Building going geothermal

Geothermal wellsMore and more new commercial buildings are going geothermal as a viable means to reduce energy costs.  The 40,000 square foot Central Iowa Shelter & Services building, currently under construction south of downtown Des Moines, features a geothermal system.  The mechanical engineer for the project, Alan Langley of Alvine Engineering, says “the trend in Iowa is more buildings are using geothermal systems, in fact about 80% of the schools we design use geothermal systems. Offices and healthcare are good candidates also.”

Alan also adds “the trend started in Iowa when the utility companies started to provide hefty rebates for energy conserving systems like geothermal”.  Basically, the utilities pay companies to lower their energy usage rather than bring on a new power plant costing millions of dollars.

A commercial system costs $16-$20 per square foot so the cost for a geothermal system for a 10,000 square foot building would be $160,000 to $200,000. The payback is typically 5 to 7 years and from day-one heating and cooling costs should be reduced by 35%-45%.

Earth tempA geothermal system takes advantage of the earth’s constant temperature.  The diagram shows the earth’s temperature near the surface in Iowa to be about 52 degrees.  Therefore, the temperature of water when circulated through a closed system of vertical or horizontal loops nears a constant 52 degrees.  The loop is tapped into by mechanical equipment which either transfers heat to the loop during the summer or takes heat from the loop during the winter.

An amazing result of the loop is the potential transfer of energy within a building during the winter.  The interior zones of a large office building many times require year-round cooling while the perimeter usually requires heating.  Mechanical equipment removes heat from the interior zone and transfers the heat to the loop.  Mechanical equipment at the exterior zone reverses the process and removes the heat from the loop providing heat where it is needed. Now that is being Green!!!

When to seek seller financing

Sellers hate it, but buyers are bound to ask themselves, “What is wrong with this business, when the seller will not bet on the future viability or their business and I am? I mean, other sellers are willing to provide seller financing?"

Here are some good reasons why seller financing is important:

  • Seller financing increases the chances for a sale.
  • The seller will usually get a much higher price.
  • The tax advantages are better than an all-cash purchase.
  • Seller financing tells the buyer that the seller believes in the future of the business.
  • Most banks will require some seller financing i.e. “If you don’t believe in the future of the business (and you know more about it than we will ever know), why should we believe in it”?

Lastly, Sellers will need to protect themselves in the same manner that a bank does when making a loan.  Some areas you may want to include would be:  Require good financials from all parties, run credit checks, use an attorney, get more than one party to guarantee payment, require quarterly financials, have a balloon payment option, keep title to the equipment, etc.

Feel free to contact me if I can be of assistance.

- Steve Sink

CBI

M&AMI

ss@phxaffiliates.com

 

Upcoming employee ownership events

2012 will be a big year when it comes to the number of businesses that will experience a transition in ownership. The driving factors are the rebound in business values and the potential threat of increased capital gains in 2013.

This spring offers a multitude of conferences that explore how to drive value and strategies for transitioning a business. The following is list of conferences that any business owner that is thinking of selling their business should consider attending:

National Center for Employee Ownership Annual Conference, April 25-27, 2012 Minneapolis, MN

The Annual Confernce on Open-Book Management, May 9-11, 2012 St. Louis, MO

ESOP Association Annual Conference, May 10-11, 2012 Washington D.C.

National Worker Cooperative Conference, June 22-24, 2012 Boston, MA

To get more details just click on the link for each conference. All of these conferences are well run and have occurred for multiple years.

- Victor Aspengren

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