In 1911, the 510,000-square-foot Butler Brothers Building in downtown Dallas opened as a warehouse for wholesalers George and Edward Butler.
More than a century year later, Alterra International Holdings in 2012 acquired the decrepit, vacant building at 500 S. Ervay, that had become an eyesore near Dallas City Hall.
Less than six years later, Alterra re-introduced the new and improved Butler Brothers Building, complete with luxury apartments and a dual-branded Marriott hotel.
“The challenge, for the longest time, was that nobody wanted to go first.”
Part of the $100 million in capital raised for the building’s massive renovation was a $23.9 million stake by of the Texas Property Assessed Clean Energy Authority, better known as TX-PACE. The result of that infusion has been a 40 percent reduction in energy use, as well as nearly 700,000 gallons of water saved, annually.
TX-PACE, a public-private lending system, is relatively new to Texas, and to DFW. Not many property owners or developers know about this different type of financing for environmentally friendly building additions, and that’s something TX-PACE is trying to change.
INNOVATIVE FUNDING FOR GREEN PROJECTS SUCH AS BUTLER BROTHERS
The Texas Legislature signed off on TX-PACE in 2012, with Travis County launching the first program in 2016.
The program is taking time to catch on, however.
“The challenge, for the longest time, was that nobody wanted to go first,” TX-PACE Managing Director Jonathon Blackburn said. “We’ve managed to solve that problem. We have case studies now, of every property type available.”
Conservation improvements for the Butler Brothers renovation ranged from installing energy efficient insulation, lighting, roofing, and glazing, to installing plumbing fixtures and water-saving irrigation systems.
A sustainable property can be a great marketing tool — tenants and renters like the idea of occupying environmentally friendly buildings. But upfront capital costs and lag time for operational savings can stymie such improvements.
TX-PACE loans are spearheaded through local governments and municipalities and are structured to help operational savings exceed payment costs from conservation initiatives. Furthermore, the loans can eliminate the need for upfront capital, while offering 100 percent project financing of up to 20 years or more.
TX-PACE FINANCING NOT AVAILABLE FOR ALL PROJECTS
So far, TX-PACE has provided funds for various commercial real estate energy efficiency and water conservation programs and upgrades. Retail developer Simon Properties has availed itself of such financing, as has Dallas-based office building owner/manager Peloton Commercial Real Estate.
The program doesn’t give money at every single project.
It is geared toward retrofits and renovations, and it doesn’t pay for ground-up construction. TX-PACE monies are for “a select set of technologies that have a water- or energy efficient component to them,” Blackburn said at a recent BOMA Fort Worth presentation.
The funding also cannot be used for all property types — most commercial real estate, hotels, and apartments, yes. Single-family residential and government buildings, no.
“Program development comes from the local property owners. If they want the program, that’s when we come in.”
The funding program doesn’t just happen, either.
“Program development comes from the local property owners,” Blackburn said. “If they want the program, that’s when we come in.”
Moving the program forward also requires government approval at the municipal, county, or regional level.
“Property owners have to have a county or city official motivated to get it done,” Blackburn said.
At this point, the Butler Brothers Building is the largest — and, for the time being, the only — TX-PACE- funded project in North Texas, although Blackburn wants to encourage property owners and builders to tap into this financial source.
“Letting folks know this program exists is a challenge,” Blackburn said. “We run into that a lot. Texas is a big state, and we have a lot of work cut out for us, making sure folks know it’s available.”
For more information about TX-PACE, visit its website here.