C-PACE Increasingly a ‘Back on Track’ Financing Solution
Commercial real estate projects hitting financial headwinds is nothing new, but the use of Commercial Property-Assessed Financing (C-PACE) to get them back on track has become a boon lately for developers, owners and project sponsors. The pandemic was a significant market-shock that caused more rapid adoption of C-PACE financing in 2019-2021, and the more recent credit-market repercussions of the Silicon Valley Bank default appear to be another. Why is C-PACE a popular bridge financing alternative, and even a “rescue-capital” resource?
First, let’s take a look at a pandemic-era project which ran into budget issues just as COVID took hold, causing project delays, materials shortages, supply-chain disruption, and increased labor costs. Fast forward to today, the site at 750 Irolo St. in Los Angeles is now under-construction on 33 new condominiums, helping make a dent in the region’s need for housing.
When PACE became a viable option for the Koreatown project last year, developer Chateau Group saw PACE as a good solution to help refinance the capital stack and get the project back on track. C-PACE was able to fund key aspects of the project’s energy efficiency and resource management including HVAC, lighting, water and mechanical systems, and structural improvements. More broadly, PACE funding can be utilized for a range of needs, depending on the local PACE legislation and the individual project’s requirements. They can include energy-related components such as HVAC systems, insulation, lighting, and the like, renewables including solar or power innovations, water reduction and efficiency items, and resiliency measures such as flood/storm improvements and, in California, seismic upgrades too.
In recent months, the already-tight credit markets experience another shock with the failure of Silicon Valley Bank. A rippling effect through the CRE lending world has drawn further attention to alternatives like C-PACE. What owners and developers are finding is that C-PACE is a strong complementary piece of the capital stack for new construction and many re-fi and look-back opportunities.
Projects turning to C-PACE the past few months alone include hospitality, industrial, multi-family housing, office/mixed-use and others. C-PACE provides an optimal capital source for most every project’s energy-efficient and renewable building components, carving out a portion of the debt requirements and adding flexibility to the capital stack. With program legislation currently enabled in 37 states, C-PACE is growing in popularity among real estate owners and with the financial institutions looking to serve them.
Anne Hill is Senior Vice President of Bayview Asset Management and 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 Please visit www.bayviewpace.com.