**PACE Equity Group’s Andrew Freter on What Makes C-PACE a Go-To Financing Source**
Originally launched two decades ago in Berkeley, California, with the formation of a “sustainable energy financing district,” Property Assessed Clean Energy (PACE) financing has expanded nationwide—making significant inroads in both residential and commercial real estate. Commercial PACE (C-PACE) financing is now a widely adopted option for borrowers. Connect CRE sat down with Andrew Freter, Director of Originations at PACE Equity Group, to explore why C-PACE is gaining traction and how it’s being utilized in today’s real estate and financial markets.
**Q: C-PACE financing is becoming a go-to source of capital for borrowers. What are some of the factors that have driven this, in terms of both current finance market conditions and the value proposition of C-PACE?**
**Freter:** I’d say three key factors are behind C-PACE’s current growth.
First, while real estate activity remains healthy, banks are under tighter regulatory scrutiny. This has led many lenders to reduce leverage or shorten loan terms, making projects more difficult to finance traditionally.
Second, interest rates are a major driver. C-PACE offers long-term, fixed-rate capital—making it especially appealing in today’s higher-rate environment. Being able to lock in financing for 20 to 30 years with no refinance risk gives project owners much-needed financial stability.
Third, the increasing use of C-PACE in recapitalizations has been a game-changer. Developers are utilizing it to cover cost overruns, fund interest reserves, and restructure capital stacks. It’s proven to be a flexible tool that goes far beyond new development.
There’s also a broader industry shift toward building more energy-efficient properties. It’s no longer just about environmental benefits; it’s about reducing operating costs and attracting tenants. I recently spoke with a developer focused on affordable workforce housing who noted that energy efficiency is now a top priority for tenants—something that wasn’t always the case in the past.
**Q: One of the hallmarks of C-PACE is its versatility. While it can help make development projects pencil out, it has also become a vehicle for refinancing existing properties. How is a refi via C-PACE structured?**
**Freter:** That’s right—C-PACE is no longer just for new developments. It’s increasingly being used in refinancing strategies, too.
We’ve structured C-PACE refinances in a number of ways—from paying down senior debt and funding interest reserves to restructuring capital stacks and covering overruns. The applications are broad and evolving.
One of my favorite examples is using a C-PACE refi to extend a loan term to allow a project more time to stabilize. In some cases, we can refinance part—or even all—of the senior debt. This timing flexibility can be crucial for sponsors working toward stabilization during lease-up phases.
**Q: While C-PACE has increased its visibility among borrowers, it is also growing in acceptance among senior lenders. What has influenced their thinking?**
**Freter:** Senior lenders are definitely getting more comfortable with C-PACE. Like any new product, there was initial skepticism. But as more deals have successfully used C-PACE, sentiment among lenders is shifting.
They’ve started recognizing C-PACE as an effective tool to complete financing and differentiate themselves. For example, when a deal is too large or needs additional capital, C-PACE can help fill that gap without requiring loan participations—something that appeals to many banks looking to protect client relationships.
In fact, I recently had a conversation with a mid-sized bank that is exploring C-PACE as an alternative to loan participations for precisely this reason. By using C-PACE, they can close larger deals without involving other banks and maintain exclusive relationships with their clients.
**Q: What’s behind the growing momentum with larger C-PACE assets?**
**Freter:** It’s been great to witness this momentum. The increased acceptance really comes down to a deeper understanding of what C-PACE can offer.
Initially, many in the market viewed C-PACE as a niche financing option—primarily for funding energy efficiency upgrades. But now it’s being embraced as a robust financing solution for complex, large-scale projects. The long-term, fixed-rate, non-recourse nature of C-PACE capital makes it suitable for projects of all sizes.
We’re now seeing institutional borrowers adopt C-PACE as a core part of their capital strategy. As these institutional players enter the C-PACE space, deal sizes have naturally grown. At PACE Equity, we’re very excited about this trend. As a balance-sheet lender with strong capital backing, we’re well-positioned to fund larger deals and write bigger checks.
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C-PACE continues to reshape how commercial real estate projects are financed—providing flexibility, long-term security, and greater financial efficiency in a shifting capital landscape. With growing lender acceptance and applicability across a wide range of asset types, it’s clear that C-PACE is becoming an indispensable tool for today’s real estate developers and investors.
