The closing panel at the upcoming Connect Investment & Finance 2023 event, held on Oct. 24 at the Hyatt Regency O’Hare in Rosemont, IL, will delve into “Navigating Capital Markets and Financing Options.” One financing option that has been gaining attention from borrowers in today’s market is C-PACE (Commercial Property Assessed Clean Energy) financing. Matthew McCormack, SVP of Originations at PACE Loan Group (PLG), an expert in this field, will share insights on how C-PACE can fulfill borrowers’ needs during Tuesday’s discussion.
Q: What advantages does C-PACE financing offer to borrowers facing lower LTVs from banks?
A: In today’s market conditions, C-PACE is priced similarly to bank construction financing but offers several benefits such as a long-term fixed-rate structure and non-recourse funding. This reduces recourse exposure for borrowers and eliminates the need for purchasing a SOFR cap while providing longer-term financing options for projects to reach stabilization and achieve their business goals.
Q: Are you seeing an increase in inquiries about C-PACE funding from a wider range of borrower profiles compared to previous years?
A: Yes. While we have traditionally served middle-market commercial real estate developers and operators with our services; larger institutional groups are now exploring options like C-PACE due to scarcity of construction finance or traditional senior debt options available across all borrower profiles.
Q: Are there any limitations when it comes applying for CP-Ace loans?
A: There are three main constraints:
1) We cannot lend more than 100% of eligible proceeds under state-specific programs which generally cover improvements that impact utility spend.
2) The loan amount cannot exceed a certain percentage of stabilized appraised value set by individual states/programs ranging between 20%-35%.
3) The consent given by existing mortgage or lienholders also plays a crucial role as they evaluate each project and sponsor individually to determine the amount of C-PACE financing they will allow.
Q: Are borrowers using C-PACE options more creatively today?
A: Absolutely. While historically, sponsors have used C-PACE for renovating or improving existing buildings and obtaining higher leverage in development deals; today, it is being utilized as a source of senior financing and recapitalizing recently completed or mid-stream construction projects due to its numerous benefits.
For real-time market insights and updates on the current cycle, don’t miss out on attending Connect Investment & Finance 2023 at Hyatt Regency O’Hare in Rosemont, IL on Oct. 24. Register now by clicking here.
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