C-PACE Made Simple

July 1, 2019

 

If you haven't already, you will soon be hearing about a powerful financing mechanism, C-PACE. The acronym stands for Commercial Property Assessed Clean Energy, and C-PACE has financed more than $1 billion in commercial real estate projects in a handful of states so far. Recently approved in Pennsylvania, with other states in various stages of approval and implementation, C-PACE financing is here to stay and is a source of high leverage, low-rate, non-recourse financing for property owners. In addition, some C-PACE financing situations, such as hotels, allow a pass-through to other parties, thereby enhancing NOI and, ultimately, value. This is a short primer on the C-PACE program.

 

What is C-PACE

C-PACE is a nationwide program financing up to 100% of the hard and soft costs incurred to improve the energy efficiency and resiliency of commercial buildings.

Available in 35 states (so far), C-PACE makes energy efficiency, water conservation, renewable energy, seismic safety and other building improvements easy and affordable. C-PACE projects reduce an owner’s operating expenses and their carbon footprint. C-PACE covers most commercial buildings—industrial, office, retail, 5+ unit multifamily (except in Pennsylvania), hospitality, healthcare and other special use properties.

 

Why Use C-PACE?

Although the main reason C-PACE financing exists is to reduce energy loads in existing and new buildings, thereby reducing buildings’ carbon footprint, owners also benefit from lower operating costs (higher NOI and value), a source of low-cost, non-recourse capital that can provide higher leverage in the capital stack, offsetting the need for mezzanine debt or equity. The end result is a win-win that increases building values while allowing the owner to retain more equity.

 

Projects that Use C-PACE

  • Value-Add

  • Transitional & Repositioning

  • Major Capex Financing

  • New Construction

 

Features of C-PACE

  • Long-term, fixed rate, non-recourse financing

  • Repaid through an assessment, similar to property taxes

  • Fully transferable and assignable upon sale

  • Prepayment anytime

  • Potential pass-through to tenants (e.g., Hospitality)

 

Examples of C-PACE Financing

For specific projects, such as a new HVAC or co-generation unit, C-PACE can finance 100% of the hard and soft costs of the project. For major building renovations or ground-up construction, C-PACE will generally finance 10% to 20% of the total construction hard and (efficiency-associated) soft costs (e.g., engineering, installation).

 

C-PACE Can Finance the Following:

 

Energy Efficiency

  • Insulation

  • HVAC

  • Lighting

  • Building Envelope

  • Water Heating

  • Air Sealing & Ventilation

  • Refrigeration Compressed Air

  • EV Charging Stations

  • Elevator Modernization

  • Building Controls

  • Daylighting

  • Cool Roofs

 

Renewables

  • Solar

  • Wind

  • Fuel Cell

  • Co-generation

  • Battery Storage

 

Water

  • Low-Flow Fixtures

  • Irrigation

  • Cooling Towers

  • Reclaimed Water

 

Building Resiliency

  • Seismic/Storm strengthening

  • Wind resistance

 

What Assets Are Eligible for C-PACE Financing?

C-PACE financing is available for a wide range of property types, including the following:

 

Eligible Core Assets

  • Office

  • Retail

  • Healthcare

  • Hospitality

  • Multifamily

  • Mixed-Use

  • Industrial

 

Eligible Special Purpose Assets

  • Hospitals

  • Golf Courses

  • Wineries

  • Educational

  • Cold & Self Storage

  • Warehouse

  • Distribution

  • Theaters

  • Auto Dealerships

  • Manufactured Housing

  • Non-profit owned

 

Ineligible

  • Gas Stations

  • Dry Cleaners

  • Auto Service Stations

  • Condominium/PUD Developments

  • SFR (1-4 Units)

  • Any project with unresolved environmental remediation or contamination

 

C-PACE is a powerful addition to the capital stack, and we can help you navigate the local regulations and any potential issues.

 

Axcel Capital Group, a leading capital markets firm with operations in Philadelphia and Florida, is an expert in C-PACE financing, and in structuring the optimal capital stack for commercial real estate projects nationwide. Contact Stephen Arrivello at (215) 519-1010 or sa@axcelcap.com to discuss any C-PACE or other financing scenarios.

Please reload

1515 Market Street | Philadelphia, PA | (215) 854-6373

© 2019 Axcel Capital

  • Axcel Capital Group
  • Facebook Social Icon
  • Twitter Social Icon