Zero Net Energy Manufacturing
- Renewable Energy,
- Lighting,
- Windows,
- HVAC Systems,
- Roofing
Working with the Landlord, Mynt Systems implemented a three phase asset improvement project that included energy efficiency and on-site renewable energy on a fully leased property. With a gross project cost of $3.33M and a net project cost of $1.96M, the team was able to increase the property’s value by over $10.44M in less than 24 months, yielding a return of 5.34X over the initial investment.The owner of the building was also motivated to reduce the building’s carbon emissions as well as renew Sonic’s lease and increase the property’s value.
As the largest electronic manufacturing services factory in Silicon Valley, Sonic Manufacturing, had a mission to reduce their carbon footprint. The three phase project included new HVAC equipment, LED lighting, window film, a TPO Cool Roof, and 1,030 kW of solar on the roof and carports. All of the upgrades were completed without interrupting the Tenant’s 24/7 design and manufacturing operations.
IMPROVEMENT TO TRANSACTABILITY
At the time of sale, the Landlord had increased revenue $0.35/SF/mo. in energy charges. However, because energy costs continued to rise after the project, the Landlord had the ability to re-lease the space at significantly higher rents due to the current equivalent of $0.51/SF/mo. of power being generated for free. This rent differential represents 30% of the market rental rate for comparable properties and is a lucrative factor in any re-leasing event.
Because of the captured value, the property Buyer recognized that the Tenant’s credit strength was no longer a barrier to the transaction. If the Tenant ever vacated the space at the end of term, future Landlord could rent it out at a significantly higher rate.
ASSET APPRECIATION
Prior to the renovation, the Tenant paid the regional utility approximately $421,000 per year for electricity. As an onsite energy provider after the project, the Landlord captured an additional $348,503/yr. in rent ($0.35/SF/mo.) in the form of energy charges. That $348,503/yr. of rent increase equated to an addition of $6,760,078 of asset value ($4,798,122 net value) at the 5.15% cap rate established during the property sale.
When the $4,798,122 net value was added to the additional value received for the energy rent increase ($5,646,505), the total increase in asset value due to the energy efficiency and generation improvements was $10,444,627 or $126.74/SF. This represents a 5.34X return on investment after Year 1.
IMPROVED LOAN RATIO
Following the advanced energy project, the building value increased from roughly $19.2MM to $29.6MM, which reduced its Loan-to-Value ratio, enabling an additional advance to the buyer’s loan, because the lender was able to deploy more dollars on a familiar asset while also maintaining an extremely safe loan.
Additionally, the renewable energy project reduced the tenant’s overall operating costs, and eliminated a problematic variable cost. The renewable upgrade offset the the equivalent of burning of over 95 million gallons of gasoline over a 20 year period, representing 32,000 metric tons of CO2 emissions.
- Rooftop+Carport Solar
The rooftop and carport systems were installed in phases in order to get Sonic grandfathered into the utilities time of use structure which was being closed off to large commercial customers.
- LED Lighting
Retrofitting the existing high bay and office lighting saved over $50,000 in electricity and reduced cooling costs as well as improved working conditions for those on the factory floor.
- HVAC Upgrades
Three of the rooftop HVAC units had surpassed their useful life and were putting strain on the other eleven units. Replacing them improved comfort levels for all and extended the useful life of the remaining units.
$334,700
$3.33 Million
$1.96 Million
$10.44 Million (5.34X)
4 YEARS
The
Benefits
