Why C-PACE? Identifying Opportunities in Today’s Commercial Real Estate Market
By Anne Hill
Picture this: A developer builds a brand new, state-of-the art hotel in sunny Arcadia, California. The design is pristine with all the amenities you can think of, and the location is picture-perfect for globetrotters hoping to catch a glimpse of the San Gabriel Mountains in real life. The only problem? The year is 2020 and the world is about to plunge into one of the worst global pandemics in history.
It’s no secret the hospitality industry suffered in 2020 and because of that, traditional banks are hesitant to provide financing—whether temporarily with bridge loans or more permanently with long-term, fixed-rate solutions—until the market stabilizes. That’s where C-PACE financing can make a material difference.
Commercial Property Assessed Clean Energy (“C-PACE”) financing is a very cost-effective financing tool for property owners and developers that helps them fill a gap in their capital stack while providing a specific need they otherwise wouldn’t be able to finance.
Quick Case Study
Take, for example, Le Meridien Arcadia Hotel in Arcadia, CA. Construction for the property began pre-Covid-19 with a completion date in May 2021. Despite having a construction loan in place, like so many other developers, they weren’t able to lock in a permanent loan given the unpredictable occupancy levels associated with the pandemic.
Thanks to typical expenditures in new construction (e.g. energy-efficient heating and air conditioning systems), the developer already met the eligibility requirements needed to qualify for C-PACE financing. That’s why they were able to take advantage of the retroactive financing tool Bayview PACE offers to fund the project.
The value here is clear: C-PACE is a cost effective alternative to traditional bridge and rescue financing. The developer can now breathe easy until the market recovers and they can apply for permanent financing. There are a host of similar circumstances that will benefit from PACE financing as the market continues to navigate the after-effects of a global pandemic. Want a more in-depth look at this C-PACE transaction? Download our free whitepaper to get our full case study.
Why Choose C-PACE?
C-PACE financing isn’t just a response to Covid-19. Across the country, states are currently pushing stringent goals around energy efficiency.
Case in point: New York City’s Local Law 97 will result in 25% of building owners making energy efficiency upgrades by 2024. With C-PACE financing, these investors can tap into a financing program specifically designed to help reach those targets and deliver an energy efficient asset that is more comfortable to occupants with lower occupancy cost.
Not only do property owners get the opportunity to install and pay for environmentally-friendly upgrades, the C-PACE obligation (and improvements) remain with the property even after its been sold.
The Bayview PACE Difference
With a commitment to lower costs across the board and a more flexible financing structure, Bayview PACE is positioned to offer solutions and support that will help property owners and developers secure the right financing for their deals.
The largest barrier to growth in C-PACE has been the acceptance of PACE by senior lenders. Bayview’s brand and long standing relationships brings a level of credibility to the industry that hasn’t existed to-date. Lenders, who in the past may not have consented to allow PACE financing on their properties, are more comfortable partnering with a player like Bayview.
Ultimately, we’re able to give borrowers and senior lenders a sense of certainty.
The C-PACE division at Bayview has the potential to bring C-PACE to the forefront and foster increased acceptance from senior lenders as they experience the benefits for themselves. In the same way, I’m excited to see property owners take advantage of C-PACE financing, whether it be from Bayview or other providers across the country. C-PACE programs help owners achieve both their financial and sustainability goals.