Commercial Property Assessed Clean Energy (C-PACE) is a relatively new and quickly growing alternative financing mechanism for energy efficiency, water efficiency, renewable energy and resiliency projects.
C-PACE makes it possible for owners and developers of commercial properties to obtain low-cost, long-term financing which is paid back through an annual assessment on the organization’s property tax bill. The payback term may extend up to 30 years, which can save organizations money by ensuring that yearly utility bill savings from energy improvements exceed annual C-PACE payments.
Through C-PACE, businesses can finance building retrofits, gut rehabilitations and new construction with no upfront costs and, in some markets, eligible projects can be retroactive to replace more expensive financing.
Game-Changing Public-Private Partnership
C-PACE is a public-private partnership enabled by state and local legislation, allowing private lenders to provide financing for eligible measures to improve building energy performance. C-PACE facilitates the reduction of greenhouse gas emissions by making the shift to clean energy sources a financial reality and plays a vital role in supporting state and local governments in their initiatives to drive sustainable, efficient upgrades within their community’s infrastructure. All of this is accomplished while reducing costs for building tenants and enhancing property values for building owners and developers.
How it Works
C-PACE loans are repaid through a special property tax assessment similar to other public benefit assessments for sewer and road improvements. This unique assessment structure provides numerous benefits for property owners and developers.
Who Benefits From C-PACE?
C-PACE financing can produce immediate positive results for the stakeholders involved in the project including the owners, developers, cities and local governments, mortgage lenders, tenants and contractors and service providers.
Owners & Developers
- Cash flow generation. No upfront costs or down payment generates immediate cash-flow for property owners and investors.
- Increased property value. Owners and investors are able to invest in properties even with the intention to sell in the future, benefiting their bottom line and inevitably leading to increased property value.
- Decreased maintenance costs. Clean energy retrofits that equip buildings with sustainable amenities decrease ongoing maintenance costs that add to the bottom line.
- Certainty of close. Mitigated risk and the lack of a personal guarantor ensures a feeling of security when choosing C-PACE financing as the route to a secure investment in a property.
- Lower cost of capital. Displaces expensive mezzanine debt in the capital stack.
- Fills gaps in the capital stack. C-PACE closes the gap in non-recourse and non-accelerated financing.
Cities & Local Governments
- Public-private partnership development tool. C-PACE promotes sustainable development for constituent’s infrastructure.
- Creates jobs. Project construction spurs economic development.
- Drives sustainability. Supports local governments’ energy and carbon reduction goals and provides a tool for investing in upgrades without the use of any taxpayer dollars.
- Increased collateral value. Upgrades improve property values and building performance.
- Non-recourse and nonaccelerated financing. Only PACE assessments in arrears are senior to mortgage – future assessments do not accelerate upon default.
- Improved debt service coverage. Energy savings exceed PACE loan payments and can provide positive cash flow and increase NOI, improving debt service coverage ratio.
Contractors & Service Providers
- Removal of financial barriers for customers. Eliminate common client objection as they can now move forward with the project without upfront costs
- Ability to fund a deeper list of improvements
- Opportunity to grow business with new customer segments
- Deal flow acceleration. Improves business development and project initiation by eliminating financial hurdles
- Sustainability. Building tenants, who are increasingly seeking out sustainable properties as part of their corporate commitments to the environment, will realize the impact of cleaner air, cleaner water, and reduced energy usage.
- Energy savings. These energy savings can be passed down to tenants via their utility bills and common area maintenance costs.
PACE financing is an excellent way to finance your building’s energy upgrades. It can spread out the upgrade costs, free up your yearly budget, realize dramatic energy cost savings, and reduce your credit risk.
See the map below to determine if your state has existing legislation permitting the use of C-PACE financing for retrofits, gut rehabs or new construction. Petros PACE Finance has funded transactions in ten states and the District of Columbia.
C-PACE financing is a game-changer compared to traditional financing options. C-PACE can provide low-cost capital at up to 20% LTV when utilized alongside a mortgage for a typical CLTV of up to 80-95%. C-PACE from Petros PACE Finance can effectively displace or replace entirely expensive equity or mezzanine debt in a capital stack. See how your financing options compare below.