C-PACE Loans Reported to be Soaring Across U.S.
The largest C-PACE office loan ever was completed this past summer for sustainability upgrades at 300 Lakeside Drive in Oakland, Calif.
According to Patricia Kirk at Commercial Property Executive, C-PACE loans are at an all-time high because they’re amongst the most favorable options on the market.
“C-PACE continues to be an increasingly attractive option from an investment point of view because it’s relatively low-levered; financing sustainability that is critical for developing or redeveloping in today’s buildings; and a very secure financial instrument,” said Joe Euphrat, GreenRock managing principal. “In competing with other financial sources, C-PACE is not only more favorable now, but one of the most favorable options,” he contends
This is attested to by the rapid growth in the market.
“At the end of 2023, we surpassed the $2 billion mark in originations since starting in 2015, nearly $1 billion of which was originated in 2023 alone,” said Jessica Bailey, CEO and co-founder of Connecticut-based Nuveen Green Capital, one of today’s most active C-PACE lenders nationally. And there is no sign that the skyrocketing demand for this funding source is slowing down.
NGC also saw the average C-PACE loan size jump nearly threefold, Bailey said, in part because projects overall were larger, and NGC was able to fill larger pieces of borrowers’ construction budgets due to its ability to raise capital quickly.
C-PACE is a green financing mechanism enabled by state policy that provides fixed-rate, long-term, non-recourse, non-dilutive loans for up to 30 years for any aspect of construction that improves building energy or water conservation. It is structured so the assessment is attached to the parcel of real estate rather than to the sponsor of the property and so does not require the sponsor to put up the collateral. And since the debt is collected on the property tax bill, some owners can pass on the cost of financing as common area maintenance charges to tenants, who are enjoying the benefits of improvements, Bailey suggested.
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