A Guide to C-PACE
CHAPTER ONE:
C-PACE Finanancing
C-PACE Financing Explained
Commercial Property Assessed Clean Energy (C-PACE) is a private capital financing solution used for new construction, renovations, redevelopments, and recapitalization. The capital is low-cost, non-recourse, and offers a fixed-rate over a 20-30 year amortization term. Available funding amounts are calculated using eligible commercial construction costs, which affect utility spend – typically 30-50% of a construction budget. C-PACE is available in most U.S. states, enabled through a state legislated public/private partnership. The repayment of the private capital is made through a long-term special tax assessment on the property, making it transferable upon sale.
C-PACE is an attractive solution to improve the IRR for development projects, offering an alternative to expensive gap-financing tools such as mezzanine debt or preferred equity.
For renovations, eligible improvements often cover up to 100% of the costs, covering such improvements as windows, elevators, roof, lighting, HVAC, plumbing, and other costs that impact energy and water efficiency, renewable energy, or building resiliency.
For recapitalization, C-PACE can apply mid-construction or up to 3 years post-construction. Because C-PACE includes capitalized interest, owners can defer payments during extended lease-up periods, or use capital to fund cost-overruns, manage debt payoffs or paydowns, or replenish debt service reserves.
How C-PACE Works
C-PACE is underwritten as a debt service constraint, with funding amounts determined by the scope of eligible improvements in a construction budget. While exact financing parameters vary from state to state (many states have multiple program guidelines), the following terms apply to all C-PACE financing.
- Provides 100% financing for eligible improvement costs—typically covering 30-50% of hard costs—up to 35% loan-to-value (LTV)
- Repaid through a fixed rate non-accelerating property tax assessment of up to 30 years (some states have slightly shorter amortization periods)
- Used for retrofits, redevelopments, new construction, and recapitalization
- Fixed-rate, non-recourse, long-term, low-cost capital
- Capitalized interest covers the construction / lease-up period
Eligible Asset Classes
C-PACE financing is available for many commercial assets. Because the repayment mechanism is a special tax assessment, only buildings that pay taxes are eligible to use C-PACE.
Eligible Assets:
Senior Housing
Office
Retail
Hospitality
Industrial
MultiFamily
Storage
Non-Profit
Mixed-Use
C-PACE Capital Solutions
C-PACE is used to finance new construction, redevelopment/retrofit, renewable energy, and recapitalization commercial development projects without upfront cost.
New Construction
Used as a supplement to a construction loan, C-PACE completes the capital stack and improves IRR by replacing expensive debt alternatives.
Redevelopment/Retrofit
C-PACE covers 100% of eligible improvements, often the entire renovation budget. It helps cover deferred maintenance costs, comply with local carbon mandates, and decrease operating expenses.
Renewable Energy
PACE Equity Finance offers substantially reduced rates for renewable energy projects through our CIRRUS C-PACE program.
Recapitalization
Available pre-construction, mid-construction, during lease-up, or after stabilization. Use low-cost C-PACE to improve short-term economics and long-term asset performance
Speak to a PACE Financing Expert
Benefits of C-PACE
Increase IRR
- Replace higher cost options as such as preferred/JV equity/mezz
- Add accretive leverage to overcome low LTC construction lending
- Lower WACC by reducing bridge/debt funds
Close Gap
- Pair with simple or complex stacks
- Use alongside CDD, EB5, HTC, NMTC, TIF, OZ brownfield grants & more
- Lower WACC by reducing bridge/debt funds
Recapitalize
- Recapitalize recent equipment installations, building renovations or development projects
- Fund cost overruns, debt payoffs/paydowns, lease up/debt service reserves, and equity refinancing
- Avoid a capital call, extend or payoff a maturing loan.