There are many options to rounding out the capital stack. Traditionally, the stack features debt and equity. However, when the equity requirement is larger than 10%, the stack will often feature mezzanine financing.

There are pluses and minuses to each form of capital. Debt is traditionally the lowest cost of capital as it is the most secure with a first lien on the property. Equity requires the developer to pay a preferred return – often in the high single to low double digits – plus give up ownership in the property. Mezzanine financing bridges the gap between debt and equity financing and functions as an expensive source of capital featuring rates from 12 – 20% per year.

There are other more efficient options. C-PACE functions as an alternative to mezzanine and, in some cases, equity. C-PACE is more attractive than mezzanine debt to the developers as it has a lower interest rate and allows…