By: Alejandra Torres
As the commercial real estate industry ushers in a new energy-efficient era with Commercial Property Assessed Clean Energy (“C-PACE”) financing, Bayview PACE is already shaping up to be a key player in providing this accretive form of finance for property owners. Bayview PACE, operating in ‘stealth’ mode, announced that it has closed on a $42 million deal for a full-service hotel in Arcadia, California. This transaction represents the first of many more to come now that Bayview PACE is ’live’.
The Le Meridien Hotel in Arcadia, California began construction prior to the Covid-19 pandemic with the grand opening scheduled for June 1, 2021. Featuring 234 guest bedrooms, a restaurant and bar, pool (with poolside delivery service) and over 6,000 square feet of flexible banquet and meeting space, Le Meridian was set to be a luxe getaway for travelers from all over the world. No one could have predicted a global pandemic would literally shut down the hospitality industry, making the hotel’s future uncertain.
The borrowers initially had a construction loan in place to build the property in 2019. With a maturity date fast approaching, they needed to quickly secure more permanent financing. Traditional banks passed because of the unpredictable occupancy levels associated with the pandemic, and so the seemingly only other option left was a short-term expensive bridge loan.
While it’s an immediate solution that many hospitality owners have and are pursuing, this financing inevitably came with a high interest rates and a 24-month term. Ultimately, the borrowers needed a longer, more secure option to enable them to open the hotel and stabilize the property post pandemic.
Since the property is new construction and featured energy-efficient improvements (heating and air conditioning systems, LED lights, low flow water fixtures, and other measures) the property met the eligibility requirements needed to qualify for C-PACE financing.
Thanks to Bayview’s retroactive C-PACE financing, Bayview PACE was able to step in and offer far more cost effective funding for the project, allowing the borrowers to refinance $42 million at a very low fixed rate over a 30-year period. Not only did they lock in a much lower interest rate (~200 basis point delta), but the borrowers were also able to secure a much longer term, which dramatically lowered the annual borrowing cost.
Without Bayview PACE, the borrowers likely would have had to settle for multiple short-term loans with higher interest rates until the market stabilized. Bayview PACE gave the borrowers significantly more time to stabilize the property and more importantly, an alternative opportunity to fund the project on their terms.
Le Meridien Hotel will join other commercial buildings across the country that are adopting energy-efficient methods to reduce carbon emissions, improve the efficiency and value of their properties, utilizing the flexible and low cost financing from Bayview PACE.
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