### 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, other states have implemented their own C-PACE legislation. Currently, C-PACE financing is available in 33 states, with an additional five states having approved enabling legislation.
**Connect CRE** recently spoke with **Lucas Nagy**, vice president of structured finance at **EcoSmart Solution**, the energy platform of Taurus Investment Holdings, to discuss the connection between C-PACE financing and multifamily construction and improvements.
#### How does C-PACE differ from other forms of financing, such as banking, private funds, or mezzanine loans?
**Lucas Nagy**: Unlike other property-secured debt, C-PACE is classified as property assessment financing by statute. This means that the financing is tied to the property itself rather than the borrower and is repaid through a property tax assessment. Since these assessments are non-accelerating and transfer with the property, they offer accounting and transactional flexibility for multifamily property owners.
C-PACE is particularly useful for multifamily projects because it allows for **100% project financing** with amortization and rates similar to mortgage financing—without requiring the refinance of a senior mortgage. Additionally, in most states, C-PACE can be used for **new construction** to enhance project leverage, with repayment structures that improve pro forma equity returns. A common example is financing structured as **10-year interest-only payments** followed by a **20-year amortization** period.
#### What types of projects does C-PACE financing typically cover?
**Lucas Nagy**: In most states, C-PACE is approved for **energy efficiency projects, renewable energy installations, building modernization, and climate resiliency improvements**.
For example, in **California**, C-PACE can be used for improvements that strengthen **wildfire and earthquake resiliency** as well as **sustainability upgrades** like:
– **Water-use reduction** initiatives
– **Geothermal exchange systems** for HVAC
– **Onsite solar electricity generation**
#### What are the challenges associated with C-PACE?
**Lucas Nagy**: One of the main barriers is the requirement in most states for **senior lender consent** before a voluntary property tax assessment can be applied. However, if lenders see the **C-PACE-funded improvements adding value to their collateral**, they often approve the financing request.
Another positive trend is the **growing number of C-PACE-approving lenders and vendors**. Additionally, while C-PACE financing is most beneficial for projects **above $2 million**, its accessibility is increasing.
#### Any final thoughts?
**Lucas Nagy**: First, **net operating income (NOI) can be significantly enhanced** for multifamily energy efficiency and solar projects—especially when the **annual cost of the C-PACE assessment is lower than the energy savings generated** by the improvements. This **higher NOI** translates to a potential **increase in property value**. If the financials make sense, implementing these upgrades sooner rather than later helps **avoid leaving money on the table**.
Second, although **C-PACE is a long-term financing tool**, it can still be **refinanced** in most states. Particularly in high-interest rate environments, a useful strategy is to **negotiate better prepayment terms after 36 months**.
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*An earlier version of this article was originally published on ApartmentBuildings.com.*
