BOMA, CCI Finalize Model Contracts For Energy Efficient Retrofits to Commercial Real Estate
January 2009 - Energy Efficiency
The Building Owners and Managers Association (BOMA) International and the Clinton Climate Initiative (CCI) have finalized the development of the BOMA Energy Performance Contracting (BEPC) model, a model contract and supporting documents which aim to allow building owners and operators to execute sophisticated energy efficiency retrofits to existing buildings.
BOMA and CCI, in collaboration with major real estate companies and energy service companies (ESCOs), identified the historical barriers to energy efficiency investment in the commercial real estate sector and developed a standardized, user-friendly contracting model that allows building owners and operators to successfully execute larger, more sophisticated retrofits and bring greater operational improvements in investment real estate.
“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,” says BOMA International 2007-2008 Chair Brenna S. Walraven, RPA, CPM, managing director, national property management, USAA Real Estate Company.
BOMA and CCI’s standardized energy performance contracting model removes current impediments to deeper energy efficiency investments. The new BEPC (pronounced bep-see) model aims to change the process by allowing 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.
While energy performance contracting has been offered by ESCOs for more than two decades as a self-financing mechanism to pay for energy efficiency retrofits and capital improvements, the complexity of the contracts and long timelines have impeded their widespread use in private commercial buildings. Another deterrent was that lenders historically required a lien or a personal guarantee from the owner.
In creating BEPC, BOMA and CCI have eliminated many of the common barriers to energy efficiency retrofits. The new contract model and CCI’s partnerships that provide lower project costs and funding sources create an opportunity to reduce the time it takes to complete these types of retrofits from 18-36 months to twelve 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 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.
According to BOMA, the new model offers the following benefits compared to previous energy performance contracting:
•The owner controls the process and specifies all project criteria, streamlining project development.
•The standardized model minimizes costs, including up-front legal costs, man-hours, project management and component costs.
•The template documents are easily 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.
• The 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 assured 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 says it will act as a resource and solutions provider to facilitate voluntary, business case driven market transformation of the built environment. CCI says it will serve as a liaison between ESCOs, owners, operators and financial partners to ensure continuity, focus on the mission and long-term program performance. At the operator 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.
“With a dramatically changing economy and financial market environment, this industry vetted, turnkey solution is going to provide opportunities for owners and operators to dramatically improve efficiency and can also be used for greening efforts – this is truly a game changer for our industry,” says BOMA International Chair and Chief Elected Officer Richard D. Purtell, portfolio manager, Grubb & Ellis Management Services, Inc.
"I applaud BOMA for their leadership in working to scale up the impact of building retrofits," says Ira Magaziner, chairman of the Clinton Climate Initiative. "The BEPC model creates a mechanism that allows owners to more easily and quickly undertake retrofit projects that have significant financial and environmental benefits."