### C-PACE Use for Multifamily: Q&A with EcoSmart Solution’s Lucas Nagy
The Commercial Property Assessed Clean Energy (C-PACE) financing tool was introduced in California in 2008 through the passage of Assembly Bill 811. Since then, many other states have enacted their own C-PACE legislation. Today, C-PACE financing is available in 33 states, with five more having approved enabling legislation.
**Connect CRE** recently spoke with **Lucas Nagy**, vice president of structured finance at EcoSmart Solution, a subsidiary of Taurus Investment Holdings’ energy platform, to discuss the relationship between C-PACE financing and multifamily construction and improvements.
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### Understanding C-PACE Financing for Multifamily Projects
**Connect CRE**: How does C-PACE differ from other types of financing, such as banking, private funds, or mezzanine loans?
**Lucas Nagy**: Unlike typical property-secured debt, C-PACE is a property assessment financing tool. Because property assessments run with the land, principal repayments are non-accelerating. These characteristics provide accounting and transactional flexibility for multifamily property owners.
C-PACE is particularly beneficial for multifamily projects because it can provide 100% project financing with amortization and rate terms similar to mortgage financing—without requiring a refinance of the senior mortgage. Additionally, C-PACE financing can be used for new construction projects in most states. It enhances project leverage and offers repayment structuring options that improve proforma equity returns, such as a 10-year interest-only period followed by 20-year amortization.
### What Projects Does C-PACE Cover?
**Connect CRE**: What types of projects does C-PACE financing typically support?
**Lucas Nagy**: In most states, C-PACE financing is approved for energy efficiency upgrades, renewable energy projects, building modernization, and climate resiliency improvements. For instance, in California, C-PACE funding can be used for measures that enhance wildfire and earthquake resiliency, as well as sustainability upgrades such as water-use reductions, geothermal exchange for HVAC, and onsite solar power generation.
### Challenges of C-PACE Financing
**Connect CRE**: What challenges do borrowers face when using C-PACE financing?
**Lucas Nagy**: The biggest hurdle is that most states require senior lender consent for voluntary property tax assessments. However, many lenders approve the financing once they recognize that C-PACE-funded improvements enhance their collateral value. The positive news is that the number of C-PACE-approving lenders continues to grow. Additionally, C-PACE financing becomes a viable solution for projects with costs exceeding $2 million.
### Key Considerations for Multifamily Developers
**Connect CRE**: What else should property owners and developers keep in mind?
**Lucas Nagy**: First, for any multifamily energy efficiency or solar project where the annual cost of the C-PACE assessment is lower than the energy savings it generates, property NOI increases. This enhancement in NOI can lead to a higher property valuation—so delaying these improvements could mean leaving money on the table.
Second, while C-PACE is designed as long-term financing, it can be refinanced in most states. In high-interest rate environments, negotiating more favorable prepayment terms after 36 months can be a strategic move.
*An earlier version of this article was published on ApartmentBuildings.com.*
