July 7, 2021
A Q&A with Bali Kumar, COO of PACE Loan Group
1. Tell us about yourself
I’m from Harlem, New York, but left for high school to attend Phillips Academy in Andover, Massachusetts. I then went to Brown for chemical engineering but decided to major in race and ethnic studies instead. I did a Masters Degree at the London School of Economics and became a Management Consultant at Deloitte in London.
Once I moved back to the United States from London, I enrolled at Berkeley Law School. I didn’t like law school because it forces you to look at the law only as it is, and I think it is important to be critical of (and improve on) law and policy. I worked at an international corporate law firm after law school in their New York and Los Angeles offices. I left my law firm to start a private equity firm in Geneva, Switzerland, financing clean energy and infrastructure projects in Sub-Saharan Africa.
Though the private equity firm struggled, I enjoyed doing the mission-driven work. I moved back to the United States where eventually I was brought on to run Lean & Green Michigan. PACE (Property Assessed Clean Energy) Financing was a great fit for me because it is at the confluence of business, real estate, and law. I had an interest in this type of work from my time in Geneva, focused on sustainable buildings and sustainable infrastructure. Then I met Rafi Golberstein (CEO of PACE Loan Group) and developed a good relationship with him and went into being a PACE lender. PACE is a very natural fit: essentially convincing property owners to be sustainable through cash flow positive PACE finance.
2. Tell us about your role with PACE Loan Group
I’ve been the Chief Operating Officer for PACE Loan Group since January 2021. Since PACE is functionally a loan, but legally a property tax, property owners submit to higher property taxes over the course of the financing, and PACE Loan Group gives financing over a longer term (for example, 20 years) because from our perspective, as a property tax, it is a very secure loan. Banks typically provide a shorter term loan, which doesn’t always cover the investment. For example, if the sustainability upgrades take 13 years to pay themselves off and the bank only gives a 7-year loan, there is less incentive for property owners to take on that loan. PACE gives you a longer loan term, so those property owners are actually saving money each year of the loan. Using the earlier example, if the retrofit takes 13 years to pay itself off, but the property owner obtains 20-year financing, then the retrofit is cash flow positive, and therefore a no-brainer!
3. How has PACE Loan Group’s work evolved since the passage of C-PACE (Commercial Property Assessed Clean Energy)?
The first PACE legislation in the nation passed in 2008 and at first, people had never heard of it, or it sounded too complicated. But over the past few years, people are using PACE financing more and more.
People aren't building commercial properties to the lowest code standards possible - they're building things above code and the legislation rewards people for that. The PACE market initially was focused on retrofitting existing buildings, but since the most recent change to the Minnesota PACE statute, now our clients are also using PACE very frequently to finance part of their new construction projects, since PACE financing is cheaper than mezzanine debt or raising additional equity. PACE Loan Group actually did the first new construction project in Minnesota - Praha Village in New Prague!
4. How do you see PACE Loans benefitting Minnesota’s clean energy progress?
There are people who would be open to upgrading buildings, putting on solar, using geothermal energy, etc. if they didn't think it was prohibitively expensive. If the numbers don't work, they won't perform the upgrades at a loss. So when these folks hear about PACE, and learn these projects can be cash flow positive, it tips them over the fence.
PACE is also good for solar contractors and other clean energy businesses that can sell clean energy projects a little easier with PACE as an innovative financing option.
5. Tell us about any exciting projects that you’ve been working on?
All of our projects are exciting in their own way!
For instance, PACE Loan Group provided finance to construct the PAE Living Building in Portland which is the world’s largest commercial Living Building. “Living Building” is a building standard (like LEED certified, etc.) that is considered to be the most stringent green building standard in the world. We are very proud to play a part in that project, and would love to finance many more!
6. How do you see PACE Loan Group’s work evolving in the next 5 years?
Where we go depends on where our clients go, and part of where clients go depends on how regulations push them.
For example, with New York’s passing of the Climate Mobilization Act, there are new, severe penalties for property owners with inefficient buildings. Building owners are now rushing to retrofit their buildings before 2024 which is causing a flood of people needing PACE financing to assist with those upgrades.
PACE Loan Group’s work will continue to evolve with these regulations around the nation. We will always be here to serve our clients and help them get the financing they need to retrofit/build the properties of the future.
7. Why do you enjoy working in this field / what makes you excited to go to work each day?
Our team at PACE Loan Group is simply the best. Also, I really believe in the mission of PACE financing – it makes me feel like I can do well and do good. I’ve done awesome nonprofit work when I was younger, but I could only sustain that lifestyle living at home with my family and eating all their food! Then I got into management consulting and corporate law and I was doing well but I didn’t feel the same sense of fulfillment as before. Now I feel like a superhero again – saving Earth one building at a time, making sure that we all do not have to move to Mars or the moon!