Understanding the Benefits of C-PACE Financing

[Christopher J. Calabrese]

Understanding the Benefits of C-PACE Financing
Commercial Property Assessed Clean Energy (C-PACE) financing, is a form of gap or incremental non-recourse financing that reduces the need for conventional debt, equity or capital reserves. This cost-effective financing tool can be used in numerous states across the country that have active programs allowing C-PACE assessments to be placed on property tax rolls. C-PACE can be utilized for new construction and rehabilitations/conversions projects. For new construction, C-PACE can typically provide between 10% and 30% of the capital stack. For rehabilitations/conversions projects C-PACE can provide even higher leverage.

I have highlighted some key benefits below:

1. Access to Capital
One of the primary advantages of C-PACE financing is its ability to provide property owners with additional capital for development projects.

2. Flexible Repayment Structure
C-PACE financing offers a unique repayment structure tied to the property's tax assessment, rather than the property owner's credit.

3. Reduces Cost of Capital
C-PACE financing can significantly reduce the weighted average cost of capital across the capital stacks and much less expensive than junior debt.

4. Higher Leverage
C-PACE financing can help sponsors obtain a higher combined LTC reducing the equity requirement in a capital stack.

5. Fixed Rate Debt
C-PACE is a long term, fixed rate program giving sponsors better predictability on payments over the course of the term.

6. Non-Recourse
C-PACE financing is non-recourse allowing sponsors to de-risk part of the capital stack.