Partners Develop Building Energy Performance Contract Model

The Building Owners and Managers Association (BOMA) International and the Clinton Climate Initiative (CCI) on June 24 announced a new BOMA Energy Performance Contract Model to allow building owners to perform major energy retrofits to the existing building marketplace by removing key barriers and providing a turnkey solution.

BOMA and CCI collaborated to develop the more efficient business model for performing energy retrofits to existing buildings to improve both the financial and environmental performance of commercial real estate while dramatically improving energy efficiency. The model provides 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 counsel and experts and CCI. Coupled with other standard documents, FAQs, and case studies, real estate professionals are now provided with a new solution for how to improve performance and value.

"I am grateful to BOMA for their partnership in promoting energy efficiency in existing buildings," said Ira Magaziner, chair 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."

As part of the model, BOMA, CCI and USAA Real Estate Co. (USAA) teamed up to generate an energy efficiency pilot project in the commercial sector that addresses key issues confronted by building owners looking to improve financial performance and reduce their company's carbon footprint. USAA provided two buildings 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 and has achieved numerous successes that will be directly beneficial to the commercial real estate sector, including a demonstrated positive business case for energy efficiency improvements and the development of a model financial structure to fund efficiency programs. 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.

Energy performance contracting has been in place for more than 20 years, but has rarely been used in the private sector due to cost, a lengthy execution timeframe of 18-36 months and limited financing options. The new model represents a significant market shift 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.

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