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BOMA and Clinton Climate Initiative Announce Model Contract for ESCOs, Commercial Real Estate
In a move that has the potential to make buildings significantly more energy efficient, Building Owners and Managers Association (BOMA) International and the Clinton Climate Initiative (CCI) have announced a new BOMA Energy Performance Contract Model to help building owners to perform major energy retrofits to existing buildings faster.
The BOMA Energy Performance Contract Model will provide a standardized energy performance contract, similar to the American Institute of Architects construction contract terms, whereby key legal and technical provisions have been vetted by top real estate companies, energy service companies as well as BOMA legal council and experts and CCI.
BOMA and the commercial real estate community joined with CCI, energy service companies and financial institutions to create the BOMA Energy Performance Contract Model , which provides a market mechanism that every building—regardless of age, location and type—can use to significantly improve efficiency and sustainability in public and private buildings worldwide.
While energy service companies (ESCOs) successfully operate in the government and education sector, ESCOs haven't been as active in the commercial real estate sector, said Brenna S. Walraven BOMA International chairman and chief elected officer and managing director, national property management, USAA Real Estate Company. Part of the reason is that traditionally, it can take 18 to 36 months to negotiate terms with an ESCO, and because they sometimes require a lien to be placed on the building.
As part of the effort to reduce barriers, BOMA, CCI and USAA Real Estate Company (USAA) teamed up to generate an energy efficiency pilot project in the commercial sector. USAA provided two buildings for the pilot project to help develop and refine an energy efficiency building retrofit model to reduce barriers, particularly time and complexity, of such projects.
The pilot project was launched in late January 2008. Working with CCI partner, Hannon Armstrong, an investment bank specializing in energy projects, USAA, BOMA and Hannon Armstrong developed a financial structure using the assets in the building as collateral, and not the building itself, and using the guaranteed energy savings from the project to pay for the loan.
BOMA expects the model contract language to be available in the next two months.
“Improving energy efficiency and financial performance is a growing priority for property owners, but energy retrofits have often been complicated, time consuming and cost prohibitive,” says Walraven. “The marketplace now has an industry-vetted, streamlined, cost effective and time efficient ‘model’ contract that building owners, energy service companies and financial institutions can use to facilitate the implementation of major energy retrofit projects in publicly and privately-owned buildings.”
The new model represents a significant market shift, Walraven says, by standardizing the contract terms and conditions whereby energy service companies are committed to lowering costs and the financial institutions are committed to extending market interest for the loans.
"I am grateful to BOMA for their partnership in promoting energy efficiency in existing buildings," says Ira Magaziner, Chairman of the Clinton Climate Initiative. "Through their leadership in the creation of standardized documentation and tool kits for building owners and managers, BOMA is helping to remove the barriers to scaling up the global market for building retrofits."