How Hotel Owners and Developers Leverage C-PACE Financing

Extending Their Stay: How Hotel Owners and Developers Leverage C-PACE Financing to Unlock Significant Savings

As hotel owners navigate a measured rebound amid ongoing market uncertainty while addressing energy conservation needs, they're increasingly turning to C-PACE.

When traveling, many of us have witnessed the concerted efforts of the hotel industry to practice sustainability: signs encouraging guests to reuse towels, low-flow showerheads, motion-sensor lighting, and centrally controlled thermostats set at energy-efficient temperatures. These visible measures reflect a deeper commitment—and for good reason. As one of the commercial real estate industry's most significant consumers of energy and water, hotels have responded to growing demand for greener buildings, which benefit both the environment and hotels' bottom lines.

As the hotel industry continues to invest in conservation efforts amid measured signs of CRE market recovery, CoStar reports that while occupancy numbers have rebounded, hotel performance will likely not reach pre-pandemic "glory days." Despite moderate signs of recovery, hotel development is gaining momentum.

Lodging Econometrics' Q2 2025 U.S. Hotel Construction Pipeline Trend Report shows that at the end of the second quarter, there were 6,280 projects with 737,036 rooms in the pipeline—representing a 3% year-over-year increase in both projects and rooms compared to Q2 2024 totals.

These market dynamics—moderate occupancy recovery paired with significant development activity and the need to build sustainably—create both opportunities and financing challenges for hotel owners and developers. C-PACE has emerged as an increasingly attractive solution.

C-PACE: Unlocking Savings for Hotels

As Commercial Property Assessed Clean Energy (C-PACE) financing continues its explosive growth trajectory, with the industry reaching over $10 billion in cumulative originations, hotels have been particularly well-positioned to leverage its appealing low-cost, long-term, fixed-rate terms. These benefits enable meaningful savings while building sustainably or recapitalizing previously installed energy and water efficiency measures.

As NGC's top-funded asset class, forward-thinking hotel owners and developers have been drawn to C-PACE for its considerable benefits to their projects' bottom lines.

Hotels as Energy and Water Consumers

Hotels are among the highest consumers of energy and water in commercial real estate. Energy Star reports that 47,000 hotels and motels across the U.S. spend approximately 6% of their annual operating costs on energy. According to the U.S. Energy Information Administration, hotels and motels generally use the most electricity for lighting, followed by cooling. HVAC systems (heating, ventilation, and air conditioning) account for up to 40% of energy usage, with additional consumption from lighting, amenities, and water heating.

With these intense energy needs to accommodate guests, hotels face challenges not only in managing expenses but also in finding ways to address the dramatic market cycles impacting both the hotel industry and the broader commercial real estate sector. C-PACE offers a solution.

C-PACE addressing market cycles: a Bridge for Hotels During COVID

During the pandemic, hotels were particularly hard hit, with a dramatic decline in occupancy. Construction starts slowed and, in many cases, halted. C-PACE enabled many hotels to stabilize and survive through COVID-related shutdowns as it provided a source of capital to refinance existing loans and stabilize assets when other lending sources pulled back. In the case of The Motto by Hilton in Philadelphia, the Sponsor had opened the hotel a few months prior to the COVID-19 outbreak. NGC provided C-PACE capital, in partnership with funding from a hospitality financing firm, to recapitalize their maturing construction debt.

Mounting Pressures: Interest Rates and Loan Maturities
The Coming Refinancing Wave

While there has been moderate recovery since the pandemic, market uncertainty persists. A recent CoStar article reports, "The U.S. hotel industry is heading toward a critical refinancing window as commercial mortgage-backed securities near maturity. Between October 2025 and December 2028, loans on roughly 1,900 hotels with 315,000 rooms will come due, with nearly $60 billion in outstanding debt. The average interest rate across these loans is 6.5%, reflecting a lower-rate origination environment that will be difficult to replicate in today's more restrictive lending climate."

The bulk of the maturing loans will be concentrated in suburban hotel properties, followed by urban and airport hotels, all of which will face steeper rates when they refinance. NGC's experts anticipate that in many of these instances, savvy hotel owners and developers will turn to C-PACE, which has proven its efficacy and ability to bridge projects to completion and stabilization.

Why Now? The Perfect Storm for C-PACE Adoption in Hospitality

The combination of sustainability demands, maturing loan pressures, and steady but slow market recovery creates a perfect storm—and a significant opportunity—for C-PACE financing to address the hospitality industry's needs. With lower-cost financing than other available options, C-PACE can replace mezzanine debt or preferred equity and offers flexible deployment throughout the development cycle, from construction through stabilization.

These strategic advantages make C-PACE particularly compelling for hotels facing today's market conditions:

• Flexibility: Can be deployed pre-, mid-, and post-construction, adapting to project timing needs
• Favorable terms: Fixed-rate, long-term financing enables borrowers to pay down existing loans, allowing hotels to operate more profitably
• Reduced cost of capital: Lowers overall financing costs to improve project economics
• Lower operating expenses: Energy and water efficiency improvements generate ongoing savings

C-PACE Hospitality Success Stories

In addition to providing C-PACE financing for the Hotel Marcel in New Haven, the nation's first all-electric, fossil-fuel-free hotel, NGC financed other notable hotel projects, including:

Bishop's Lodge, Santa Fe, NM – The First C-PACE Financed Transaction in the State of New Mexico
NGC provided $76.2 million in C-PACE financing to recapitalize energy and water efficiency improvements that were part of the hotel's $127.2 million renovation and for several ongoing improvements. The strategic use of C-PACE enabled the asset to transition to more favorable financing terms, ensuring its continued profitability and growth.

C-PACE financed measures are projected to save the property an estimated lifetime 7,392 metric tons of CO2, as well as 122,254,512 gallons of water.

See video here – https://www.youtube.com/watch?v=MQdGQUqRKfk

Pendry Hotel & Residences, Tampa, FL – The Largest C-PACE Financed Transaction to Date

NGC provided a record-setting $290 million in C-PACE capital to the sponsor, Two Roads Development, in partnership with Sculptor Capital Management for the total $520 million financing package for the Pendry Hotel & Residences. By strategically utilizing C-PACE mid-construction, Two Roads was able to leverage its flexible repayment structure and ability to finance the project in multiple tranches.

The overall energy and water savings measures financed through C-PACE are estimated to save the property approximately $524,572 annually.

As hotel owners and developers invest in sustainable building practices and navigate a critical refinancing window, C-PACE financing continues to provide an accretive solution—driving sustainability, cost savings, and long-term profitability.

To learn how C-PACE is revolutionizing commercial real estate finance and to explore recent hospitality case studies, visit https://greencapital.nuveen.com/