Ever wonder about the numbers in terms of cost for a LED retrofit? This is not an incidental question, because virtually every building in NYC greater than 25,000 sf will need to upgrade their lighting to LED in order to comply with LL 88 and LL 134.
While the compliance requirements are more fully described below, remember every LED retrofit saves on energy costs. The amount of the savings depends entirely on the type of lighting to be replaced and the LED products selected. Replacing incandescents with LED products offers the greatest level of savings – paybacks in about one year. Then comes the next savings level with LED products replacing fluorescents – paybacks in the two-year range. Now back to compliance.
Buildings in the Commercial and Industrial category will need to upgrade all of their interior lighting to LED. This category includes both Hotels as well as Assisted Living Facilities that exceed 25,000 sf in size. Requirements include lighting upgrades for all of the common areas as well as the living areas. Multifamily properties that exceed 25,000 sf are also covered by Local Law 88 and 134, however, the requirements to upgrade are limited to building common areas. Residential units in multifamily buildings are excluded from these requirements.
The upfront costs for these upgrades can be substantial. Think in terms of a $50,000.00 price tag – start to finish – for the average multifamily property. Certainly, this number can go lower or higher depending on building size and fixture count. For buildings in the Commercial and Industrial category, where the living areas must also be upgraded, more lighting is involved, so costs will run higher.
While some buildings have already completed their LED upgrades, the majority have yet to comply. The rate of progress toward LL 88 and 134 compliance will need to increase, as the window of opportunity to address these requirements is closing. While the deadline (January 1, 2025) may seem on the distant horizon, the problem is that there is an imbalance between the large number of buildings that need to comply and the small number of providers that are qualified to perform the LED retrofit work. While there are many licensed electrical contractors in NYC, there are only a very few that have the knowledge and expertise to successfully perform LED retrofit work. Specific qualifications include the ability to model a project. Project modeling is the ability to determine the electric savings that will be realized with LED product options. Additional qualifications include the ability to retrofit existing lighting fixtures with LED modules to maintain lighting aesthetics. The ability to calibrate battery back-up LED stairwell fixtures is also required. Expertise in LED lighting is a specialized field of work with a limited number of qualified providers. With the very large number of buildings that have yet to comply, it is only a question of time before this imbalance becomes a serious backlog problem.
Our recommendation is that buildings get started with their LL 88 and LL 134 compliance. For buildings that want to start, but have competing projects, we would suggest a project financing option, such as equipment leasing as outlined below.
Equipment leasing will provide 100% of the up-front funding required for implementation of a LED retrofit (purchase and installation). The “debt service” consists of fixed monthly payments for a term of two to five years. At the end of the lease term, the installed LED product is purchased for $1.00.
For more information, we reached out to the M-Core Credit Corp with regard to the practicality of lease financing – which M-Core has been providing for over twenty years. Michael Weisberg, Principal of M-Core advises that the “Financing process is simple. As an example, the one-page lease financing application for coops and condos consists of the name and address of the building, their bank and a copy of their annual statement – as provided to their shareholders or condo owners. The approval process is fast – usually three to five business days.” He further advises that “Financing a project such as LED lighting makes sense as the LED project will provide sufficient savings that will more than offset the related financing costs. The project not only pays for itself, but can provide free cash flow to the building.”
An actual example of a lease arrangement for a LED retro-fit follows:
The scope of this project for a two-building multifamily complex involves the replacement of all existing common area and garage lighting with LED. The existing lighting consists of a variety of fluorescent and incandescent lighting products. The cost of the retro-fit, with installation, totals $55,840.00. The monthly electric utility savings is $2,737.08. The project lease financing provides an upfront payment to the vendor(s) of $55,840.00 – equal to the full cost of the project. The building selects their monthly lease payment schedule. With a 24 month schedule, the monthly payment would be $2,574.22 – which closely matches the savings. If the maximum 5-year schedule is selected, the monthly payments would be $1,183.81 – less than 50% of the monthly savings realized. At the conclusion of the lease payments, the purchase price is $1.00.
Get started. Send Michael an email to (Michael@m-corecredit.com) with your questions and get started with your project. Avoid the inevitable LL 88 and LL 134 compliance crunch by starting the process now.