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Commercial PACE

What is Commercial Property Assessed Clean Energy?

Commercial property-assessed clean energy (CPACE) is a financing structure in which building owners 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. CPACE may be funded by private investors or government programs, but it is only available in states with enabling legislation and active programs.

CPACE may be a good fit if your organization...

  • Owns or occupies facilities located in jurisdictions with CPACE programs
  • Wants long-term financing (10+ years) with lower monthly payments
  • Prefers to do pilot projects at a few locations before implementing more broadly
  • Does not plan to own or occupy its facilities long-term and wants to transfer financing obligations at the time of sale
  • Wants to invest in long-term improvements to building resiliency and reliability

To compare CPACE to other financing options that might be a good fit, answer a few questions about your organization.


How it Works

To be eligible for CPACE financing, a project must be located in a county or municipality that has approved CPACE programs within a state that has passed PACE-enabling legislation. For more details on where CPACE is available, use the tools provided by PACENation. Note that residential PACE (RPACE) is also available in some jurisdictions, but only CPACE is covered in this fact sheet.

The parties involved in a CPACE deal usually include:

  • A PACE administrator that manages the project and ensures adherence to program requirements;
  • A local government that collects the property tax assessment and remits payment to the capital provider(s) if necessary;
  • A contractor or energy services company (ESCO) that installs the equipment;
  • The building owner (customer) receiving the upgrade or tenants working in concert with their landlord; and
  • Private investors, bondholders, or a government to provide the capital.


The PACE administrator will typically conduct marketing and sales to originate potential customers. Before financing is disbursed, the project must be approved by the PACE administrator. For properties with a mortgage, consent from the mortgage lender is usually required. Depending on state statute, capital for CPACE projects may come from the government through reserve funds or bond issuances, from private investors, or a mix of the two.

Once the project is approved and financing is secured, the contractor installs the equipment and the customer begins to realize energy savings. The financing is then repaid in the form of an assessment on the building owner’s property tax bill over a period of typically 10-20 years. A PACE lien is also placed on the property. The lien is senior to most other debt on the property, which can encourage investors to provide capital over longer terms than with standard loans. If the building is sold during the PACE repayment period, the lien securing the assessments remains on the property and becomes an obligation of the new building owner (unless it is paid off in full by the original owner before sale). Nonpayment of a PACE assessment results in the same set of repercussions as the failure to pay any other portion of a property tax bill.

CPACE financing can be structured in a variety of ways depending on the jurisdictional laws, available providers, and project type. Building owners should be aware of the following details:

  • Funding Source: A PACE jurisdiction may have an open market, in which private financiers compete to provide competitively priced capital, or a turnkey program, in which a single public or private financing source is pre-selected to simplify the funding process and reduce complexity for the building owner.

  • Management: Some PACE programs are administered directly by the local government, whereas others are run by a third-party administrator. Many programs take a blended approach where responsibilities are split.

  • Applicable Project Types: PACE policies and programs differ on the types of eligible technologies. Some narrowly define the technologies they allow, and others are more flexible. Some programs allow non-energy measures as well, such as water efficiency, seismic retrofits (i.e. earthquake-proofing), wind resistance, flood mitigation, and stormwater management. A variety of commercial building types, including multifamily facilities, are typically eligible for commercial PACE.

  • Savings to Investment Ratio (SIR) and Loan to Value (LTV) Requirements: Some programs have a required level of energy savings that must be realized through the project relative to its cost in order to qualify, known as an SIR. However, even in programs with an SIR requirement, certain types of measures may be exempt, or SIR can be improved by bundling low-return measures with high-return measures. Some programs also have an LTV requirement, which specifies that the funds borrowed through CPACE must not exceed a certain ratio to the total value of the property.

  • Underlying Financing and Balance Sheet Treatment: PACE is a repayment mechanism that can have several different types of financing backing it (e.g. loan vs. lease vs. other arrangements). CPACE is most commonly backed by debt or loan financing. Many organizations believe that because these loans are repaid via property tax bills that are often treated as off-balance sheet operating expenses, there may be some off-balance sheet benefit to PACE. This remains an open question subject to varying accounting opinions, as no consensus has been reached. In some cases, PACE can be backed by off-balance sheet financing such as an operating lease or energy services agreement (ESA), but these structures are not common.

Advantages and Disadvantages


CPACE financing can cover 100% of project cost with long 10-20 year terms, not to exceed the useful life of the installed equipment. This results in lower annual payments that are typically less than project savings.


CPACE provides strong security for investors because the financing is repaid on the property tax bill. This allows lenders the ability to offer better interest rates and longer repayment terms than are otherwise available.


CPACE assessments are linked to the property and automatically transfer to a new owner upon the sale of the property.


CPACE may be structured to be off-balance sheet or on-balance sheet. However, appropriate accounting treatment for CPACE remains inconclusive, as clear consensus has not been reached by the accounting community.


CPACE can align incentives for landlords and tenants, as both the tax assessment and cost-savings from the project can be shared with tenants under most lease structures.


CPACE is limited to jurisdictions with PACE-enabling legislation, which has currently been passed in 32 states and the District of Columbia.


For properties with a mortgage, mortgage lender consent is usually required before CPACE can move forward. This can be difficult and time-consuming to obtain.


CPACE financing must be structured differently for specific properties, making it challenging to use for portfolio-wide initiatives.

State of the Market

Commercial PACE is a fast-growing financing structure that has attracted much industry and legislative attention due to its potential to overcome common financing barriers. CPACE financing can work for buildings in any sector, including non-profits that would not normally pay property taxes. However, it is extremely uncommon for tax-exempt government buildings.

Following the introduction of residential PACE in 2007, commercial PACE programs began to appear in 2009. Commercial PACE has grown quickly in popularity, with incumbent banks and financiers as well as new companies entering the market to meet demand. According to PACENation market data, 36 states and the District of Columbia have passed laws enabling CPACE programs as of 2017. However, only 22 states plus D.C. have active CPACE programs in operation. Over $2 billion in CPACE financing has been provided to over 2400 commercial buildings. The majority of completed projects fell in the $75,000 - $750,000 size range, though smaller or larger projects are not uncommon.

Connect with providers

Better Buildings Implementation Models

Prologis: CPACE Financing at Historic Pier 1

Prologis, Inc., took advantage of commercial PACE financing to retrofit its headquarters at the historic Pier 1 building in San Francisco. The projects financed are projected to reduce electricity consumption by 32% and save nearly $100,000 annually.

City of Milwaukee: Property Assessed Clean Energy Program to Finance Efficiency Improvements

Milwaukee, WI, created a property assessed clean energy (PACE) program which allows building owners to pay for energy projects through a voluntary municipal special charge that is attached to the property, not the owner. To date, the city has yielded annual savings of over $1 million.

Greenworks Lending funds efficiency, renewable and microgrid improvements using Commercial PACE

Hartford, CT, financed a $1 Million project through Greenworks Lending's Commercial PACE structure to implement energy efficiency, renewable energy, and microgrid improvements for a mixed-use building.

Financing Seismic Retrofits at a Hospital Campus with CPACE

Financed by CleanFund and Petros PACE Finance, this $40 million seismic and energy efficiency retrofit of the Seton Medical Center campus in Daly City, CA, is the largest in the history of CPACE financing to date.

Lever Real Estate Capital: PACE Enables Energy Efficiency in Redevelopment Project

Lever Real Estate Capital provided $4.6 million in PACE financing as part of the restoration of Omaha, NE’s Blackstone Hotel to help fund energy efficiency upgrades with no upfront costs.

CPACE At-A-Glance

The following table will give you an at-a-glance summary of a typical CPACE structure, including a basic description, contract structure, tax and balance sheet implications, contract terms, and market information. Mouse over the ‘?’ next to each attribute for more information.
Basic Attributes Project Types?Which project types can be financed using this option? Energy Efficiency, Renewable Energy, Other Generation
Applicable Sectors?Which economic sectors does this option commonly serve? Common: Commercial & Industrial, Multifamily, Affordable Multifamily, Non-Profit, Private University/School/Hospital
Less Common: Government
Geographic Scope?Is the financing option available throughout the U.S., or limited to certain areas that have the appropriate policies and programs in place? Limited by legislation
Building Ownership?Does this option work well for projects in leased space, owned space, or both? Works well for owned; sometimes leased; the financing must be closed by the property owner
Typical Project Size?What range of project sizes does this option typically serve? Typically $250k+, but some programs serve smaller markets
Contract Structure Contract Complexity?How complex is the financing option from the customer’s perspective, in terms of the size and complexity of the financing contract, the number of parties involved, and other factors? Medium; contracts are typically simple except for the requirement of mortgage lender consent
Parties Involved?Which types of organizations are typically involved in executing the financing option? Building Owner, Local Government, PACE Administrator, Contractor/ESCO, Investor(s)
Payment Type?Are customer payments fixed over time or might they be variable based on factors such as energy savings or utility rates? Typically fixed; variable in some programs
Performance Risk?Which party bears the risk that the installed equipment may not perform as expected? Borne by customer
Tax & Balance Sheet Budget Source?Do customer payments made on this financing option typically come from an operating budget ("opex") or capital budget ("capex")? Typically capex; sometimes opex
Balance Sheet Treatment?According to industry best practices, does the financing option typically appear as a liability on the customer’s balance sheet, or is it off-balance sheet? Inconclusive; potentially some off-balance sheet benefit
Tax Deductions?Which amounts can a customer typically deduct from its taxes under this financing option? In some cases all payments are deductible, and in other cases only interest and depreciation are deductible. Typically depreciation and interest; all payments might be deducted if treated as off-balance sheet 
Equipment Ownership?During the financing term, is the efficiency equipment typically owned by the customer (internal) or by an outside party such as the lender or contractor (external)? Typically internal unless treated as off-balance sheet
Collateral Source?Which customer assets can the lender use as collateral to secure repayment? Tax Assessment Lien
Contract Terms Typical Duration?How long does a typical financing contract last? 10-20 years; with shorter terms in some cases; may not exceed useful life of equipment
Typical Close Time?How long does it typically take to secure financing once you start speaking with providers? Medium (3-9 months); due to mortgage lender consent and other requirements
Market Attributes Market Size?What is the total cumulative dollar value of projects financed under this option? $1.5B cumulative as of June 2020
Time in Market?How long has this financing option been available in the market? Since 2009