By Hayden Spiess
Investment firm and asset manager Nuveen has a dedicated “What is C-PACE?” page on its website, outlining the basics of this unique type of financing. That the firm sees such a fact sheet as necessary is unsurprising, given that within the commercial real estate industry, Commercial Property Assessed Clean Energy (C-PACE) financing carries less familiarity relative to other financing products.
Anne Hill, senior vice president of Bayview PACE, says that “there are some misconceptions out there” and that there is “some confusion around the product.”
Lenders say that now though, despite the fact that some misinformation and lack of awareness persist, the tool is rapidly gaining favor among borrowers that recognize its exceptional utility, especially in the volatile environment of today.
Origins
Originated in Berkeley, California, in 2008, commercial property assessed clean energy (C-PACE) financing is now available in 40 states throughout the country. C-PACE serves as an alternative funding source for commercial projects that qualify on the basis that they will result in reduced energy and water usage and greater building efficiency.
“When the program was created, the idea was that the government wanted to allow property owners an easier way to finance energy efficiency improvement,” explains Hill.
Key features of the funding type include fixed interest rates, a payment term that matches the useful life of the improvements or new construction and the ability to finance with no money down.
C-PACE loans are also characterized by longer terms. Financings are typically structured as 30-year, fixed-rate, self-amortizing instruments.
Perhaps most importantly, C-PACE financing is repaid through the property tax collection mechanism, bearing the same rights and responsibilities that a property tax would. Hill clarifies that “it’s private money that’s financing this, but we’re using the government collection process, and we’re being given the same rights as taxes.”
Early on, a very limited number of C-PACE deals were being executed, according to Rafi Golberstein, president and CEO of PACE Loan Group. “Pre-2017, the [national loan] volume was less than a million dollars,” expounds Golberstein. “It was really tiny.”
Golberstein, who founded PACE Loan Group in 2017, says that the sizes of the deals themselves were also more negligible in earlier years. “When we started the company, if we closed a $1 million PACE assessment, we were like ringing the bell,” recalls Golberstein. “And now, $20 or $50 million PACE assessments are pretty much run of the mill and not uncommon. We have moved away from financing mom-and-pop owners to institutional models, which means the deal sizes are much, much larger.”
Best, Worst of Times
In a somewhat Dickensian dynamic, the past couple of years — which have proven to be challenging (if not the “worst”) time in terms of economic headwinds — have also afforded C-PACE financing a chance to shine. Within the context of uncertainty and inflated interested rates, the tool has proven its value and viability to borrowers.
“When I first started with this company and started doing C-PACE four or five years ago, bank debt was at 4 percent [interest],” says Bert Belanger of PACE Equity. “The PACE providers were charging 5 or 6 percent, and it didn’t really make sense for developers to pay the higher interest rate.”
Tumult in the broader economy and capital markets shifted this dynamic. Laura Rapaport, CEO and founder of North Bridge, which offers C-PACE financing across all commercial real estate asset classes, cites volatility, decreased access to capital and lack of liquidity from banks in the macro commercial market as drivers of growth for C-PACE.
Once the interest rate environment changed, Belanger explains, C-PACE became increasingly attractive. “Interest rates spiked, and bank debt started becoming more expensive. Their spreads increased significantly, and ours didn’t increase quite as much,” he says. “Today, a PACE provider can loan money at about 7 to 8 percent, and that’s about where bank debt is. So, it became a more viable alternative to bank debt. Plus, our debt is nonrecourse once the project is complete, and it’s a 30-year, fully amortizing, fixed-rate loan.”
Golberstein says that while his firm does not share internal volume numbers, PACE Loan Group has “more or less doubled [its] volume year over year.” Speaking to the explosive growth in the C-PACE industry at large, he cites figures showing that in 2024, there was roughly $2.6 billion of financing done across the country. This constitutes almost a quarter of the total $10 billion in deals that have been done since the inception of C-PACE.
Education has been an important element of C-PACE’s growth. “We believe we are currently in the third iteration of C-PACE, where it is being viewed as part of the capital stack from the beginning,” says Rapaport. She also states that continuing to bring awareness to the financing type is critical moving forward.
“Education is especially critical now, as the commercial real estate maturity wall is projected to reach $998 billion this year and peak at $1.26 trillion in 2027,” she notes. “A substantial number of loans — many originated in a low-interest-rate environment — will require refinancing at today’s higher rates. C-PACE offers a compelling refinancing solution, providing long-term, fixed-rate capital that can help fill critical gaps.”
Sector Significance
Some property types can stand to benefit more greatly from C-PACE, according to Belanger. Hotels, for example, stand to reap greater rewards from energy and water savings, which result in net operating cost reduction. “When you rent a hotel room, you’re essentially renting it under a gross lease,” Belanger explains.
The same principles apply to seniors housing properties.
Nuveen Green Capital recently deployed $40 million in C-PACE financing for the development of The Whitford, an ultra-luxury senior living project in Dublin, California. Upon completion, which is scheduled for September 2026, the property will feature 140 units. Nuveen partnered with Live Oak Bank on a financing package, totaling $80 million, for the development. Developer South Bay Partners will use the C-PACE financing to fund The Whitford’s lighting, HVAC, water savings and building infrastructure measures, as well as associated soft costs.
C-PACE providers expect that the growth in deal volume within the seniors housing sector specifically will only continue. If nothing else, the sheer increasing need for seniors housing units alone will drive a greater number of financings.
Sean Ribble, senior director at Nuveen Green Capital, reports that while seniors housing financings currently comprise a smaller portion of Nuveen Green Capital’s activity, he expects a shift moving forward. “We expect this to increase dramatically as the baby boomer population ages and the corresponding demand for seniors housing grows,” he notes. “Seniors housing properties benefit greatly from C-PACE as owners and developers seek to build energy efficiently while realizing cost savings.”
Lenders Learn
It’s not just borrowers who are learning about and warming up to C-PACE, which is not meant to replace senior debt, but rather complement and in some cases, replace more costly subordinate capital.
Historically, one of the obstacles to C-PACE financing has been the attitude of other lenders.
“There’s a reluctance, because they view us, in part, as competition,” Belanger reasons. “They want to maintain their first mortgage priority.”
Rapaport says though that one of the biggest changes over the past 12 months has been senior lenders approaching North Bridge to bring the firm into deals. “We now have banks and major debt funds bringing us into deals,” she says.
Looking Forward
Another challenge facing the completion of C-PACE deals moving forward could be the heightened cost of construction, sources say. Lenders can’t finance projects that don’t pencil out, and it is increasingly difficult to underwrite new developments and redevelopments that meet required return thresholds.
Nevertheless, C-PACE professionals are firmly optimistic about the outlook for 2025 and beyond, particularly as a tight credit market drives borrowers to seek new financing solutions.
“Overall, we project continued growth as C-PACE continues to provide cost-effective, stable financing,” says Ribble.