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Florida PACE Agency Inks $500M Financing Deal

FEB 6, 2013 4:13pm ET
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BRADENTON, Fla. — Florida’s new statewide PACE program has inked a deal for $500 million in funding through Irvine, Calif.-based Samas Capital LLC.

The funding means that Property Assessed Clean Energy financing for energy-related and wind-hardening improvements will soon be available through the Florida PACE Funding Agency, a special-purpose unit of local government with municipal bonding authority.

In PACE financing, an assessment collected on the improved property’s tax bill is used to finance clean-energy improvements for a property. Bonds can then be issued backed by those assessments.

The agency already has its first subscriber, Flagler County on Florida’s northeast coast, and expects to begin funding residential and commercial projects in the next 60 days, according to program manager Jonathan Schaefer with SAIC Energy, Environment & Infrastructure LLC, the administrator for the Florida PACE agency.

The agency is in discussion with other cities and counties about joining the program, and will soon begin marketing to home and business owners.

Establishing the program’s structure and start-up funding has taken more than a year.

The Florida PACE agency selected Samas as the final step in rolling out the program to residential and commercial subscribers, according to Schaefer.

“Our target was really the financing,” he said. “We have a door that’s open to us now that the financing agreement has been signed. [Samas] allows us to have immediate liquidity to take money out and pay for the work.”

While cities and counties decide if they will subscribe to the voluntary program, Schaefer said the comprehensive nature of the Florida PACE agency’s program limits their liabilities, and provides the program to residents and businesses at no cost to local governments. The program also can create needed jobs, he added.

“We are proud to be an integral part of the Florida PACE Funding Agency team and look forward to providing the best and lowest-cost PACE financing to Florida,” said Samas managing director Mark Aarvig.

“Our investors are impressed with the uniformity and statewide scale of the agency’s inviting interlocal model,” he said. “We also like the way the agency is geared to help counties and cities quickly launch these job-creation opportunities.”

Samas Capital describes itself an international financial originator and asset manager of structured products with “a wealth of experience in asset-backed securities origination, trading and securitization,” according to its website.

According to the U.S. Department of Energy, Samas committed $150 million in funding to its “Better Buildings Challenge,” and uses its PACE platform to finance energy upgrades in commercial buildings in California. The company has also worked with PACE programs in other parts of the country.

The Florida PACE Funding Agency selected Samas because of the firm’s capitalization and its model, which will handle the program’s ramp-up period, said managing director David Moore of Public Financial Management Inc., co-financial advisor for the Florida PACE agency with First Southwest Co. and Southeastern Investment Securities LLC.

“The structure is set up so we don’t have to worry about aggregating a thousand of those loans around the state,” Moore said. “This is the only concept that has the money and will provide funding for commercial and residential loans. And it’s all funded through Samas.”

Samas Capital will purchase bonds secured by the underlying assessments for a trust funded by institutional investors.

While similar to PACE programs in other states, in Florida the financing can also be used to help property owners strengthen their homes against storms in addition to renewable energy and energy-efficiency improvements.

Former Gov. Charlie Crist signed HB 7179 in law in 2010 to create the statewide PACE program.

In 2011, a Florida judge validated $2 billion of municipal bonds for the Florida PACE Funding Agency.

The judicial ruling confirmed a provision in the state’s PACE law, which prevents a mortgage lender from declaring a default or accelerating the payment of a mortgage, note or lien if a property owner enters into a PACE financing agreement.

Despite that provision, PACE programs across the country have been hindered by ongoing questions raised by the Federal Housing Finance Agency.

The FHFA directed Fannie Mae and Freddie Mac to stop buying mortgages with PACE liens out of concern for the lack of standard underwriting and energy retrofit guidelines, and questions about a PACE assessment’s priority over mortgages when homeowners default.

It had been hoped that the binding nature of the court ruling on Florida’s program, and on private and federal mortgage agencies, would resolve FHFA questions. However, those questions linger, and Fannie Mae and Freddie Mac purchase most mortgages.

SAIC’s Schaefer said Florida’s program will move forward offering PACE advantages to property owners with jumbo mortgages, people who owe nothing on their homes, and the 30% of homeowners whose mortgages haven’t been purchased by the Fannie or Freddie.

“The main objective here is through a statewide program we have attention and momentum to push back and say this program is successful, and we’re accomplishing other federal objectives in terms of encouraging energy-efficiency, wind-hardening and renewable generation,” Schaefer said.

The program’s website is at www.floridapace.gov.

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A recent phenomenon is the emergence of bonds with shorter call protection as funding alternatives for municipalities. However, the shorter call protection also dampens the potential upside for investors, which in turn reduces the price they are willing to pay.

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