FAQ
Commercial Property Assessed Clean Energy (C-PACE)
C-PACE is a publicly-sponsored and privately capitalized program developers and property owners can access to help finance a portion of their project costs.
Public / Private partnership which allows property owners to finance projects through voluntary assessments placed on the property by a state economic development agency.
C-PACE programs finance 100% of the energy efficiency, renewable energy, water conservation, resiliency improvements and the related costs, covering retrofits to ground-up construction.
The financing payments are collected with regular local real estate taxes and are amortized over the useful life of the project, usually 15- 30 years.
100% Project Financing Finance 100% of the project costs up to 30% of the appraised value including hard and soft development costs, design, engineering, permits and service contracts. Improvements increase NOI and property value, improve aging infrastructure, and align landlord and tenant interests.
Fixed Long-Term Rates Projects are financed over the useful life of the improvement with fixed long term interest rates between 4.5% - 6.50%, with fully amortizing terms ranging between 5 and 30 years.
Transferable Tax assessments are linked to the property and C-PACE financing can transfer automatically to the new property owner without the cumbersome restrictions related to typical bank/mezzanine financing or PPA agreements.
Flexible Prepayment Options C-PACE financing provides flexible prepayment options that allow the developer to effectively manage the capital structure of the property. PACE financing can include prepayment options coterminous with a potential property sale.
Low Cost Financing for Stabilized Property Upgrades 100% Project Financing
C-PACE provides a 100% cost effective financing of Energy Efficiency, Renewable and Sustainable upgrades and retrofits of a commercial real estate, reducing the need for value engineering.
Effective Alternative to Mezzanine Debt in Deep Retrofits, Repositioning or Ground Up Construction
PACE provides a cost effective part of the capital stack allowing the developer to increase the overall potential of the project and profit opportunity. Financing may be passed to the Tenants Depending on Lease Structure.
Financing may be passed to the Tenants Depending on Lease Transferable
Depending on the lease terms the annual PACE assessment may be passed to tenants with NNN, or Modified Gross Leases. The potential pass through nature of C-PACE can result in a zero cost equity.
Flexible Prepayment Options
C-PACE financing provides flexible prepayment options that allow the developer to effectively manage the capital structure of the property. PACE financing can include prepayment options coterminous with a potential property sale.
Maybe. Over 200 lenders including many of the largest money center banks have consented to C-PACE financing. See a list of consenting lenders at the link here (PACE Nation Lender Consent).
Fewer lenders have agreed to C-PACE in the capital stack on bridge loans involving construction or heavy value-add; however, a number of recognized names have already successfully closed loans with C-PACE. The stronger the sponsor and business plan, the more leverage you have to get a lender to permit C-PACE at some level in the capital stack.
C-PACE execution is most effective when you identify the right construction lenders to bid on the financing. A variety of construction lenders ranging from debt funds to money center banks have successfully closed C-PACE in the capital stack.
We have a balance sheet construction program that permits C-PACE for the right multifamily projects and we have off-balance sheet solutions for projects that don't fit our internal programs
Many lenders view a C-PACE financing similar to a ground lease payment, but with far more predictability and less stress since it's prepayable.
A few other differences that make C-PACE even easier than ground leases include the following:
Fully amortizing
No payment escalation
No acceleration rights in case of defaults
No technical defaults
Actions limited to paymnt recovery
Lenders will look at their total combined loan and PACE leverage to value and/or cost comfort level.
Similar to tax liens, default provisions in a C-PACE assessment are limited to non-payment and do not have any technical default provisions. In general, the defaulted C-PACE assessment is recovered through the regular local tax recovery process and the tax collector can only recover the defaulted coupon, rather than the entire outstanding assessment. Although the tax collection process will vary by state, generally a tax foreclosure is very property owner friendly in order to avoid losing the property.
Yes. Similar to other taxes, a lender with concerns about payments of future tax assessment bills related to can require that funds be escrowed to ensure timely payment. In addition, a lender may request the C-PACE capital provider to capitalize an interest reserve to carry the PACE payments through the construction period.