementing the recommended EEMs, such as incentives from the SBA, FHA and Fannie Mae.
Small Business Administration (SBA) 504 Loan Program: Qualify for More by Going Green
Borrowers can increase their SBA 504 loan amount by up to $4 million by implementing projects that meet the SBA 504 new public policy goals of reducing energy consumption by 10% or generating renewable energy. Click here for more info on the SBA energy program.
FHA/HUD and Fannie Mae: Green Refinance Plus
Green Refinance Plus is a program between HUD’s Federal Housing Administration (FHA) and Fannie Mae to allow owners of existing affordable rental housing properties to refinance into new mortgages that include funding for energy- and water-saving upgrades, along with other needed property renovations. Under this program, borrowers must obtain a Green Physical Needs Assessment to identify property improvements that will reduce energy use and operating costs.
Additionally, many cities and states are requiring that building owners disclose their building’s energy efficiency or consumption. Click here to see the cities and states with energy disclosure requirements. This energy disclosure information can be identified during a Green PCA and/or an energy benchmarking study.
Making your Property Condition Assessment or Physical Needs Assessment a Green one really just makes dollars and sense.