County of Los Angeles Commercial PACE Financing Program Request for Qualifications from Interested Investors

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1 County of Los Angeles Commercial PACE Financing Program Request for Qualifications from Interested Investors The County of Los Angeles (County) is implementing the Los Angeles County Property Assessed Clean Energy (PACE) Financing Program (also referred to as the Los Angeles County Energy Program). The Program aims to assist non-residential property owners make capital investments in comprehensive energy efficiency and water efficiency improvements and distributed generation renewable energy sources (collectively, the Energy Improvements ) in existing non-residential facilities, including commercial, multifamily, agriculture, non-profits and industrial buildings. The County is seeking information from investors interested in funding these projects. The purpose of this Request for Qualifications (RFQ) is to: 1. Expand the existing list of interested investors capable of providing funding on an individual project basis, which is secured by a single and unique bond issued to an investor for each project financed. The information collected through this RFQ will be used to create investor-specific profiles which will be posted on the program s website All profiles will be subject to review and approval by investors prior to posting. Specific information requested by the PACE financing program is outlined in Annex B and the following online survey Participating property owners will be able to access this information to more efficiently identify potential sources of capital. Selection of an investor will be solely the decision of the property owner. An investor may reject any projects that do not meet its underwriting requirements. The Los Angeles County PACE Financing Program allows private investors to finance Energy Improvements on commercial property through the issuance and sale of County-issued 1915 Act Bonds (the Bonds 1 ) to the investor. The Bonds are secured by an assessment contract between the County and the property owner, with the debt service on the bonds levied and collected through the County property tax system along with regular property taxes. Commercial PACE financing is available throughout unincorporated portions of the County and in incorporated cities that have elected to participate in or opted-in to the County PACE Financing Program (please see For participating PACE investors, the Los Angeles County Commercial PACE Financing Program offers: Legal documents to execute a PACE financing; PACE Bonds are secured by an assessment contract and the County property tax system; 1 See pages : 1 July 2014

2 Opportunity to fund implementation of retrofit investments that may lower operating costs, improve the property value, improve building services that attract and retain tenants, and position the property to comply with state/city energy efficiency mandates. This Request for Qualifications: 1. Interested investors are requested to provide information on the PACE financing product(s) offered by your firm, and evidence that your firm meets the requirements of the County and is eligible to purchase PACE bonds under Los Angeles County PACE Financing Program. The information obtained through this RFQ will be used to link interested investors with project sponsors, energy services companies and property owners to develop transactions for individual PACE projects. The three sections of this RFQ address the following information: Section Number Section Topic Page Number 1 Market Potential 3 2 Description of the PACE financing structure 5 3 Request for Qualifications, Procedures, Content of Requested Responses 14 Annex A Accredited Investor Questionnaire 16 Annex B PACE Investor Profile 22 Annex C PACE Financing Process 25 Interested investors are requested to submit their information, with the content prescribed in this RFQ at any time that this RFQ is open and posted on the website. Only electronic submittals with required information completed will be accepted. Primary contact for questions and for submittal is: PACE Program Administrator Subject line: LA County PACE Investor RFQ info@lapace.org For further information, please visit: 2 July 2014

3 1. Market Potential Non-residential PACE financing is available to privately-owned non-residential properties throughout unincorporated portions of the County and in incorporated cities that have opted-in to the County PACE Financing Program. To date, 80 of the 88 cities in Los Angeles County have opted-in to the Program. A list of those cities that have opted in is available at PACE Statistics The Los Angeles County Commercial PACE Program has received 112 initial applications totaling over $162 million 2. Of those Initial Applications, 34 ($123 million) have been reviewed and are actively working with PACE project developers. Funding requests include diverse projects, such as lighting retrofits and major heating, ventilation and air-conditioning (HVAC) upgrades as well as solar photovoltaic (PV). Property types also vary and include hotels, offices, religious institutions, non-profits, industrial properties, and other property types. 1.2 Representative Project Economics and Available Incentives Typical projects include lighting, HVAC equipment, controls systems, cogeneration, solar PV and solar thermal systems, water conservation measures, refrigeration, compressors, variable frequency motor drives for fans and pumps, boilers and other energy-consuming equipment. Some projects have simple payback periods 3 of three to five years. Conversely, some major HVAC and mechanical system investments will have longer payback periods, but may be necessary for property owners to meet equipment replacement needs in the short or medium term. Total cost-effective investments typically range from $1-5 per square foot. Summary economics for a representative project financed under PACE is illustrated in the table below. Property Type & Size (SF) Office building with retail; 300,000 SF EE Project Scope Full HVAC retrofit, controls, air handler controls, lighting Total Project Capital Cost, turnkey $1,200,000 EE retrofit investment per SF $4.00 Utility rebates/ % Total Project Cost $300,000 (25%) Net Project Cost to Finance * $900,000 Annual estimated energy cost savings $128,571 (7 year simple payback) Annual Assessment Payments** $92,666 Annual net cash savings $ 35,905 Potential Valuation Impact*** +$448,812 * Assumes finance transaction fees are included in turnkey project costs, and that rebates will be applied towards principal. ** Based on a fifteen-year term, 6% fixed interest rate and level semi-annual payments of principal and interest. Assessment administration fees, of no more than $100 per year are to be determined and will be added to assessment payments. Actual rates will vary. *** Assumes a Capitalization Rate of 8%. 2 As of May Ratio of total capital costs to annual energy and operational cost savings 3 July 2014

4 Utility Rebate Programs Utilities servicing Los Angeles County property owners have rebate programs to promote efficient energy use. Rebates can cover 20% or more of total project costs. The amount and timing of utility rebate payments should be incorporated into a project s construction financing plan. The utilities review of project measures will provide engineering due diligence and project review, as well as preand post-installation inspections. Rebates can be applied to project costs reducing the total amount financed or they can accrue to the property owner post-commissioning and be used to offset financing payments. Decisions on how to apply any available rebates are made by the property owner and the investor when negotiating a financing plan. Tax Incentives In addition, the federal government, through the Energy Policy Act of 2005, established the Energy- Efficient Commercial Buildings Deduction (EPAct 179-D) 4, a corporate tax deduction of up to $1.80 per square foot for energy efficiency investments meeting prescribed levels of energy reduction. Additional incentives are available for distributed generation renewable energy projects, including the federal investment tax credit (ITC) 5 and Modified Accelerated Cost-Recovery System (MACRS) accelerated depreciation Market Investment Potential Commercial building space in Los Angeles County totals nearly 1.82 billion square feet. 7 Buildings with senior mortgages securitized through commercial mortgage backed securities (CMBS) may have difficulty using existing finance mechanisms, such as PACE, since mortgage holder consent is required and may be challenging to obtain. Assuming that 26% 8 of all commercial buildings have mortgages resold as CMBS, the net addressable market for Los Angeles County is 1.36 billion square feet. And, assuming a further market penetration of 10% and an average investment per square foot of $3, total investment potential for the County exceeds $400 million. With increased market penetration to 50%, the investment potential is $3+ billion. These calculations are summarized in the following table. Potential Commercial Building EE Retrofit Investment Los Angeles County Retrofit Cost / SF Market Penetration $1.00 $3.00 $ % $136,281,964 $408,845,892 $681,409,820 25% $340,704,910 $1,022,114,729 $1,703,524,549 50% $681,409,820 $2,044,229,459 $3,407,049, Source: CoStar April 18, This estimate is consistent with data published by the Mortgage Bankers Association as of 2011, based on dollar volume. This is an aggregate number since LA-specific data was not readily available. 4 July 2014

5 Other jurisdictions in California, including San Francisco, Sonoma County, Placer County, and California FIRST (a Joint Powers Authority covering 141 cities and Counties within California), are implementing commercial PACE financing programs, as are other communities nationwide. Thus, the investment potential is quite large. 2. Description of the PACE Financing Structure Los Angeles County uses an open market PACE financing model whereby property owners have the flexibility to independently structure and secure financing with an investor of their choice for each individual project within the legal parameters of 1915 Act Bonds. The County will rely on the PACE investor, property owner and the property s existing lien holder(s) to negotiate the interest rate and term of the 1915 Act Bond. 2.1 PACE Private Placement Structure PACE is an innovative financing mechanism that allows property owners to finance energy efficiency, water-saving and renewable energy projects through proceeds from the sale of a privately placed bond, secured by a voluntary contractual assessment on the property. Pursuant to California Assembly Bill No. 811 ( AB 811 ), the County has established a countywide PACE program, the Los Angeles County Energy Program ( Program ). PACE bonds under this Program are issued by Los Angeles County as 1915 Act Bonds secured by contractual assessments levied pursuant to Section et seq. of the Streets and Highways Code of the State of California to finance Improvements in existing buildings. Cities within the County must pass a resolution to opt-in to the Program to allow their property owners to participate in PACE financing. As of the date of this RFQ, more than 90 percent of the cities in the County have passed a resolution to opt-in. The Los Angeles County Board of Supervisors (the BOS ) will approve the issuance of each Bond and delegate authority to authorized officers of the County to administer the transaction. Hawkins Delafield & Wood LLP represents the County as bond counsel. The County Auditor-Controller is the Fiscal Agent for all PACE transactions. The County Treasurer and Tax Collector has appointed Wilmington Trust to serve as the trustee and paying agent (the Trustee ) for PACE Bonds issued by the County. Bonds are privately placed with pre-arranged interest rates and terms negotiated between the property owner ( Owner ) and a single qualified institutional buyer ( QIB ) or an accredited investor 9, who is committed to purchase the bonds (the Investor ), as evidenced by such Investor s Commitment Letter and Financial Term Sheet (collectively, the Commitment Letter ). 10 PACE bonds (i) will not be registered under the Securities Act, and are not being registered or otherwise qualified for sale under the Blue 9 As defined by the U.S. Securities and Exchange Commission under the Securities Act of The County s purpose for the Commitment Letter is to assure that the transaction is well-advanced in the structuring and credit approval process with the Investor before the County begins the legal work to document the transaction. The Commitment Letter can define conditions precedent/subsequent to closing. Eligibility of a given project for PACE financing can be confirmed by the Program Administrator earlier in the process. 5 July 2014

6 Sky laws or regulations of any state, (ii) will not be listed on any stock or other securities exchange, (iii) will not carry a rating from any rating service, (iv) may not be readily marketable, (v) may not be offered, resold, pledged or otherwise transferred except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act, (vi) will bear restrictions as to transfer or exchange, as set forth in the Indenture and (vii) will be delivered in a form which may not be readily marketable. The County is not required nor does the County intend to issue an Offering Memorandum or any other disclosure documents related to the Bonds. Key financing terms, including a Not to Exceed Interest Rate and a Not to Exceed Principal Amount, must be contained in the Investor Commitment Letter, which will provide the basis for the PACE assessment contract, bond purchase agreement and trust indenture. Expressing the final not to exceed interest rate as a spread to Treasuries on the Financial Term Sheet (FTS) is acceptable. The not to exceed interest rate expressed as a spread to Treasuries, and the Not to Exceed Principal Amount from the FTS should be the same numbers reflected on the final project application (along with Lender Commitment Letter and FTS) that is submitted to the County for final approval. The County will require documentary evidence of the applicable treasury rate on the day of the interest rate lock to validate that the assessment contract and the bond purchase agreement are being executed in accordance with the FTS. In Commercial PACE transactions, the closing date is the same as the date of issuance of the PACE bonds and the execution date for the assessment contract, bond purchase agreement, trust indenture and all other closing documents required for the transaction. Once the actual interest rate and principal amount is established in accordance with the parameters defined in the FTS, the Treasurer and Tax Collector will commence the process for obtaining approval of the PACE financing from the County Board of Supervisors. The parties to the transaction will schedule a mutually agreeable closing date after the date the financing is approved by the Board of Supervisors. On the closing date, the County will execute the assessment contract, bond purchase agreement, indenture and all related closing documents. To facilitate a timely and efficient closing process, the assessment contract, indenture and bond purchase agreement must be prepared in substantially final form prior to the filing date for Board of Supervisors approval of the transaction, which is generally two weeks before the Board agenda date.. On the closing date for a Commercial PACE transaction, the County will issue the PACE Bond to the Investor, and the PACE Investor will wire transfer the Bond proceeds to the Trustee The Trustee will disburse funds to the property owner to install the Energy Improvement in accordance with the terms of the indenture. See section 2.7 for additional terms. The Bonds will be structured in accordance with the parameters of 1915 Act Bonds, with a final maturity date that is consistent with the estimated useful life of the Energy Improvement up to 20-years. Payment for the bonds will be secured by an assessment contract (the Assessment Contract ) between the County and the Owner, pursuant to which the entire principal amount of the assessment is levied against the property and payable over time through level semi-annual installments on the Owner s property tax bill. Contractual assessments and the interest and any penalties thereon are paid on a pari passu basis with general ad valorem property taxes and other assessments and are prior and superior to all liens, claims and encumbrances except (a) the lien for general taxes or ad valorem assessments in the 6 July 2014

7 nature of and collected as taxes levied by the state or any county, city, special district or other local agency; (b) the lien of any special assessment or assessments the lien date of which is prior in time to the lien date of the assessment for which the deed is issued; (c) easements constituting servitudes upon or burdens to said lands; (d) water rights, the record title to which is held separately from the title to said lands; (e) restrictions of record Resale of PACE Bonds The County may place certain restrictions on the purchase and resale of the bonds and require that any subsequent owner be a QIB or an accredited investor. Strategies for PACE bond resale, secondary market development and/or future securitization for capital markets resale will be discussed with interested Investors, and will be determined in consultation with and subject to the approval of the County. In no event will the County permit potions of a single PACE Bond to be divided and sold to secondary investors. 2.2 Rights of Existing Lenders In all cases, the Owner must obtain written consent from each existing private lien holder on the property for the PACE assessment and assure that the PACE assessment will not trigger a default under the existing mortgage(s) before the project is approved and the assessment contract is executed. At the Owner s request, the County s Program staff will coordinate and work with existing lien holders to explain the program and obtain consent to PACE assessments. Existing first mortgage lenders may be interested in funding PACE transactions because investment in a well-designed energy retrofit project can lower operating costs, potentially increase cash flow net of financing costs, improve building services and attract/retain tenants, thus improving the credit profile of the owner and enhancing the mortgage lender s position in the asset. PACE program staff may help investors identify property owners from an institution s existing portfolio and provide project development services for property owners choosing to move forward with a project. Alternatively, the property s existing lender may choose to finance a project through an existing lending program to allow the Owner to refinance the loan upon project completion using PACE financing from another group within the existing lender entity or from a third-party PACE investor. Thus PACE can serve as take-out financing for another loan 11. If a property owner becomes delinquent or defaults on its property tax payments, which will also include the annual debt service on the PACE Bonds, the Investor may request the County to pursue an accelerated judicial foreclosure process to recover the delinquent debt service payments. As a component of the bond structure, the PACE Investor has the option to require the establishment of a debt service reserve fund to mitigate credit risk and help prevent the need to pursue judicial 11 The PACE applicant must have previously been approved by the Program and have secured Lender Consent prior to start of construction in order to be eligible to use PACE as take-out financing for a construction loan or cash investment. 7 July 2014

8 foreclosure. The debt service reserve fund would be maintained with the Trustee over the life of the Bonds and could be financed with Bond proceeds. 2.3 Property and Project Eligibility Eligible Properties To be eligible for PACE financing in Los Angeles County, the property must meet the following minimum eligibility requirements. Property is located within Los Angeles County, and if within the boundaries of a city, the city has also adopted a resolution to opt-into PACE; Applicant is the legal owner of the property, and all the legal owners of such property agree to participate; Property is used for commercial purposes and is not publicly owned. Properties owned by nonprofit entities may be eligible, even if the owner does not pay property taxes, provided the property has a property tax identification number with the County; Property is not undergoing development at the time of application for project financing; All existing private lien holders on the property must provide written consent that the placement of the PACE assessment on the tax roll will not constitute a default under the existing mortgage(s); Property owner must be current on any existing mortgage(s); Property tax and assessment payments are current on the property, and have not been delinquent for 5 years (or since taking ownership if less than five years); Property owner must not be in bankruptcy and must not have declared bankruptcy within the last 10 years; Property owner must not have defaulted on any deeds of trust; Property must meet a positive equity test. Property must not be subject to any involuntary liens or judgments; and Property is subject to the appropriate jurisdiction s (county, city, or town) permitting and inspections and all other applicable federal, state, and local codes and regulations. Eligible Improvements The Program provides property owners the opportunity to take advantage of a wide range of Improvements, subject to the following provisions: The Program will only finance distributed generation renewable energy sources and energy efficiency and water efficiency measures that are permanently affixed to the property and an existing building. Property owners who elect to engage in broader retrofit projects (such as remodeling, or tenant improvements) will only receive financing through PACE for costs associated with Improvements financeable under the Program. 8 July 2014

9 2.4 PACE Project Application & Process To participate in PACE financing, there is a two-part online application process through followed by completing the bond documents and assessment contract: 1. Initial Application First, the Owner must submit a free PACE Initial Application to the Program Administrator via the PACE website The PACE Initial Application includes basic information about the subject property and a general description of the proposed scope of the Improvements and the expected budget. The Program Administrator then conducts a search to verify initial compliance with the underwriting criteria, and alerts the Owner of the project s eligibility status. 2. Final Application Once the Initial Application is approved, the Owner may begin the Final Application Process. The Final Application is accessed via a web portal. Upon approval of the Initial Application, the applicant is given a unique user ID and password to access the Final Application and upload supporting documentation. The website also includes a list of the supporting documentation that must be included with the Final Application in order for it to be considered complete. At this time, the Owner should negotiate the financing terms with his mortgage holder and/or the Investor of choice and obtain written consent to the PACE lien from any existing lien-holders. Required Final Application supporting documents must be uploaded at this time for the Final Application submittal to be considered complete. For a list of required supporting documents please see the program website at 3. Transaction Documents Once approved, the transaction documents and the assessment contract are created and executed by the Treasurer and Tax Collector, its Bond Counsel, the property owner and the Investor. The primary documents for completing a transaction are: the Trust Indenture, Assessment Contract, Mortgage Lender Consent, and Bond Purchase Agreement. 12 The County has prepared initial drafts of these documents. The current draft documents will provide the starting basis for completing specific transactions, and will be available for distribution to prospective Investors and Owners upon request. 4. Project Financed Upon execution of the transaction documents and lien recordation, funds may be wire transferred to finance the project. 2.5 Roles of the County, Fiscal Agent and Paying Agent; Debt Service Reserve Fund; Flow of Funds and Assessment Collections Proceeds from the Bonds are deposited in accounts established by the County with the Trustee in accordance with the terms of an indenture. The County Auditor-Controller will perform the functions of 12 An Intercreditor Agreement between the Investor and existing private lien holder(s) may also be entered into at the option of these parties. 9 July 2014

10 the fiscal agent for all PACE transactions, which includes the levy and collection of debt service payments on PACE Bonds and their subsequent transfer to the Trustee for payment to the Investors. Bond proceeds to finance the Energy Improvements will be deposited in a separate account ( Improvement Fund ) maintained with the Trustee. Disbursements from the Improvement Fund will be governed by the terms of the indenture. Debt Service Reserve Funds (DSRF) Lien-holders and/or Investors may require a DSRF for PACE financing. DSRF monies either can derive from bond proceeds as negotiated between the Property Owner and Investor or from a grant-funded DSRF such as that offered by the City of LA for properties within LADWP service territory. DSRF monies may not be comingled with other bond proceeds. Collections and Payments after Bond Issuance The execution of the Assessment Contract constitutes the levy of the contractual assessment by the County against the subject property and provides legal authority enabling the County to add the assessment to the regular property tax roll. The County collects and receives payments from the PACE assessment and remits the funds necessary to pay principal and interest on the bonds to the Investor as they become due. The timing for getting new assessments approved and for making interest and principal payments for particular transactions must be coordinated with County procedures and applicable law. Collection of PACE Assessments LA County s fiscal year is from July 1 through June 30 of the following calendar year. In the current fiscal year, any PACE assessment contracts executed prior to June 30 (note: this is an approximate deadline) will be placed on the property tax roll for the next fiscal year. Property tax bills are delivered in October of the current calendar year and include assessments related to any PACE contracts executed in the prior fiscal year. The PACE assessments, along with other assessments and regular property taxes are payable in two equal installments, which are due no later than December 10 and April 10 of each year. Debt Service Payment on the PACE assessments The PACE bonds created from the PACE assessment contracts are issued as 1915 Act Bonds under the California Streets and Highways Code, which require semi-annual debt service payments on March 2nd and September 2nd, with mandatory principal amortization on the September 2nd payment. For a PACE assessment contract executed in the current fiscal year, the first debt service payment (interest only) on the PACE Bond will be due to the PACE investor on March 2 of the following fiscal year. The second debt service payment (interest and principal) will be due to the PACE investor on September 2 of the following calendar year. The collection/payment cycle described above will repeat on an annual basis through the life of the PACE assessment contract, which in no event will exceed 20-years. 10 July 2014

11 The bond issuance date determines these payment dates; in other words, the financial closing can be timed to achieve the desired due dates for initial assessment and debt service payments. For example: 1. PACE financing closes on June 30, 2014 before the July 1 cut-off date to be placed on next fiscal year s Tax Roll (FY ): October 2014 Property tax bill including PACE assessment delivered to property owner December 10, 2014 First PACE Assessment payment is due from the property owner to LA County (50% of total annual payment) March 2, 2015 First Interest-only Debt Service Payment from LA County is due to the PACE investor April 10, 2015 Second PACE Assessment payment is due from the property owner to LA County (50% of total annual payment) September 2, 2015 First Principal + Interest Debt Service Payment from LA County is due to the PACE investor 2. PACE financing closes on December 15, 2014 (after the July 1 cut-off date to get on the next Fiscal Year s tax roll): October 2015 Property tax bill including PACE assessment delivered to property owner December 10, 2015 First PACE Assessment payment is due from the property owner to LA County (50% of total annual payment) March 2, 2016 First Interest-only Debt Service Payment from LA County is due to the PACE investor April 10, 2016 Second PACE Assessment payment is due from the property owner to LA County (50% of total annual payment) September 2, 2016 First Principal + Interest Debt Service Payment from LA County is due to the PACE investor Note: Interest on a PACE Bond accrues from the closing date to the first interest payment date. Note: Installation of Energy Improvements can begin upon closing, enabling savings to begin prior to the first PACE assessment collection and subsequent interest-only debt service payments. Note: PACE funds may be used as take-out financing for a construction/ bridge loan so long as Lender Consent is obtained and a Final Application are approved prior to the start of construction. Collections in Default In the event that the Owner fails to make property tax payments and causes a default to occur in the due and punctual payment of principal and interest on the bonds, the Investor shall have the right to instruct the County to initiate judicial foreclosure proceedings. These foreclosure proceedings may be subject to agreements between the Investor and existing private lien holders (i.e., independent of the bond financing with the County), as memorialized in an intercreditor agreement, to address collections 11 July 2014

12 procedures and their respective rights and remedies in the event of payment delinquency or default, including the existing mortgagee s right of first refusal (if agreed to by the parties) to cure such delinquency to avoid initiation of foreclosure proceedings. The Investor and lien-holder(s) shall indemnify the County for all matters related to such judicial foreclosure. The Investor may choose to take collection enforcement actions directly and postpone making the instruction to the County to initiate collections and foreclosure actions. The ability of Investors to receive any late payment penalties collected by the County is addressed in the Assessment Contract and Bond Purchase Agreement. 2.6 Transaction Costs & Documentation The County has successfully completed three commercial PACE financings. The County has developed standard form documents for PACE financings that will be used for future financings, thereby lowering the transaction costs for future PACE projects. The Owner and Investor will be responsible for transaction costs associated with the PACE bond financings, which can be capitalized in the bond financing for the project. Description Timing Cost Notes One-Time Fees Application Fee At Final Application $250 Technical Project Review At Final May be required for certain projects or varies Application measures. County Closing Fees At closing $5,000 -$10,000 Most projects will incur only $5,000. County Recording fee At closing $100 County Bond Counsel At closing TBD Not to exceed $25,000 per PACE Bond 13 County Assessor Fee At closing $300 Trustee Fee At closing $500-$1000 CDIAC fee On-going Program Fees Annual Administrative Assessment At closing Trustee Annual Fee Annually $ x Par Amount of Bonds $500. If the lender requires a legal opinion, then an additional $ Fee is capped at $3000. Fee to the Investor on projects >$1million. Annually NTE $100 Not a fixed fee. Adjusted annually. 13 Certain highly complex transactions and/or transactions with difficult PACE investors could cause bond counsel fees to exceed this limit. 14 Property owners have the option to capitalize (borrow) the total cost of trustee fees over the life of the assessment contract into the PACE bond. 12 July 2014

13 Note: It is expected that Bond Counsel fees will reduce over time as more projects are completed. However, the numbers quoted above should serve as a guideline. Note: The City of Los Angeles has allocated budget to cap PACE transaction fees for qualifying at 2% of the amount financed, until budget is exhausted. This Cost of Issuance Subsidy is available on a first come, first serve basis and is available only to qualifying property owners within the City of LA. This Subsidy may not be used to cover fees charged by entities outside of those listed above, such as origination fees paid to PACE Investors. 2.7 Timing of Closing and Construction Financing Comprehensive energy efficiency and renewable energy projects typically take months to complete construction. Thus, a construction financing plan must be developed for each transaction that meets the needs of the Owner, Investor and contractor and is consistent with the timing requirements of the PACE bonds and collection of assessments. Prospective Investors should expect a 5 8 week time period from the date a Financial Term Sheet and commitment letter is submitted to the Treasurer and Tax Collector by the Program Administrator to the date the Board of Supervisors approves the transaction and the PACE financing is eligible to close. Another option is to arrange for interim financing, usually through a construction loan, and close on the PACE financing at the end of construction. To do this, the Program must receive and approve the PACE Application PRIOR to commencement of construction. In this scenario, construction period interest accrued as a result of the interim financing, may not be included in the amount financed through PACE. Ultimately, the transaction costs, interest carrying costs and risks of various construction financing options must be evaluated as part of an overall construction financing plan. Note: a complete PACE Final Application and supporting materials must be approved by the Program Administrator before a Financial Term Sheet and commitment letter is submitted to the Treasurer and Tax Collector. If the parties desire to utilize PACE financing as take-out financing, property owners are required to obtain consent from existing lienholders and secure a firm commitment from a PACE investor prior to final approval by the Program Administrator. 13 July 2014

14 3. Request for Qualifications, Procedures and Content of Requested Responses Purpose The objective of this Request for Qualifications (RFQ) is: 1. Expand the existing list of Investors interested and capable of providing funding on an individual project basis, in which a single and unique bond is issued to the Investor for each project financed. RFQ Schedule Key steps and schedule for the RFQ process are as follows: Milestone Investor responds to RFQ PACE Program Administrator reviews Investor s response and notifies Investor of their eligibility If approved, PACE Program Administrator creates a draft profile for Investor to review and edit Investor reviews their profile and sends revisions to PACE Program Administrator PACE team adds Investor s profile to the PACE website Days After Completed Qualifications Are Submitted 0 business day 15 business days 15 business days 20 business days 25 business days Questions and Answers Any written questions shall be submitted to LA County at the address specified for the receipt of proposals. Faxed questions or inquiries will not be accepted. Reponses to submitted questions will be handled in writing and will be posted to the County PACE website, RFQ Submission of Information All submissions must be ed to the following: PACE Program Administrator Subject line: LA County PACE Investor RFQ info@lapace.org Only ed submissions will be accepted. Questions regarding the RFQ may be submitted via only to the address listed above. 14 July 2014

15 Required Content for Responses The following prescribes the content for a complete RFQ response. General Requirements 1. Transmittal Letter Signed by an appropriate officer of the Investor institution Confirm interest to provide PACE financing as described in this RFQ Indicate the key point of contact for the Investor institution for follow-up discussions 2. Eligibility Documentation Complete the Accredited Investor Questionnaire provided in Annex A proving the responding company is an Accredited Investor 15 or a Qualified Institutional Buyer 16 as defined by the Securities and Exchange Commission. 3. Narrative Written in 11 point Times New Roman single-spaced with one inch margins, no longer than two pages. The Narrative must provide responses to the following: Summary of energy efficiency and distributed generation and/or renewable energy project finance experience Examples of prior/recent transactions similar to those contemplated by the program Description of the firm s readiness to close PACE transactions immediately Staffing and personnel that can be devoted to these transactions including primary contact for interested Building Owners and Contractors 4. Complete online PACE Investor Profile PACE Investor profile must be completed and submitted through the online form. See Annex B for a copy of the survey for reference. Incomplete profiles will not be posted to the LA PACE website. 5. Company Logo A digital high-resolution print-quality company logo (vector file preferred) to post on along with the Investor profile described below July 2014

16 Annex A Accredited Investor Questionnaire Please answer all applicable questions If the appropriate answer is None or Not Applicable, so state. Please print or type your answers to all questions. Attach additional sheets if necessary to complete your answers to any item. Your answers will be kept strictly confidential at all times; however, County of Los Angeles and the Los Angeles County Energy Program may present this Questionnaire to such parties as it deems appropriate in order to assure itself that the offer and sale of its securities will not result in a violation of the registration provisions of the Securities Act of 1933 (the Securities Act ) or a violation of the securities laws of any state. 1. Name and Address Please provide the following personal information: Company Name: Company Address: Company Telephone: 2. Accredited Investor Qualification Unless otherwise determined by LA PACE in its sole discretion, LA PACE will accept subscription offers only from persons who are Accredited Investors, as that term is defined in Regulation D under the Securities Act. Please check the appropriate space(s) in this section indicating the basis on which you qualify as an accredited investor. 16 July 2014

17 Qualification as an Accredited Investor Please check the categories applicable to you indicating the basis upon which you qualify as an Accredited Investor for purposes of the Securities Act and Regulation D thereunder. INDIVIDUAL WITH NET WORTH IN EXCESS OF $1.0 MILLION. A natural person (not an entity) who has individual net worth, or joint net worth with the person s spouse, that exceeds $1,000,000 at the time of the purchase, excluding the value of their primary residence. INDIVIDUAL WITH A $200,000 INDIVIDUAL ANNUAL INCOME. A natural person (not an entity) who had an individual income of more than $200,000 in each of the preceding two calendar years, and has a reasonable expectation of reaching the same income level in the current year. INDIVIDUAL WITH A $300,000 JOINT ANNUAL INCOME. A natural person (not an entity) who had joint income with his or her spouse in excess of $300,000 in each of the preceding two calendar years, and has a reasonable expectation of reaching the same income level in the current year. CORPORATIONS OR PARTNERSHIPS. A corporation, partnership, or similar entity that has in excess of $5.0 million of assets and was not formed for the specific purpose of acquiring an interest in the Fund. REVOCABLE TRUST. A trust that is revocable by its grantors and each of whose grantors is an accredited investor. (If this category is checked, please also check the additional category or categories under which the grantor qualifies as an accredited investor.) IRREVOCABLE TRUST. A trust (other than an ERISA plan) that (i) is not revocable by its grantors, (ii) has in excess of $5.0 million of assets, (iii) was not formed for the specific purpose of acquiring an interest in the Fund, and (iv) is directed by a person who has such knowledge and experience in financial and business matters that such person is capable of evaluating the merits and risks of an investment in the Fund. IRA OR SIMILAR BENEFIT PLAN. An IRA, Keogh or similar benefit plan that covers a natural person who is an accredited investor. (If this category is checked, please also check the additional category or categories under which the natural person covered by the IRA or plan qualifies as an accredited investor.) NON-PROFIT ENTITY. An organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, with total assets in excess $5 million (including endowment, annuity and life income funds), as shown by the organization s most recent audited financial statements. 17 July 2014

18 OTHER INSTITUTIONAL INVESTOR (Please check one) A bank, as defined in Section 3(a)(2) of the Securities Act (whether acting for its own account or in a fiduciary capacity); A savings and loan association or similar institution, as defined in Section 3(a)(5)(A) of the Securities Act (whether acting for its own account or in a fiduciary capacity; A broker-dealer registered under the Securities Exchange Act of 1934; An insurance company, as defined in section 2(13) of the Securities Act; A business development company, as defined in Section 2(a)(48) of the Investment Company Act of 1940; A small business investment company licensed under Section 301(c) or (d) of the Small Business Investment Act of 1958; or A private business development company, as defined in Section 202(a)(22) of the Investment Advisers Act of ENTITY OWNED ENTIRELY BY ACCREDITED INVESTORS. A corporation, partnership, private investment company or similar entity each of whose equity owners is a natural person who is an accredited investor. (If this category is checked, please also check the additional category or categories under which each natural person qualifies as an accredited investor.) Qualification as a Sophisticated Person If you did not check a selection under Section 2 above, please check below, if applicable, indicating that you are a Sophisticated Person for purposes of the Securities Act and Regulation D thereunder. Please skip this question if you have checked a selection under Section 2 above. KNOWLEDGE AND EXPERIENCE. The undersigned is a person with knowledge and experience in financial and business matters so as to be capable of evaluating the relative merits and risks of an investment in the Company. The undersigned is not utilizing any other person to be its purchaser representative in connection with evaluating such merits and risks. The undersigned shall attach to this Questionnaire a summary of the undersigned s business and investment experience as evidence of his or her knowledge and experience in these matters. 18 July 2014

19 3. Representations By signing this Questionnaire, I hereby confirm the following statements: A. My answers to the foregoing questions are true and complete to the best of my information and belief, and I will promptly notify the County of Los Angeles of any changes in the information I have provided. B. I also understand and agree that although the County of Los Angeles will use its best efforts to keep the information provided in answers to this Questionnaire strictly confidential, the County of Los Angeles may present this Questionnaire and the information provided in answers to it to such parties as they may deem advisable if called upon to establish the availability under any Federal or state securities laws of an exemption from registration of the private placement or if the contents thereof are relevant to any issue in any action, suit or proceeding to which the County of Los Angeles or its affiliates is a party or by which it or they are or may be bound. C. I realize that this Questionnaire does not constitute an offer by the County of Los Angeles or its affiliates to sell any securities but is merely a request for information. [Signature Page Follows] 19 July 2014

20 Signature Page Individual Subscriber IN WITNESS WHEREOF, the undersigned has executed this Accredited Investor Questionnaire as of the day of,. Typed/Printed Name of Applicant Typed/Printed Name of Co-Applicant, if any Signature of Applicant Signature of Co-Applicant Residence Address of Applicant Residence Address of Co-Applicant City, State, and Zip Code City, State, and Zip Code Mailing Address (if not residence) Mailing Address (if not residence) City, State, and Zip Code City, State, and Zip Code Social Security No. of Applicant Social Security No. of Co-Applicant Contact Tel No. Address Type of Proposed Ownership Natural Persons Only (Check One): Individual Joint Tenants with Rights of Survivorship Tenants in Common Uniform Gift To Minors Other: 20 July 2014

21 Signature Page Corporate, Partnership, Trust or Plan Subscriber IN WITNESS WHEREOF, the undersigned has caused this Subscription Agreement to be executed as of the day of,. Typed/Printed Name of Applicant Entity Principal Office Address of Entity Type of Entity City, State, and Zip Code Typed/Printed Name of Authorized different from Representative Mailing Address (if principal office address) Signature of Authorized Representative City, State, and Zip Code Federal Tax Identification No. of Purchaser Contact Tel No. Address 21 July 2014

22 Annex B PACE Investor Profile Must be completed and submitted through the online form linked below. PACE Investor Profile Completing this PACE Investor Profile is part of the requirements for submitting a response to Los Angeles County's PACE Investor Request for Qualifications (RFQ). Information collected through this RFQ will be used to create Investor-specific profiles which will be posted on the program s website ( All profiles will be cleared with Investors prior to posting. Participating property owners will be able to access this information to efficiently identify potential sources of capital. A copy of this survey is included in the Annex B of the RFQ for informational purposes only. This online version MUST be completed for every RFQ response. * Required Provide the complete and legal name of your qualified institution. * Provide the web address of your qualified institution. * Provide the name of the Primary Contact for your qualified institution as it relates to this RFQ. * Provide a phone number for the Primary Contact. * (Include area code) Provide the address for the Primary Contact. * 22 July 2014

23 What is the minimum project size that you will finance? * There is no minimum Other: What is the maximum project size you will finance? * There is no maximum Other: What types of project measures will you finance? * Check all that apply. Energy Efficiency Measures Solar Photovoltaics Other Renewable Energy Generation Water Efficiency Measures Electric Vehicle Charging Stations Which property types will you NOT finance? * Check all that apply. Commercial Industrial Multi-family (5 units or greater) Agricultural Non-profit Faith-based Other: Do you offer warehouse or bridge financing? * Yes No If you offer warehouse or bridge financing, at what rate? * 2-4% 23 July 2014

24 4-6% 6-8% 8-10% over 10% Does not apply For PACE financing, what rate will you offer? * 2-4% 4-6% 6-8% over 10% Participation in the PACE Program includes some underwriting guidelines for Investors (as described in the RFQ). What additional requirements does your qualified institution have? * For example: loan-to-value, lien-to-value, savings-to-investment ratio, etc. If there are no other additional underwriting guidelines, please respond "None". Participation in the PACE Program includes some general terms for PACE financing (as described in the RFQ). What typical terms does your qualified institution require? * For example: fees, type of rate, repayment terms, closing costs, etc. What documents do you require from applicants? * For example: property appraisal, year-to-date financials, tax returns, profit and loss statements, federal/ state tax credit, depreciation allocation, rent roll, lease types, or occupancy rates. 24 July 2014