Victorville, Calif.—Solar panels aren't easy to spot at La Mirage, a new apartment community here. The array is tucked out of sight on the roofs of the carports that ring the property.
That's OK, said Jay Pierce, president of Irvine, Calif.-based home builder JD Pierce Co., Inc. The panels aren't there to lure environmentally conscious renters—they're there to generate power.
“To me, it was about economics,” said Pierce. With help from rebates and tax credits, the solar panels will pay back the developer's investment in less than seven years.
Most of the green building ideas at La Mirage save money. The developer chose green features that would pay for themselves quickly, make La Mirage a better place to live, or both.
The solar panels cost $270,000 to install. The cost was offset by a $56,000 rebate from the local utility and roughly $100,000 in federal energy tax credits.
With the help of the brutal sunshine of California's High Desert, the 35-kilowatt array will supply enough electricity to air-condition and light the common areas at La Mirage, an annual bill that would otherwise add up to $15,000, said Pierce. That will quickly pay back Pierce's investment in the panels. La Mirage also includes a $5,000 solar system to heat the swimming pool, which will allow it to stay comfortable later into the year.
La Mirage also includes watersaving fixtures, energy-efficient appliances, and even a radiant barrier in the attic, which helps to keep heat from the sunlight on the red-tile roof from traveling down through the attic into the apartments.
However, Pierce stopped short of the federal Energy Star standard, which would have required extra insulation and more efficient airconditioning units. Residents pay for their own electricity, heat, and water.
Pierce doesn't believe tenants are paying higher rents for the green features at La Mirage, although many experts believe apartments with green features rent faster than conventional apartments. Work finished on La Mirage in April. By early September, all but eight of the 52 units had rented for about $1,100 a month, meeting the developer's pro forma estimates. Pierce offers concessions averaging less than one month of free rent. Those rents are slightly below advertised rents at other new two-bedroom apartment communities in town.
Pierce developed the $7.3 million project with a $4.5 million construction loans from Bank of America and its own equity.
In exchange for low leverage, the developer got a great interest rate that floats at 170 basis points over the London Interbank Offered Rate, said Pierce. In early September, that rate worked out to just more than 4 percent.
Pierce is looking for permanent financing for the property, though the developer isn't in a hurry to give up its low interest rate. The construction loan, which closed in early 2007, lasts through September 2009.