Challenge: Cost overruns and hard costs continue to climb.
Projects are getting more difficult to get started. You want to push forward, but you are worried about protecting your returns.
Since the onset of the pandemic, surging construction costs have impacted the commercial real estate industry. Clarion Partners, a leading U.S. real estate investment manager, points out that these higher construction prices, along with significant increase in land costs, are resulting in lower profit margins on new development and renovations, plus project budget overruns and delays. “This unprecedented surge in construction costs is having profound impacts on both new development projects and existing CRE assets,” they note.
All of us in the commercial real estate industry are feeling these effects. PACE Equity offers potential solutions to the challenges we are facing for both new construction and renovation projects.
Solution: Refinance your project using low-cost PACE funding
- Timing: PACE Equity can provide new construction and redevelopment funding at any point in the construction cycle -- at mid-construction, at CO and even up to 3 years after construction is complete.
- Cost of Capital: PACE Equity offers 50% lower cost of capital compared to mezz or equity. With our CIRRUS Low Carbon financing, we can even offer a substantial rate reduction beyond our standard offering for buildings that meet our low carbon specification.
- Results: Freeing up equity, managing cost overruns & improving returns.
How does it work?
Case Study 1: Freeing Up Equity
This Milwaukee area senior living project used PACE Equity financing as a way to refinance equity prior to stabilization, allowing for more equity and the chance to capture more growth with available equity. This $15.3 million project is the largest retroactive project in Wisconsin.
Case Study 2: Cost Overruns & Construction Delays
This Detroit area senior living project using PACE Equity financing to overcome the impacts of Covid on their redevelopment project which was delayed and experienced cost overruns. Using our funding, they were able to replenish the operating reserves for opening and lease up.
Case Study 3: Cost Overruns & Construction Delays
This Dallas area multifamily project faced cost increases with construction. We were able to rapidly reconfigure our funding calculations to accommodate the 20% increase in needed funding.
Case Study 4: Improved WACC & IRR
The national developer of this large multifamily project chose PACE Equity over increased equity requirements or mezzanine debt to complete their capital stack with a lower overall WACC and project return.
