Commercial Investment Real Estate March/April 2013 | Page 39

EAC Payback vs. Straight Payback Method
EAC Payback
$200,000 new boilers perform as expected
Total energy & repair
savings
Tenant(s)’ gain
$30,000 per year for 25 years
$10,000 per year for 10
year cost recovery period
$100,000
Landlord reimbursed
$16,000 per year for 12.5
year cost recovery period
Total $200,000
$20,000 per year for 10
year cost recovery period
$200,000
$30,000 per year for
12.5 years remaining life
$375,000
Total
Year
1–12.5
period of straight-line pay-
back to landlord
12.5–25
equipment life after landlord
is reimbursed
$200,000 new boilers underperform by 33%
Total energy & repair
savings
Tenant(s)’ gain
$20, 000 per year for 25
years
$4,000 per year for 12.5
year cost recovery period
Total $50,000
Total
1–12.5
period of straight-line pay-
back to landlord
Total energy & repair
savings $33,000 per year for 25
years
$20,000 per year for 10
year cost recovery period
$200,000
12.5–25
equipment life after landlord
is reimbursed
$200,000 new boilers overperform by 10%
1–10
period of straight-line pay-
back to landlord
$16,000 per year for 12.5
year cost recovery period
Total $200,000
$200,000 new boilers overperform by 10%
$20,000 per year for 10
year cost recovery period
$200,000
$33,000 per year for 12.5
years remaining life
$412,500
Total
1–12.5
period of straight-line pay-
back to landlord
11–25
equipment life after landlord
is reimbursed
$13,000 per year for 10 year
cost recovery period
$130,000
Landlord reimbursed
CCIM.com
$20,000 per year for 15
years remaining life
$300,000
$33,000 per year for 25
years
$17,000 per year for 12.5
year cost recovery period
Total $212,500
Landlord’s gain
11–25
equipment life after landlord
is reimbursed
$200,000 new boilers underperform by 33%
$20,000 per year for 12.5
years remaining life
$250,000
Year
Year
1–10
period of straight-line pay-
back to landlord
$0 per year for 10 year cost
recovery period
$0
$16,000 per year for 12.5
year cost recovery period
Total $200,000
Landlord’s gain
$30,000 per year for
15 years remaining life
$450,000
$20,000 per year for 25
years
Landlord reimbursed
Tenant(s)’ gain
$200,000 new boilers perform as expected
$30,000 per year for 25 years
$14,000 per year for 12.5
year cost recovery period
Total $175,000
Landlord’s gain
Straight Payback
12.5–25
equipment life after landlord
is reimbursed
$33,000 per year for 15
years remaining life
$495,000
1–10
period of straight-line pay-
back to landlord
11–25
equipment life after landlord
is reimbursed
March | April | 2013
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