In cooperation with its joint venture partner Mitsui & Company, Transcend Equity Development Corporation out of Dallas will perform a free $1.4 million energy-efficient retrofit at 125 Maiden Lane, a 17-story, 340,000-square-foot office condominium in the Financial District that is sponsored by Time Equities, Inc. The project is smaller than Transcend’s typical retrofit, which is usually between $2 million and $10 million. But the 8-year-old company took the work on anyway in order to get its foot in the door in the New York City market. “We want owners to get comfortable with us,” Transcend’s managing director Sean Patrick Neill recently told Crain’s.
125 Maiden Lane is home to many non-profit organizations, whose stretched budgets wouldn’t permit a comprehensive building renovation (despite Time Equities’ long-standing interest in upgrading the property). Now, over the course of a ten-year contract, Transcend will automate the energy management system and replace steam valves, which should drop overall energy consumption by 24 percent. Transcend is to pocket the amount of energy savings that the retrofit generates during the contract term (over a predetermined amount derived from the building’s historical energy costs, which the tenants will pay during the term). After the term ends, tenants will reassume the responsibility for paying their utility bills directly. But thanks to the building improvements, those bills should be significantly lower.
Transcend’s funding for the project came from BB&T Bank, which requested additional security that was provided by New York City’s new Energy Efficiency Corporation, which is backing up to 20 percent of Transcend’s loan (around $190,000). Those funds are coming from a $37.5 million federal grant that is targeted specifically at retrofitting and sustainability in New York City. Transcend is slated to begin the 125 Maiden Lane retrofit program this month and complete it sometime in April.
As you may know, energy service companies (or ESCOs) have long-offered building capital improvements to be paid for out of the corresponding energy and operational savings derived from those improvements. But the completion timeframe, complex nature of the underlying contract documents, and lender requirements (typically a lien on the building or a personal guarantee from the owner) have, at least historically, stood in many ESCOs’ way. For those reasons, we haven’t covered much ESCO work here at gbNYC. But hopefully that will continue to change as the renewed focus on retrofits permits companies like Transcend to successfully penetrate New York City’s commercial real estate market.