C-PACE is an affordable, attractive financing option that can help fill lending gaps
Pick up pretty much any publication that covers the commercial real estate industry today, and you’ll notice a common theme. Your clients who are looking for bank construction loans are in for a difficult time.
That’s because lenders, increasingly reluctant to take on new-construction risk, are raising their rates and fees, and getting more stringent with their underwriting requirements. That includes requiring more owner equity in the capital stack.
While this challenge is all too familiar to mortgage brokers, a relatively new financing tool called Commercial Property Assessed Clean Energy, or C-PACE, may help solve it. This financing option represents an opportunity that should be of interest to clients who are pursuing new-construction loans. It also can provide you, as a commercial mortgage broker, with a competitive advantage.
C-PACE is an innovative, voluntary financing program for energy-efficiency, water-efficiency and renewable-energy projects. If you’re familiar with C-PACE — and you may be, since more than 30 states have PACE-enabling legislation on the books — you probably think of it as way to fund energy-equipment replacement projects. This isn’t surprising, given most C-PACE projects that have closed to date have done exactly that.
What many people don’t know is that a growing number of programs now allow commercial real estate developers to tap into C-PACE financing for new construction. C-PACE financing for new construction is attractive to developers for two primary reasons:
- It provides affordable, long-term, nonrecourse financing that can reduce the ownerequity contribution or the need for other types of high-cost capital; and
- It enables commercial property developers to achieve superior building performance by financing improvements that are often valueengineered out of a project.
Most developers know that designing energy-efficient buildings is a smart move. Such buildings reduce operating costs, help attract and retain tenants, and maximize lease rates. They also have better environmental performance and are more sustainable than
their less-efficient peers — not to mention they go a long way toward enhancing the
comfort and health of occupants.
Read the Scotsman Guide article here.