Pairing C-PACE With USDA Financing Solves Funding Crunch for Many U.S. Commercial Real Estate Projects

Under-Radar USDA Program Combined with C-PACE Taps A Ready Flow of Capital at Rates and Terms that can be Better than Traditional Financing

By Anne Hill

Developers and investors in commercial real estate projects across the U.S. are discovering a little-known financing package that solves many of today’s funding challenges.

By combining Commercial Property-Assessed Clean Energy (C-PACE) financing with U.S. Department of Agriculture (USDA) loans, borrowers are getting higher leverage versus standard bank loans, and there’s strong availability of capital. The total volume for USDA lending has grown significantly year over year whereas bank construction lending has decreased. 

Many borrowers are surprised to find that they qualify for USDA lending aimed for use in ‘rural’ America. According to Federal estimates, some 97 percent of the U.S. is rural and includes suburbs of major metros. That’s quite a lot of commercial real estate.

Similar to Small Business Administration loans, USDA lending programs are government-guaranteed loans that private lenders can utilize nationwide.

The USDA Rural Development program for Business and Industry (B&I) can apply to construction or refinancing of commercial, industrial, manufacturing, hospitality, healthcare, Assisted Living/Memory Care, energy and infrastructure as well as mixed-use projects. While senior living facilities qualify, traditional multi-family does not.

Through this program, lenders obtain the USDA loan guarantee at origination after certain conditions have been met. The USDA loan can fund amounts up to $25 million per project, but total proceeds for the borrower can go higher when combined with CPACE.

For example, on a $27 million debt-stack for the new 124-unit Mesa Verde senior living community in Durango, CO, Bayview PACE provided $6 million in C-PACE while a community bank provided a $20.9 million USDA-guaranteed loan.  The combined leverage on this transaction was more than 80% loan-to-cost (LTC).

The deal was originally structured as a traditional construction loan without a CPACE component. However after the lender revised their financing to a USDA guaranteed loan, they consented to the additional proceeds from the PACE financing, resulting in higher proceeds and higher combined leverage for the borrower. 

Mesa Verde is now under construction about four miles from downtown Durango in a popular neighborhood directly adjacent to the region’s only major hospital, Centura Mercy Hospital. Durango’s 2024 population was just over 20,000, while its SMSA regional population is over 56,000.

The 105,000 square-foot Mesa Verde will offer 92 assisted/transitional living units spread across studio, 1-bedroom and 2-bedroom configurations, and also 32 memory care studio-units. Amenity spaces will include multiple dining rooms, exercise facilities, a beauty salon/barber shop, library, activity rooms, computer room, theatre auditorium and a coffee shop/deli.

Bayview’s C-PACE financing offers favorable and cost-effective terms for qualified improvements in energy, HVAC, electrical, lighting, plumbing and water systems, building envelope and other resiliency components, and it can be applied to new construction as well as renovations. C-PACE is active in 38 states and the District of Columbia.

Packaging of C-PACE with a USDA loan offers a compelling advantage over traditional financing in today’s capital markets. For commercial real estate projects in rural America including many city suburbs, it can be a linch-pin that helps move projects forward.

Anne Hill is Senior Vice President of Bayview PACE. Bayview PACE offers creative financing solutions that combine construction, bridge and CPACE lending. Unlike most PACE-only providers, Bayview PACE works with commercial property owners and developers to provide a full capital stack solution. Bayview PACE is a division of Silver Hill Funding, LLC.  NMLS# 1564077 www.nmlsconsumeraccess.org.