BOMA, CCI Deliver Energy-Efficient Retrofit Tools to Commercial Real Estate

January 21, 2009 // Published as a news service by IHS

In collaboration with real estate companies and energy service companies (ESCOs), BOMA and CCI said they identified the historical barriers to energy-efficiency investment in the commercial real estate sector and developed a standardized contracting model that allows building owners and operators to execute larger, more sophisticated retrofits and bring greater operational improvements in investment real estate.

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The standardized energy performance contracting model removes current impediments to deeper energy-efficiency investments. The new BEPC model allows capital investments that improve buildings' financial and environmental performance to be paid for out of the energy and operational savings created by those improvements. The savings are financially guaranteed by the ESCO performing the work, reducing risk and enabling deeper potential investment, BOMA and CCI said.

ESCOs have offered energy performance contracting for more than two decades as a self-financing mechanism to pay for energy-efficiency retrofits and capital improvements. However, the complexity of the contracts and long timelines impeded their use in private commercial buildings, BOMA and CCI said. Another deterrent was that lenders historically required a lien or a personal guarantee from the owner.

The new contract model and CCI's partnerships that provide lower project costs and funding sources can reduce the time it takes to complete these types of retrofits from 18 to 36 months to 12 months or less.

Furthermore, since the contracts are standardized, real estate professionals need not become experts in performance contracting or energy performance guarantee provisions to execute a successful retrofit project, the organizations said.

According to the BEPC:

• The owner controls the process and specifies all project criteria.
• The standardized model seeks to minimize costs, including up-front legal costs, man-hours, project management and component costs.
• The template documents can be edited to incorporate specific goals and objectives.
• An industry-vetted model means high confidence in project implementation without having to be an expert in performance guarantees or energy efficiency, according to BOMA and CCI.
• There is potential for commercial real estate firms to self-finance, using the energy savings produced by the retrofit to reduce operating costs even after amortizing the cost of the improvement.
• Building performance is ensured through a performance guarantee by the energy service company, guaranteeing performance throughout the life of the agreement.

As building owners and operators adopt the contracting model and implement energy-efficiency retrofits, BOMA said it will serve as a resource and provide tools to facilitate voluntary, business-case-driven market transformation of the built environment.

CCI will serve as a liaison between ESCOs, owners, operators and financial partners to foster continuity and focus on the mission and long-term program performance. At the operator's or owner's request, CCI will serve in a consultative role, advising on best practices, introducing suppliers and other providers and supporting the project development where needed.

"The BOMA-CCI Energy Performance Contracting model has removed the key barriers to larger, more sophisticated energy-efficiency investment in commercial real estate so that real estate professionals can implement retrofits that positively impact financial and environmental performance as well as increase asset values," said Brenna S. Walraven, BOMA International 2007-2008 chair.

The BEPC and supporting documents include a variety of information, including advice on best practices in project development and execution, a series of model documents that can be used to streamline the project development process and a number of additional resources that can be accessed for assistance in executing an energy-efficiency project.

The BEPC and supporting documents are available on the BOMA Energy Performance Contracting Model web site.

Source: Building Owners and Managers Association (BOMA) International.