### 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 with the passage of Assembly Bill 811. Since then, several other states have enacted their own C-PACE legislation. Currently, C-PACE financing is available in 33 states, while five additional states have approved enabling legislation.
Connect CRE recently spoke with **Lucas Nagy**, vice president of structured finance at **EcoSmart Solution**—Taurus Investment Holding’s energy platform—about the role of C-PACE financing in 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 types of property-secured debt, C-PACE is structured as property assessment financing. Since property assessments are tied to the land, principal repayments do not accelerate. These features offer accounting and transactional flexibility for multifamily property owners.
C-PACE can be particularly beneficial for multifamily projects since it allows for 100% project financing with amortization and rate terms similar to mortgage financing—without requiring a senior mortgage refinance.
Additionally, in most states, C-PACE can be used for new construction. The financing helps enhance project leverage, while flexible repayment structures can improve pro forma equity returns. For instance, developers can opt for a 10-year interest-only period followed by 20-year amortization.
#### **What are the typical projects that C-PACE financing covers?**
**Lucas Nagy**: In most states, C-PACE is approved for energy efficiency projects, renewable energy systems, building modernization, and climate resiliency improvements.
For example, in California, C-PACE can be used to enhance wildfire and earthquake resiliency, reduce water usage, implement geothermal exchange for HVAC, and install onsite solar electricity generation.
#### **What are the challenges of C-PACE?**
**Lucas Nagy**: One of the main challenges is that most states require senior lender consent for voluntary property tax assessments. However, lenders typically approve assessments if they view C-PACE-funded improvements as increasing their collateral value.
The good news is that the number of vendors approving C-PACE financing is growing. Additionally, C-PACE financing is most effective for projects exceeding $2 million.
#### **What else should multifamily property owners consider?**
**Lucas Nagy**: Investing in energy efficiency and solar projects can enhance a property’s net operating income (NOI). When the annual cost of a C-PACE assessment is lower than the energy savings from those improvements, NOI increases—which can boost property value. Property owners should act quickly to implement improvements to avoid missing out on cost savings.
Furthermore, although C-PACE is long-term financing, it can be refinanced in most states. In high-interest rate environments, negotiating better prepayment terms after 36 months can be a smart financial strategy.
An earlier version of this article was published on ApartmentBuildings.com.
