A Game Changer in Development Finance

Commercial Property Assessed Clean Energy, or C-PACE, is a dynamic and efficient financing tool that provides an alternative to mezz and equity to diversify capital stacks and lower overall capital costs.  A form of long-term permanent financing, C-PACE enables property owners and developers to obtain low-cost, fixed-rate financing for the energy efficiency, water efficiency, renewable energy and resiliency components of their real estate development and adaptive reuse projects.

How C-PACE Works

Petros can fund up to 25% LTV in the capital stacks of value-add & opportunistic investments, as well as ground-up new construction.  In this scenario, C-PACE is essentially a low-cost alternative to mezz and equity, folding into the capital stack alongside other alternative sources like Historic Tax Credits (HTCs), Tax Increment Financing (TIF), and New Market Tax Credits (NMTCs) to boost project returns.

 

Mezz Debt Alternative

 

C-PACE Financial Benefits for Developers

In addition to offering valuable favorable terms, C-PACE financing boosts project returns by lowering the cost of capital.

 

C-PACE Boosts Equity Returns

Capital Stack Structure

In addition to being substantially less than the cost of mezzanine debt and equity contributions, C-PACE also offers the following attractive features for sustainable developments:

Capital Stack Stability
  • Fixed-rate permanent financing, providing a hedge against interest rate risk
  • Up to 30-year amortization
  • Includes C-PACE project hard and soft costs
  • Interest only during construction
  • Fully funds into escrow at closing and disburses concurrent with construction loan
  • Non-accelerating under any circumstance
  • Non-recourse to owners after construction
  • No ongoing financial covenants
  • Interest rates are typically half the cost of mezzanine debt or equity
  • Lower capital costs help boost equity returns
  • Improves ability to service debt and generate free cash flow on the asset
  • Enables sustainable building designs that minimize future utility expenses
  • Improves the marketability of property to investors, tenants, and guests
  • Fills gaps in the capital stack

Facilitates Sustainable Building Designs

In development projects, C-PACE finances a long list of energy and water-focused budget items that typically involve a building’s mechanical, electrical, and plumbing systems along with the building envelope (ex. HVAC, chillers, boilers, roofing, lighting, solar, controls, windows, plumbing, irrigation, etc.).  In most cases, C-PACE eligible expenses in new construction deals exceed the funding caps listed above and enable sustainable measures that might otherwise be value-engineered out of a project.

While there is no specific list of efficiency measures that qualify for C-PACE, the general guidelines require that they save energy or water or generate onsite.  Savings requirements vary by market but generally require the measures to be more efficient than the building’s current consumption baseline or that they meet or exceed local building codes.

Eligible C-PACE Markets for New Construction Projects

 

 

*Texas allows for construction on previously developed lots only

 

Petros Funded Development Projects