C-PACE as an Economic Driver
The commercial real estate industry is catching on to the value of C-PACE as an attractive financing solution to fund CRE projects – particularly in times of economic volatility, and an increasing number of CRE owners and developers are turning to the mechanism to help finance their projects. With the industry exceeding $6 billion this year, it is poised to continue its upward trajectory. But beyond the environmental and financial benefits driving the surge in demand, there is another crucial way that C-PACE is making an impact – it’s also helping to bolster local economic development
There are numerous reasons for the surge in demand for C-PACE: it offers myriad potential benefits – including providing long-term (20-30 years), fixed-rate, non-recourse financing for sustainability measures, (such as solar energy, battery backup/storage, water conservation, LED lighting and HVAC systems), it is currently one of the least expensive forms of capital available for commercial real estate projects, and it is a flexible financing mechanism that can be used in a variety of different situations, including the renovation of existing buildings, new ground-up development and/or to refinance projects completed within the last three years. In the face of recent economic uncertainty, C-PACE is also providing welcome relief to hundreds of commercial real estate owners and developers seeking to complete their projects.
In addition, C-PACE enables property owners to comply with sustainability mandates, while lowering upfront and long-term energy costs. It also helps increase property value and addresses growing tenant demand for modernized, sustainable buildings.
But there is another benefit to C-PACE that is having a considerable impact on cities, towns, and communities - C-PACE can also be a key driver for economic development.
At zero cost to taxpayers, C-PACE provides owners and developers with the possibility of significant financial benefits. Beyond this, because C-PACE enables projects to move forward that may otherwise not have been able to, the surrounding communities and their economies are also positively impacted through the creation of jobs (pre and post construction), the expansion/development of underdeveloped areas, and in the rehabilitation of blighted buildings. Furthermore, C-PACE can help communities increase resilience to natural disasters and seismic events by funding resiliency measures, such as building envelope/structure, storm water drainage, and protection for mechanical elements.
In the case of Hotel Marcel, the iconic former Pirelli headquarters, which is adjacent to Interstate 95 in New Haven, Connecticut, stood vacant for over 20 years until it was reimagined to become the nation’s first net-zero hotel. Nuveen Green Capital partnered with visionary owner and developer, Bruce Becker of Becker + Becker, as well as the Connecticut Green Bank, to provide $7 million in C-PACE financing to fund extensive sustainability measures, allowing the hotel to generate its own electricity. This adaptive-reuse project has enabled the hotel to provide numerous local jobs, while helping to revive an idle, rundown part of the city.
Critically, C-PACE is underwritten to the long-term value of buildings, which are often held non-investment grade credit entities, thus expanding affordable capital to implement energy efficiency, net-zero, and climate resilient improvements - which helps further its positive social impact.
An example of this is Cooke Technologies, a manufacturing building in Green Lane, Pennsylvania. The owner utilized C-PACE to update the building with state-of-the-art sustainability measures, including a rooftop solar array, as well as high-efficiency LED lighting. Cook Technologies is known for its strong community support, as the company provides training and employment for formerly incarcerated citizens. Owner Jonathan Goldstein said, “The C-PACE-financed solar array and LED lighting retrofit resulted in tremendous energy savings, covering the costs of the roof replacement, but they’ll also be used on a go-forward basis to help fund the programming and community support we give as the largest employer in Green Lane, PA.”
Through $8.9 million in C-PACE financing, of the total project cost of $32 million, the sponsor of HOHM Highlandtown Apartments in Baltimore City was able to build a 149-unit, mid-rise, apartment building, which provided housing near Johns Hopkins medical facilities, while bringing life to a building that had been vacant for over five years.
Similarly, the sponsors of the Pacifica on Green project funded a 153-unit student housing building near the University of Illinois Urbana Champaign campus, which not only provided a projected $2.8M in future energy savings, but also resulted in the creation of 235 local jobs, according to the Illinois Energy Conservation Authority (IECA).
The advantages of C-PACE are potentially significant, and when looking at it as an economic development tool benefiting local communities, its impact is further magnified. Using C-PACE financing, projects that would otherwise not be feasible can be unlocked for commercial property owners and developers, creating energy contracting and construction jobs, helping the community by consuming less energy and water, and improving the local property stock and value, which will, in turn, attract new residents and businesses to the area – all through a private capital financing structure that doesn’t burden local governments. C-PACE also frees up capital for property owners to use elsewhere, further benefiting local economies.
The Nuveen Green Capital team is passionate about C-PACE for these reasons, as well as their collective mission to show that “Saving Energy is Smart Business.”