I get to talk about solar! Peter here, and I finally get to talk about something that is quite firmly in my wheelhouse and passion area.
An incredibly exciting design element of our build is that we are expanding our existing solar array. Between our triplex and our garage, we already had a 9.3 kWdc solar array on our property. These were from 31 300Wdc SolarWorld mono modules that were installed in 2017. There were some positives and negatives here. Our installer unfortunately oversized our array so we didn’t qualify for a substantial state incentive, but we did maximize our on site potential. Another negative is that SolarWorld was actually one of two companies that led a push to introduce solar tariffs against China (and eventually most of the rest of the world), which the Trump administration very disappointingly implemented as a result. Even with the tariffs, SolarWorld (side note: a German company that just had operations in the US) ended up going bankrupt, so getting any replacement parts in the future will be a pain. Anyway, swinging back to the positives. Our new structure is going to have a perfectly southern oriented, wide open roof. We uninstalled and saved the 10 modules that had been installed on our garage. In addition to those, we will be adding 22 new Heliene 380Wdc bifacial modules and a 315 Heliene mono module. Why am I so excited about this? First off, Heliene is a Canadian company but has a manufacturing operation in Mountain Iron, MN. This is the only active solar module manufacturer in Minnesota. Very cool that this is happening in our state and in an area of the state that definitely needs the industry support. Additionally, these new modules are bifacial, meaning that the backsheet of the module is clear instead of metallic. This allows some light to pass through, reflect, and then produce some energy on the backside of the module. It doesn’t double production, but it can add a 15-20% boost. So cool! One last design note on the solar array. We are going to test out if the bifacial modules can be used as a quasi-stained glass window. We didn’t want to alter the existing thermal envelope of the building, so we designed a peak-a-boo opening above the balcony. This will have a bifacial module above it, which will allow some light through. The bifacial module won’t have the same efficiency benefit since the reflection won’t happen, but it will hopefully add a cool element to our balcony! At a minimum, it will allow us to show off the technology to groups interested in visiting our site in person. If you have more solar questions, please comment below and we will do our best to answer them! Sometimes to my wife’s chagrin, I could talk about solar all day. If you ever want to come visit our site in person, definitely let us know that, too. A major goal of this project is to demonstrate the various technology elements and try to normalize them in the marketplace. Everything is being designed with that in mind to be able to share the knowledge. Come say hi!
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Passivhaus standards largely have to do with how tight a building envelope is, how well a building holds a steady temperature, and how many air exchanges are needed per hour. Many design elements, including window size and placement, wall thickness and material, etc. can impact this. Consistency of insulation is very important because hot air will always try to displace cold air, so gaps in insulation can create a chimney effect and cause air exchange requirements to increase.
In our case, we are using straw bales and plaster for our wall insulation. A big question that Katie and I are interested to answer in our build is whether straw bale walls will be tight and consistent enough to achieve passive house certification (US or international). The main concern is on the seams of the bales. We will, of course, try to pack the bales as tightly as possible. No matter how tight we pack them, though, there will still be small seams between the bales. Will those small seams be too much to meet the passive certification? Check back with us after the build to find out! If you have more questions about this, let us know in the comments below! Let’s talk about how we are planning on paying for this project of ours. Peter here! This is a good one to skip if you don’t want a probably too long post about our project finance. I will not be holding back!
As you hopefully picked up from our discussion about budgets, we didn’t really stick to our initial goal. In fact, we blew that original budget out of the water. Then, for a fun wrinkle, our economy plunged into a major crisis as COVID-19 spread across the globe, stocks plunged briefly before making a wild recovery (also stonks), and many of us sat at home wondering if and how anything would ever get back to a comparable “normal.” Now it’s time to pay for a major construction project! Cool cool cool. Financing this project has probably been my main contribution, other than the solar panel elements. I have been working with various lenders to see if we can make something work for probably 18 months now. Part of this is because we ended up delaying our project a year, as referenced in our post about budgets. Mainly, though, financing this project simply presented its own challenges and I wanted to give us a long runway to figure out how to make the money work. With unique projects like ours, I have learned that there is a sweet spot in which banks to talk to. Small, local banks likely don’t have the risk profile or tolerance to take on the project. They may not even have the financial mechanisms in place. Big banks have some standard products in construction finance that probably could work, but the terms weren’t great and there wasn’t much flexibility in term length, payment schedule, and underwriter needs, not to mention restrictions that they started implementing to hedge against a potential recession. Those last two pieces can be challenging because underwriters can get a little spooked by projects they don’t know enough about. What worked best for us was to work with a midsize, regional bank (we are working with Old National). This gave the bank a big enough portfolio and risk tolerance to work with us, while still being small enough to be somewhat personable and flexible to work with our needs. Our process started, quite honestly, with me making several cold calls. Sometimes I would get routed around to the various mortgage groups. As we have mentioned, our project is weird. We are refinancing a contract for deed that we have in place for our triplex to a traditional mortgage to open up our wider lending options (home equity financing or construction financing). We aren’t a traditional mortgage, though, because we are immediately trying to build a new structure on the property. Are we a quadplex? A triplex + a single family home? Two separate properties? Who knows! This confusion scared some banks off or ended up with me getting routed to people who couldn’t help me. Eventually, though, I found a few folks who weren’t the correct people but were interested/curious and helpful enough to get me to their higher ups. I was given the chance to pitch our project and convince them that they should give us a chance. We settled on a construction loan style that would refinance the property out of the contract for deed (so the deed will move to the bank like a traditional mortgage). At the same time, the bank would issue a 4x5 construction loan. We were allowed to lend up to 80% of the value of the appraised future property minus the outstanding amount owed on the existing mortgage. The amount of money that we want to borrow will be amortized as if it were a 30 year product, but there were then 4x 5-year terms where the loan would be updated and renewed. At the end of that final renewal term, there would be a balloon payment for the remainder of the amount. (If all of the above made your eyes/brain hurt, some more details are below.) The downside of this structure is that the interest rate gets updated at each renewal. With the economy being rather tense right now due to COVID-19, lending rates are incredibly good. I would love nothing more than to lock this into a traditional 30-year mortgage product and be done. With our major construction piece, though, we couldn’t do that. A traditional home equity refinance would have only covered ~40% of our build cost and we didn’t have the cash to cover the remainder. So, hopefully interest rates don’t skyrocket at any of the 5 year renewal points. The interest rates are at least locked in during the 5-year terms. The upside of this financing scheme is that we will have the option of refinancing to a more traditional product at any of the 5-year renewal time periods. If interest rates stay low, for example, we could convince a bank at that point to convert all of the outstanding debt on the property into a traditional product and stretch the payments out over a traditional 15 or 30 year term. Now, I know many people wouldn’t necessarily be on board with paying all of the extra interest incurred by continually stretching out payments, but the saving grace of this project for us is that the triplex at the front of the property covers a large portion of the overall payment. It doesn’t cover everything in this case, but it certainly covers a healthy chunk. If we can stretch out the payments into the future to lower our monthly payments, we can cover more and more of that amount with our revenue from the triplex and maybe even get back to cash neutral or positive at some point. This last piece is a huge element for us. Though the triplex can make our property confusing for many banks, it also provides a big, revenue generating asset that banks liked as a collateral component. Being able to show rental history and project revenue made the banks more comfortable and at least willing to hear us out. I know other folks will have different collateral that they can use (stock portfolios, other properties, etc.), but this is how we did it. Turning our property into a quadplex, though, did add one extra challenge. To determine our lending limit, we had to get an appraisal of our post-construction property (our as-built appraisal). Minneapolis does not have many quadplexes (we actually had to get a special permit for this construction - see previous blog posts on Cluster Developments), particularly ones with one of the units being high end, eco-friendly, and brand new. Luckily, the bank we ended up working with found an appraiser familiar with environmentally-conscious construction elements (mainly solar, but better than nothing!). To close our financing, we have had to show tax returns, credit statements, title reports, full site surveys, construction design sets, zoning and building permits, building guarantees, and the aforementioned appraisal. We have provided an initial construction budget but are now waiting for our final construction budget now that we have our final design elements picked out and approved permits in place. Thanks for sticking with me through this long post! If you have questions, ask them in the comments below and I will do my best to answer. Peter here with a quick update. As Katie mentioned in our last post, we had a very productive meeting with a large group of influential people including code officials, architects, subject matter experts, and policy makers. After a few more rounds of questions, our Code Alternate Review has been approved! Strawbale wall assembly is going to be allowed in Minneapolis, at least with this particular team and this set of plans. Not exactly opening up the flood gates, but this is an important step for anyone that wants to follow in our footsteps and do this elsewhere in Minneapolis in the future.
This approval isn't quite our final greenlight, but we are now on much firmer footing to be able to plan our construction schedule, finalize financing, and order materials. The last approval that we are waiting for is of our building permit. Given that the last main hurdle has been cleared, though, we are now quite confident that we will be able to construct the Uptown Strawhouse in 2021! We have had a few other posts sitting in our drafts about our solar array, project finance, and passive house standards that we will release shortly to make up for our relatively quiet last several months. I hope you all are getting as excited as we are! |
AuthorKatie Jones and Peter Schmitt chronicle their building adventure. Archives
January 2024
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