Hartford Business Journal

28 HARTFORDBUSINESS.COM | JULY 24, 2023 Opinion & Commentary EV growth represents electric opportunity for CT's commercial businesses By Gabe Phillips E lectric vehicles are expected to experience significant growth in the next 10 years, ushering in the EV revolution. A recent report by BloombergNEF projected the global EV market to grow to over 540 million vehicles by 2040 — that's an eye-popping average annual growth rate of 29%. According to a report by the Interna- tional Energy Agency (IEA), the number of EVs on the road in the U.S. is projected to reach 20 million by 2030, representing approximately 7% of all passenger vehicles. I think the IEA's projection is closer to the floor and that EV sales will far exceed those projections. Policy has joined with product innovation to supercharge this growth. Major U.S. states, including New York and California, have set ambitious targets for EV adoption, aiming for 100% zero-emission vehicle sales by 2035. The Biden administration, and the recently passed Inflation Reduction Act, will spur investment in charging infra- structure and incentivize consumers to purchase EVs. However, to support the widespread adoption of EVs, an extensive and reli- able electric vehicle charging network is required. While governments and utilities can play a role in building this infrastructure, commercial businesses will play a critical role in expanding and sustaining the EV charging network. The requirements for refueling an EV are very different from gasoline cars. It takes time to refuel, or recharge, an electric vehicle. That simple fact is what makes commercial businesses so important for expanding the reach of the EV charging network. Customers and employees will value the ability to charge while they shop, work or run errands. The existing parking infrastructure at shopping malls, restaurants, and office buildings is an asset ready to be unlocked. That is why EV growth represents an electric opportunity for Connecticut's commercial businesses. By utilizing their existing on-site parking infrastruc- ture to add EV charging, businesses can reap multiple rewards: provide an employee and customer perk, while adding a revenue stream and accessing state and federal incentives. Here are the different bene- fits and incentives available to commercial businesses: Tax credits: The U.S. federal govern- ment offers a tax credit of up to 30% of the cost of installing EV charging stations for businesses. This credit is available through the end of 2023. Grants: Several states and local governments offer rebates or grants to businesses to help cover the costs of installing EV charging stations. These grants may cover up to 80% of the cost of the charging station. Rebates: In 2021, Connecticut's Public Utilities Regulatory Authority estab- lished a nine-year program to support the installation of electric vehicle charging infrastructure. Under the state's Electric Vehicle Charging Program, commercial customers of Eversource and United Illuminating Co. are eligible for rebates Gabe Phillips Commercial real estate loans are coming due — what lenders, property owners, tenants and managers need to know By Brion J. Kirsch C ommercial real estate loan portfolios are facing a tidal wave of maturities at a time when certain commercial real estate classes are potentially entering a crisis. Countless properties were purchased and/or refinanced at a time when interest rates were historically low, and occu- pancy levels and operating expenses were stable and predictable. All of this has changed. Loans secured principally by office and retail properties could see values drop by as much as 40%, with vacancy rates skyrocketing to levels of 20% or more. While these properties may have performed well enough to cover debt service and oper- ating costs in recent years, because of bank failures, structured buyouts, rising geopolitical tensions, historic inflation, rapidly increasing interest rates and lower occupancy levels, the pressure is mounting on commercial property owners and their lenders. Sales of commercial mort- gage-backed securities (CMBS) fell about 80% in the first quarter of 2023 as compared to 2022, according to Bloomberg, which also projects that $1.5 trillion of U.S. commercial real estate debt will mature and become due and payable by the end of 2025. Owners, tenants, property managers and lenders need to understand the current climate and take steps now, before it is too late, to address the issues that will arise when a commer- cial loan goes into default. Resolve the problem before it becomes a problem A lender should conduct a thorough review of its file, the loan and the collateral. If the default is not cured, or the parties are unable to restructure the loan, the lender faces the options of foreclosing on the property, taking a deed in lieu of foreclosure or exercising other remedies that may be available. If an owner of a troubled property sees a potential default, or an inability to refinance the existing indebtedness secured by the property, the owner should approach the lender as early as possible to start the discussion about restructuring and extending the loan. The options that should be exhausted before resorting to litigation include selling the property, raising capital or simply turning over the keys to the lender. If those options don't work and the owner wants to keep the property, the loan can be restructured through reorga- nization in a bankruptcy proceeding. Litigating the foreclosure action, if bankruptcy is not an option for the owner, becomes the next best option. Rights are not uniform Residential tenants have certain rights provided by state statutes, but commercial tenants don't have the same safeguards. They should determine if they have the ability to remain a tenant in the property post-foreclosure, what happens to any security deposits, and whether agreements made with the owner will be honored by the foreclosing lender. The rights, duties and obligations of the parties — the borrower, tenant and lender — need to be well-thought-out and documented prior to foreclosure. These issues, including those regarding attornment, non-disturbance and subordination, are all significant legal concepts that affect everyone involved. Commercial tenants must understand their significance and address them before it is too late. Otherwise, they could become collateral damage. Like tenants, property managers must also take stock of their contrac- tual rights and responsibilities. If the property manager has not entered into an agreement with the lender, the lender may have the option of removing the property manager at the onset of the foreclosure process. If the property manager has no contractual relationship with the lender, it should take steps to establish one and negotiate for certain rights. One such circumstance would be to remain the property manager following the initiation of a foreclosure. Set guidelines for how and when monthly income will be collected and distributed, as well as the fees that the property manager can charge and collect. When commercial properties fail, it creates a downward spiral of economic contraction in the form of job losses and vacant properties. The domino effect is felt by everyone in the community, including the banks that serve those communities. There's still time for action, but the first steps must be taken now. Brion J. Kirsch is co-chair of the real estate department at law firm Pullman & Comley LLC. EXPERT'S CORNER OTHER VOICES of up to $250,000 for some projects. Property tax exemption: A 2022 state law provides a property tax exemption to level two EV charging stations (that supply 208- to 240-volt alternating currents) on commercial or industrial property. Increased revenue: Installing EV charging stations can attract new customers and increase revenue for businesses, especially those in high-traffic areas or near highways. In addition, businesses can collect user charging fees. Public relations: Businesses that install EV charging stations can benefit from positive publicity by showing their commitment to sustainability and reducing emissions. The EV revolution is inevitable, and it's a momentous change. That change comes at a time when it is more important than ever to make your business stand out to attract customers and employees. For smart Connecticut businesses, that represents an opportunity. For early adopters, becoming "the place" where customers and employees charge their vehicles is the most important value. Gabe Phillips is the CEO of Cata- lyst Power, a clean energy services provider for the commercial and industrial sectors. Brion J. Kirsch

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