Top 5 questions about C-PACE
The top 5 questions our experts get asked about C-PACE financing
Our team of experts in sustainability financing solutions are based in major CRE markets throughout the U.S., where they are engaging with professionals across the commercial real estate industry
Below are the top five questions they are most frequently asked — along with their answers!
What is C-PACE?
C-PACE stands for Commercial Property Assessed Clean Energy. C-PACE is a public-private funding mechanism that allows owners and developers to access fixed-rate, low-cost and long-term financing to fund sustainability measures, such as solar, water savings, energy efficiency (and in some states, resiliency) on their properties.
C-PACE can be used to finance new construction, gut rehab, and retrofit projects, in addition to retroactive financing for projects (that are ongoing or have already been completed). C-PACE is catching on as those in the industry see the win-win prospect of developing energy-efficient buildings that save money and help meet ESG targets.
What is the financing rate for C-PACE, and is it really fixed?
Currently, a typical rate is ~7% and funds 100% of the hard and soft costs for sustainability measures on a property. And yes, not only is the rate fixed, it is long-term and repaid over the useful lifespan of the financed measures (up to 30 years).
How does C-PACE financing fit into a capital stack?
C-PACE is non-recourse, non-accelerating, can be prepaid at any time, and the loan can be transferred upon resale – making it a secure “brick” in a project’s overall capital stack. Over 280 banking institutions are currently working alongside C-PACE lenders, many of which have consented multiple times.
Nuveen Green Capital Vice President of Originations, Kate Cusack said, “C-PACE is similar to real estate taxes as the C-PACE assessment payment is only senior to a senior loan, to the extent that a C-PACE payment is outstanding. The remainder of the C-PACE assessment is non-accelerable.”
Nuveen Green Capital Vice President of Originations, Kate Cusack
Nuveen Green Capital President and CEO, Jessica Bailey
Lenders who are familiar with C-PACE generally feel comfortable with it as C-PACE helps improve the overall value of a property, as well as the property owner’s cash flow (i.e., their ability to fund the project and repay their mortgage).
In addition, payment is not due for two to three years after closing, which provides an opportunity for the property to get built, or to stabilize. This, in turn, improves a project’s overall underwriting metrics. While lenders are typically required by states to sign a consent or acknowledgement that the C-PACE financing will take repayment priority (because it is included as a benefit-assessment on the property tax bill), this step is widely accepted as it is a protection for both the property owner and the lender.
Will using C-PACE be complicated?
Nuveen Green Capital’s team is comprised of multifaceted experts who are skilled in commercial real estate finance, sustainability, as well as C-PACE policy in their respective market(s). While there can be nuances to any deal, the team works with property owners from start to finish to ensure an efficient, seamless process. These practices have contributed to the firm being widely considered the C-PACE industry leader.
Jared White, Head of Acquisitions at Quadrum Global, said: “We recently financed the Arlo Wynwood, our ALIS award-nominated hotel in Wynwood Miami, with Nuveen Green Capital and could not be happier. From our initial phone call, to term sheet, through seamless execution, to a fast and on-schedule closing, Nuveen Green Capital’s highly professional team was straight-forward, efficient and a pleasure to work with. They maximized C-PACE loan proceeds and honored our attractive pricing, even as the environment around us changed. We are grateful to have selected Nuveen Green Capital on this and look forward to our next one with them.”
Why should I use C-PACE vs. another financing mechanism?
C-PACE’s fixed-rate, long-term, no money down financing terms make it a very attractive financing option, particularly in a volatile rate environment. Not only is C-PACE a good replacement for expensive mezzanine debt or preferred equity, it can also be competitive alongside traditional bank debt. Compared to a typical bank loan, C-PACE offers a lower rate, which is fixed at up to 30-years, whereas most bank loans are generally fixed at a higher rate for a shorter period of time. In addition, C-PACE requires no money down, meaning $0 out of pocket.
As stated in a recent Propmodo article, “For commercial properties, C-PACE programs offer a financing framework that eliminates the typical barriers to paying for expensive clean energy upgrades.”