Anyone have any experience using PACE Financing for ground up development in the Multifamily space? We're looking at taking advantage of to help cover our equity stack, but I've heard conflicting opinions on where to place the payments in my underwriting.
Since it's paid through a special tax assessment, my assumption would be that it should be paid above the NOI line along with the other RE Taxes for the property. But when I spoke with the PACE rep yesterday he was saying that's a common misconception and it should actually be place below the NOI line - along with the other debt service payments.
Naturally - if it's above the NOI it will significantly affect the refi/sale value down the line. But if it's below the NOI, then it would be alot cheaper for us to use PACE funding instead of raising the preferred equity. How have you guys typically placed it in your underwriting?
We did a deal with a MF developer that used a PACE loan. I placed it above NOI as it is a tax assessment and will be transferred with title.
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