Leveraging C-PACE Financing Across All Stages of Commercial Real Estate Construction

Commercial Property Assessed Clean Energy (C-PACE) is transforming the landscape of commercial real estate finance by providing a flexible and innovative tool for funding commercial real estate construction projects at varying stages of development. Whether it’s projects pre-, mid-, or post-construction, C-PACE is providing one of the least expensive forms of capital available in the market.

As many in the CRE industry know, there has been a sharp increase in demand for C-PACE, now available on a near-national level, as commercial property owners and developers are utilizing it to fund new developments, substantial rehabilitation projects, and to recapitalize recently completed projects – up to three years in most states. Over 40 states throughout the country, as well as Washington, D.C., have passed legislation to enable C-PACE financing. The number of C-PACE enabled states is expected to continue to increase in the coming months.

Authorized by a state-level government policy that classifies clean energy upgrades as a public benefit, C-PACE can be financed with no money down and then repaid as a benefit assessment on the property tax bill over a term that matches the useful life of the measures implemented.

While C-PACE was once primarily considered as efficient capital for new construction projects, owners and developers have become increasingly aware that it can be deployed mid-stream, or to recapitalize recently completed construction projects. This has contributed to the spike in demand as the overall C-PACE industry exceeded $7 billion in 2023.

• Flexible capital
  C-PACE’s flexible structure allows for it to fund commercial real estate projects pre-, mid-, or post-construction.
• C-PACE can finance new construction projects to:
  • Reduce weighted average cost of capital
  • Replace more expensive forms of financing
  • Eliminate need for a participant lender
  • Provide incremental leverage
• C-PACE can finance projects mid-construction to:
  • Fund construction cost overruns
  • Provide additional working capital for interest reserve deficits
  • Provide additional capital for future contemplated tenant improvements
  • Eliminate or reduce need for capital call or additional equity injection
• C-PACE can finance recently completed projects post-construction to:
  • Recapitalize projects up to 3 years after completion
  • De-risk and paydown the senior lender
  • Bridge the gap for slow lease-up or to stabilize projects
  • Stabilize the asset with lower debt service by paying down expensive capital
  • Flexibility to push out debt service payments for ~3 years

Deploying C-PACE pre-construction to finance new development projects

When financing new construction with C-PACE, borrowers can complete their capital stack and lower their weighted average cost of capital – or increase the total available capital – with cost-efficient, long-term financing that can take the place of more expensive debt and equity. In addition, C-PACE provides them with incremental leverage, while eliminating the need for a participant lender.

Utilizing C-PACE for new development projects incentivizes the development of more high-quality, sustainable buildings, which are much more desirable to tenants, while simultaneously improving building economics for owners - a win-win proposition. C-PACE is also facilitating the transition to higher efficiency building standards, which is increasingly becoming a requirement, rather than a “nice to have,” as cities and states implement strict carbon emission standards for new buildings.

Depending on the location, C-PACE can finance up to 40% of the stabilized property value, making it a very attractive solution for filling financing gaps in a development’s capital stack. A recent example is a mixed-use new development - Innovation OKC - $28.4 million C-PACE financing in Oklahoma City, OK. NGC provided $28.4M in C-PACE financing to fund extensive sustainability measures for phase I of the expansive mixed-use new development that will consist of 277k square feet of rentable space, which will include an office tower, R&D space, a regional bank, an innovation and tech-focused co-working environment, as well as an Oklahoma University incubation center. The capital cost efficiency of NGC’s C-PACE financing helped enable the project to move forward.

C-PACE for mid-construction projects

In addition to supporting new construction projects, C-PACE can advance stalled projects or provide funds for projects mid-stream.

When deployed mid-construction, C-PACE infuses liquidity, easing financial strain, and enhancing project stability to redirect funds to cover cost overruns, ensuring a project remains on track and financially viable. C-PACE provides additional working capital for interest reserve deficits or for future contemplated tenant improvements and can eliminate or reduce the need for capital call or an additional equity injection.

C-PACE provides flexibility for challenges faced during the construction phase. If the construction project runs into delays or incurs unexpected additional costs, C-PACE can fill the gap without increasing traditional debt obligations – enabling CRE projects to cross the finish line. Deploying C-PACE’s cost-effective capital mid-construction can enable a sponsor to reduce the amount of senior debt on their project. C-PACE can also help increase overall leverage.

A recent example of C-PACE being deployed mid-flight is a multifamily townhome project – the River Run Townhomes in Woodinville, Washington. NGC provided $20 million in C-PACE capital for the 31-unit luxury townhome development situated within Harvest, a master-planned large-scale development project, several months after the project had started. C-PACE’s cost-effective capital was utilized mid-construction to fund core building and seismic mitigation systems, enabling the sponsors to reduce the overall weighted average cost of capital, while also reducing the senior lender's exposure.

Using C-PACE to recapitalize CRE projects post-construction

One of the most appealing – yet lesser known – benefits of C-PACE’s innovative financing structure is its ability to recapitalize projects after they have been completed. States with C-PACE policy in place have adopted provisions that enable building owners to utilize C-PACE financing during “look-back” periods. These generous look-back periods allow owners to refinance expenses incurred up to three years prior in many states. This is particularly attractive for property owners that have faced challenges during the construction or the lease up of their properties, as they can recapitalize using C-PACE proceeds to pay down or restructure existing debt and replenish operating reserves. C-PACE also offers borrowers the option to delay repayments – up to 24 months post-closing.

When used to recapitalize, C-PACE reduces lenders’ existing exposure on projects, increases project proceeds, frees up liquidity, and decreases the average weighted cost of capital.

A recent example is the recapitalization of the Thompson and tommie Hotels, a $90.4 million C-PACE financing in Los Angeles, CA. NGC provided $90.4 million in combined C-PACE proceeds to refinance the Thompson Hollywood, a 190-key luxury hotel, as well as sister property, the tommie Hollywood, a 212-key, upscale boutique hotel. Through C-PACE, the sponsor was able to dramatically lower their average cost of capital for the projects, while simultaneously allowing for the continued success of the hotels’ business plan.

Benefits of using C-PACE



• Fixed rates: C-PACE offers a fixed rate, with a long amortization (20-30 years from first payment date).
• Non-recourse: C-PACE financing is non-recourse, except for the completion guaranty, and there are no financial covenants post completion.
• Non-accelerating: C-PACE financing is secured via a secure property assessment, which is non-accelerating.
• Prepayable at any time: C-PACE can be prepaid at any time, subject only to a declining fee.
• Favorable to senior lenders: There has been an increase in willingness for senior lenders to understand how C-PACE can be an attractive source of financing for their borrowers and accretive to their projects. It has gained widespread acceptance in the lending community, with over 500 banking institutions working alongside C-PACE lenders to date.

One of the main reasons that demand is so high for C-PACE is for its flexibility as a financing solution that can be used to fund projects at varying stages of completion – pre-, mid-, or post- construction. The financing can cover hard, soft and any associated costs of measures that improve the water and energy performance, or resiliency of a commercial building – and it can be utilized for nearly all commercial real estate asset classes, including multifamily, hospitality, office, industrial and retail.

The expert team at Nuveen Green Capital has financed hundreds of C-PACE projects across the country to complete development capital stacks, provide incremental leverage, finance capital expenditures, or recapitalize recently completed projects – and they are involved at every stage of a C-PACE financed project.

To learn more about how C-PACE’s flexible capital is revolutionizing commercial real estate finance, visit: //www.nuveen.com/greencapital