Commercial property owners seeking to reduce operating costs related to energy consumption are benefiting from a federal financing program called Commercial Property Assessed Clean Energy. One of its champions is Jessica Bailey, co-founder and CEO of Greenworks Lending in Darien, whose 3-year-old firm has already underwritten more than $100 million in loans.
“We’re at the intersection of finance and clean energy, where I think the state of Connecticut is going to see some real growth,” said Bailey. As a direct lender to commercial property owners seeking to reduce operating costs related to energy consumption, the company has found a lucrative niche within the commercial lending sector.
Greenworks Lending focuses exclusively on a platform called C-PACE (Commercial Property Assessed Clean Energy) financing. This platform encourages property owners to borrow for energy efficiency or renewable energy projects on existing commercial buildings.
“I’ve known about this for nearly a decade,” said Bailey. “I first learned about it when I was at the Rockefeller Brothers Fund in New York doing energy policy work. I knew it was a good policy that could bring private capital into the energy market and help building owners, which are major consumers of energy, and help to cut their energy expense.”
Bailey became involved in Connecticut’s Green Bank when it was created in 2011 and Gov. Dannel P. Malloy was looking for different products that the Green Bank could offer. “I helped design the policy, then the programs, then the lending platform as it works for C-PACE,” she said. “It worked really well and we saw quite a few projects close. I realized that it was not only a good product, but a really good business.”
Bailey teamed with Alexandra Cooley, an assistant director of clean energy finance at the Green Bank, in founding Greenworks Lending in 2015, with Cooley taking on the chief operating officer position. They needed to consider some startup challenges: C-PACE lending is only available in states where this platform has been enabled by legislation, and a thorough engineering review of the properties would need to be conducted in order to assess the viability of the loan applications.
The company initially targeted the Connecticut market and quickly realized that drumming up business would take patience. “There aren’t large portfolio owners in Connecticut, where you educate one building owner and he or she says, ‘Oh good, I have 300 buildings that I’d like you to do this for,’” she said. “We had to be more diligent, going onesy-twosy and growing business along the way.”
That approach began to click and to date Bailey estimated Greenworks Lending has originated approximately 150 loans totaling roughly $100 million. “Our smallest deal was about $80,000, the largest was $3.5 million and our average deal size is about $600,000,” she said. One challenge, she said, was publicizing the availability of C-PACE loans — which still surprises Bailey, considering the product has been around for years.
“Every time a business owner hears about C-PACE, their reaction is, ‘Aha, it is too good to be true’,” she said. “Marketing is always our challenge. We have a sales team communicating with building owners and energy contractors. It’s kind of a shoe-leather operation. You’ve got to have a sales team out there talking to the right people and getting connected into the right building owners that need this.”
Last September, Greenworks Lending saw its first securitization. “We had a $75 million pool of assets that we had originated across several states that we were holding on our balance sheet,” Bailey stated. “We did a term securitization with Guggenheim leading it, and it was fully purchased by TIAA-CREF. For us, it was a really nice fit because they have a matched needs with what we are creating — we have very long-term assets that perform over 20 years and that’s what investment funds need. We are happy to be the first securitization on the C-PACE side in the country.”
Lately, Greenworks Lending has been in an expansion phase. In February, the company partnered with Main Street America to introduce C-PACE financing to the nonprofit’s membership of municipalities and development associations. Earlier this month, it entered the California market when the Western Riverside Council of Governments (WRCOG) partnered with the company to offer C-PACE financing to the 15 WRCOG member jurisdictions in Riverside County and to more than 370 California municipalities involved in the state’s Home Energy Renovation Opportunity program.
“We plan to be in Massachusetts in the next couple of months and go into New York, Pennsylvania, Virginia and Florida later in this year,” Bailey said. The company also operates in Colorado, the District of Columbia, Maryland, Michigan, Missouri, Ohio, Rhode Island, Texas and Wisconsin.
Bailey noted that the Trump administration’s chilly attitude to renewable energy and energy efficiency policies has generated some concern, but she does not foresee disruptions out of Washington.
“The policy that enables our company to grow depends upon a state policy and a local ordinance,” she said. “There isn’t much that’s going to happen in the White House, no matter who is in there, that is going to dampen that. There is a lot of enthusiasm for building upgrades, whether you’re in a red state or a blue state. And while having a president who doesn’t support renewable energy and doesn’t see the economic benefits that renewable energy is giving our country creates a bit of a mood-dampening effect, we haven’t seen it hit our pipeline. We were concerned about the solar tax credit, but the good news is that he didn’t remove that when he removed some of the other tax incentives and tax breaks.”