Keeping It Clean: Understanding C-PACE Financing
Terrydale Capital
Aug 24, 2023 8 Min read
What is C-PACE Financing?
C-PACE (Commercial Property Assessed Clean Energy) financing is a financing mechanism that allows for commercial property owners to make energy-efficient upgrades to their properties. C-PACE financing is unique in that it is repaid through a special assessment on the property tax bill, which allows financing to be tied to the property rather than the owner. This means that if the property is sold, the financing obligation stays with the property and transfers to the new owner.
C-PACE is typically offered through state or local governments and is available to commercial property owners who want to make energy-efficient upgrades but lack the upfront capital to do so. This type of financing can be used for the installation of solar panels, efficient heating and cooling systems and improving the property’s insulation.
The amount of financing available through the C-PACE program varies depending on the state or local government offering the program, but it can range from $100,000 to $5 million and even above. The financing is typically paid over a period of 10 to 25 years with interest rates running from 4% to 8%.
What Are the Benefits of C-PACE Financing for CRE Investors?
There are several benefits of C-PACE financing for commercial real estate investors. First and foremost, C-PACE financing enables commercial property owners to make energy-efficient upgrades to a property without having to pay up-front for them. This can be beneficial for property owners who may be managing multiple properties and may not have the on-hand capital available.
In addition, C-PACE financing can help commercial real estate investors to attract and retain tenants who are interested in environmentally sustainable properties. Energy-efficient upgrades can lower energy consumption, which can be attractive for tenants seeking energy-efficient properties. Similarly, C-PACE financing can help increase the value of a commercial property as the lowering of operating costs can make a property more attractive to potential future buyers.
Finally, C-PACE financing can help commercial real estate investors and owners meet regulatory requirements related to energy efficiency. Many states and local governments have established energy-efficiency standards for commercial properties. C-PACE financing helps commercial property owners meet these standards and avoid penalties - especially as more and more states and local governments adopt these standards.
What are the risks of C-PACE Financing for CRE Investors?
While C-PACE financing offers many benefits for commercial real estate investors, there are also some risks to be aware of. First and foremost, C-PACE financing is tied to the property rather than the owner, which means the debt obligation transfers to the new owner upon sale. This can be a concern for commercial real estate investors who may be planning to sell their property in the future, as it may make the property less attractive to potential buyers.
Another risk of C-PACE financing is that the financing is typically paid over a period of 10 to 25 years, which is a longer-term financial commitment. Commercial real estate investors must carefully consider their ability to repay the financing over this period.
Finally, C-PACE financing may not be available in all states or localities, which can limit its usefulness for commercial real estate investors. Therefore, investors must understand where the properties reside if they want to seek C-PACE financing.
How Can CRE Investors Take Advantage of C-PACE Financing?
Commercial real estate investors who are interested in taking advantage of C-PACE financing should begin by researching if the financing is available in their area. If the financing is available, investors should weigh the potential benefits and risks of taking it on and if it is a good fit for the property.
Commercial real estate investors and property owners should work with experienced professionals, such as engineers and contractors, to identify the right energy-efficient upgrades best for the property. These are the best individuals to assist in determining the cost of upgrades and give the best estimates for potential energy savings.
Commercial real estate investors should work closely with the local government to ensure they understand the terms and conditions surrounding the C-PACE financing program. Similarly, as only specific lenders are capable of accepting C-PACE financing options, it can be pertinent to work with financing professionals such as Terrydale Capital in order to be appropriately linked to the right lenders.
In Conclusion
C-PACE financing offers many benefits for commercial real estate investors. By providing up-front capital and tying financing to the property, C-PACE financing can help investors attract and retain tenants, increase the value of their property and meet regulatory requirements. If you’re seeking to make energy-efficient upgrades to your property, contact us at Terrydale Capital. With our wide array of industry and lender connections we can plug you into a wide range of certified lenders offering C-PACE financing options.
Partner With Terrydale Capital for Your Debt Financing Needs
When it comes to debt financing, understanding the right timing, process, and options is crucial. At Terrydale Capital, we provide a comprehensive range of commercial loan solutions tailored to meet your business's unique needs.
Success!
Product has been created successfully!
Headquartered in Dallas, Texas, Terrydale Capital is a leader in commercial real estate financing. We have close relationships with the nation’s top banks, lenders & family offices allowing us to provide the most competitive financing solutions in the market.
