PACE Equity recently completed funding for the new construction of the Best Western Plus hotel in Isanti, Minnesota. Midway through construction, the developer required additional funding in order to meet forthcoming hotel flag standards and avoid renovations down the line. PACE Equity provided a turnkey solution by stepping in midstream to retroactively finance additional project costs and qualified upgrades, preventing a delay in the project or future construction needs.
“Working with PACE Equity and Stephen Grebe on our hotel project has been a very good experience. We had a need for both some additional funding as well as an added equity source to the project. Our 60 room new build Best Western Plus was the perfect fit for this financing. I am sure we will include this again in future projects,” said Troy Hoekstra, President of United Development Solutions.
Due to investors’ intent on streamlining the project with more upgraded brand standards after construction already started, they were in need of further funding. Neither the local bank nor the developer wished to provide further financing, so PACE Equity stepped in as the financing solution the sponsor, United Development Solutions, needed. PACE Equity uniquely worked hand-in-hand with United Development Solutions to help complete a project already in progress and efficiently add value to the construction project by funding the increase in costs.
Utilizing a lookback provision, the capital stack was reevaluated by PACE Equity in order to fund eligible investments for the upgrades, providing nearly 10 percent of the total funds — $790,000 out of the approximate $7.7 million capitalization. A bank provided a construction loan in the amount of $4.8 million, the sponsor provided $1 million in equity and the city of Isanti contributed approximately $1 million worth of land.
PACE Equity’s turnkey solutions provided everything from energy engineering to program management, weekly status reports and more to fill the client need rather than an additional outside equity investment. Alongside the St. Paul Port Authority, PACE Equity also worked to expand the MinnPACE district to Isanti county in time for funding. Community need for a new hotel led to this being the first Best Western Plus in Isanti and the first of two PACE Equity funded projects in Minnesota this month.
“We were excited to bring a solution to fund the Isanti Best Western Plus upgrades after the initial capital stack had closed. Our funding eliminated the need to go back and obtain additional funds from investors or the bank,” said PACE Equity Vice President of Commercial Lending Stephen Grebe.
About PACE Equity
PACE Equity is the leading Property Assessed Clean Energy (PACE) funder of commercial real estate development projects in the U.S. PACE Equity is a resourceful addition to the capital stack to boost return on investment while making commercial buildings more sustainable through clean energy efficiencies. PACE Equity has unmatched expertise in new commercial construction, having completed the first new construction projects in several asset classes and completed the first PACE funded projects to utilize Historic and New Markets Tax Credits. PACE Equity has a local presence in 20 markets and can fund projects on a national basis.
What is PACE?
PACE, which stands for Property Assessed Clean Energy, is a simple and effective way to finance energy efficiency, renewable energy and water conservation upgrades to commercial buildings. PACE can pay for new heating and cooling systems, lighting improvements, solar panels, water pumps, insulation and more. It can be used for almost any property – commercial, industrial, multifamily, non-profit and agricultural. PACE facilitates building improvements that result in utility savings to be funded by private capital and repaid via a long-term tax assessment. The program is designed to break down longstanding barriers to energy efficiency and to promote job creation through economic development.