C-PACE Financing: Alternative Financing In A Challenging Market – Renewables

Commercial Property Assessed Clean Energy (C-PACE) financing is
a specialized form of financing, which enables commercial real
property owners to fund energy-efficient improvements, renewable
energy improvements, and other qualifying improvements for
renovations or ground up projects. It enables commercial real
property owners to repay the financing for these improvements over
an extended period through a voluntary assessment on their real
property tax bill. Below is a brief overview of C-PACE
financing.

History of C-PACE Financing

C-PACE financing originated as a local program in Berkeley,
California in 2008 and has since gained traction across the United
States. C-PACE programs are adopted at the state level through
state legislation. Today, most states around the country, including
Florida, Pennsylvania, New York, New Jersey, Maryland, Virginia,
and Washington D.C., have passed statutes enabling their own C-PACE
programs.

Uses for C-PACE Financing

Commercial property owners can use C-PACE financing for a wide
array of qualifying improvements, which vary from state to state.
For example, “qualifying improvements,” as they are known
in Florida’s C-PACE statute, include energy conservation and
efficiency improvements, renewable energy improvements, and wind
resistance improvements. See § 163.08, Fla. Stat.
These categories encompass improvements ranging from
energy-efficient HVAC systems and electric vehicle charging
equipment to new windows and roof reinforcements. Similarly, and as
another example, “qualifying projects,” as they are known
in Pennsylvania’s C-PACE statute, include clean energy, water
conservation, and alternative energy projects. Such projects range
from building retrofits that meet high-performance building
standards to the installation of solar thermal equipment. 12 Pa.
Cons. Stat. § 4302. While C-PACE programs in different states
often overlap in their scope and criteria, it is important to
review each state’s C-PACE program to determine which
improvements and projects qualify for C-PACE financing. In the
majority of states with C-PACE programs, the breadth of qualifying
improvements means that most projects will include components that
can be financed with a C-PACE loan. In addition, C-PACE financing
programs include a lookback period of up to 3 years, which means
C-PACE loans can be used to finance projects that are already
complete.

How C-PACE Financing is Secured

C-PACE loans are secured by a lien on the property that
functions similarly to a lien for property taxes or assessments.
The property owner pays the C-PACE loan by paying assessments on
its property tax bill. Like a property tax lien and unlike
traditional mortgages, C-PACE loans do not accelerate when the
property is sold. Instead, the repayment obligation passes to the
subsequent owner.

Advantages of C-PACE Financing

C-PACE financing offers several advantages, including:

• Repayment terms of up to 30 years (varies with each state),
  resulting in lower payments and improved cash flow for the
  borrower.




• Energy cost savings generated by the improvements can help
  offset the loan repayment.




• Up to a 3-year lookback period (varies with each state) to
  finance completed qualifying improvements.




• The ability to transfer the loan to the new property owner upon
  sale without approval from the C-PACE lender or acceleration of the
  loan.

C-PACE financing provides commercial real property owners with a
valuable and innovative tool for funding sustainable improvements
and reducing energy consumption, while offering another financing
option to add to the capital stack.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.