The benefits of C-PACE financing
Right now a lot of lenders aren't operating C-PACE, but that is expected to change as more areas roll out energy-efficiency legislation. For developers and sponsors, C-PACE is another way to get the money needed to comply with both local and federal legislation and the growing desire from building owners and tenants to have green buildings. The improvements funded through a C-PACE loan may also help reduce energy costs for the building owner for years to come. It can also help improve the internal rate of return for investors in a commercial real estate project. What's even more appealing for many owners is that in some areas, such as New York City, they will be able to use C-PACE retroactively to finance improvements they have already installed.
New York City is often the bellwether for major changes. The first C-PACE deal in New York City was announced in June 2021 and should open the door for many more projects. There's also a hope that as it becomes more widespread, lenders will get on board.
"People take out these loans when they're building a building or retrofitting a building, they get a construction loan from a mortgage lender, and then they get a PACE loan to fund the green stuff," said O'Connor, "That's a great competitive advantage they're going to have. No one's done it yet, but someone's going to figure it out."
The future of C-PACE and clean-energy upgrades
C-PACE is still a relatively new program, and there will be more changes to come as states roll out and refine their energy efficiency legislation. The fact that 37 states and Washington, D.C., have passed laws that allow C-PACE is one sign that this program will play a larger role in commercial real estate financing in the future. PACE programs are active in 26 states, and that number is increasing. C-PACE represents an intersection between public policy and private financing that should help many developers achieve the renewable energy improvements their local communities demand.