Financial Allies Contribute to Growth of CPACE Financing

By Better Buildings Beat Team on Nov 05, 2018

The use of commercial property assessed clean energy (CPACE) continues to grow across the country, with nearly $600 million in funds deployed through 2017. Better Buildings Financial Allies are helping to drive energy efficiency by offering innovative financing options, and several Allies have achieved significant milestones that reflect the increased market adoption of commercial PACE financing:

  • CleanFund closed the first ever 144A securitization of commercial PACE assets in Summer 2018. A $103 million note was issued in connection with the transaction, and the securitization is backed by $115 million of commercial PACE assessments on 82 properties. Securitization is the process of pooling various financial assets (e.g. CPACE loans) into one financial instrument for investors to purchase in the market.
  • Greenworks Lending completed the first rated securitization of commercial PACE assets in Fall 2017. The $75 million, privately-placed securitization was rated AA and is backed solely by commercial PACE assets.
  • Lever Energy Capital, a new addition to the Financial Allies program, recently announced their ability to originate up to $500 million in commercial PACE financing, making it one of the largest ventures of its kind in the country. The venture is in partnership with Crescent Real Estate. Lever’s venture announcement aligns with the company’s Better Buildings goal of financing $500 million in sustainability focused improvements.

These Better Buildings Financial Allies see the potential in leveraging this financing structure to overcome common financial barriers. Commercial PACE is a financing structure that enables building owners to borrow money for energy efficiency, renewable energy, or other projects and make repayments via an assessment on their property tax bill. The financing arrangement then remains with the property even if it is sold, facilitating long-term investments in building performance. In the capital stack, commercial PACE can function as a cost-effective alternative to gap financing (e.g. mezzanine debt, bridge loans, preferred equity) and can reduce conventional debt, equity, and capital expenditures.

Legislation enabling commercial PACE has passed in 36 states plus the District of Columbia to date, and there are active CPACE programs in 21 states. Current market trends particularly point to a growing use of commercial PACE financing for resiliency improvements that make buildings more resistant to natural disasters and other threats. CleanFund, Greenworks Lending, Lever Energy Capital, and the rest of the Better Buildings Financial Allies that offer commercial PACE are actively financing these types of projects. To learn more about financing for resiliency in commercial real estate, visit the Commercial PACE Financing for Resiliency toolkit.