The $1.7 billion National Automatic Sprinkler Industry Pension Fund, Landover, Md., committed up to $100 million to a fund that will lend money to property owners who want to retrofit buildings with sprinkler systems.
There is a requirement that union labor be used on the projects. But the yields will be competitive, and the loans will have recourse in the event of default.
The Retrofit Investment Program is the brainchild of State Street Global Advisors, Boston. Vice President H. Peter Norstrand learned of the opportunity during discussions bank representatives had with Taft-Hartley clients.
Representatives of sprinkler fitter unions mentioned there was an opportunity, but many property owners were having difficulty financing the work, said Mr. Norstrand.
The program seeks to capitalize on the trend in several states to retrofit public buildings with sprinkler systems.
"In the case of fire sprinklers, its impetus is fire legislation in 14 states," he said. "A federal law requires federal employees to stay in hotels equipped with sprinklers."
Universities could be a potential source of deal flow, he said. According to the National Fire Protection Association, there was an average of 1,437 dormitory fires a year from 1990 through 1994.
SSgA is in discussions with an unidentified New England college about borrowing money to retrofit the school's dormitories. A college is potentially an attractive borrower because a loan could be guaranteed by the endowment.
The pension fund can lend at better rates than commercial banks because the loans will be priced off Treasuries, not the prime rate, and if they are repaid, value will be added to the pension fund's fixed-income allocation, the source of the money, said Mr. Norstrand.