Curious on the thoughts of private lenders regarding C-PACE financing. Leasehold repayment structure makes it iffy to lend on top of, no? Thoughts on alternatives to C-PACE??
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Based on the most helpful WSO content, C-PACE, which stands for Commercial Property Assessed Clean Energy, is a financing structure that enables owners of commercial, industrial, and other eligible properties to obtain low-cost, long-term financing for energy efficiency, water conservation, renewable energy projects, and more. Here are some thoughts and considerations regarding C-PACE from a private lender's perspective:
Leasehold Repayment Structure: C-PACE financing is typically repaid as an assessment on the property's tax bill. This can be a concern for private lenders because the C-PACE loan often has a senior lien position to existing mortgage debt, which could affect the lender's collateral position.
Lender Consent: For properties with existing mortgages, lender consent is usually required before a C-PACE lien can be placed. This is because it may affect the lender's security interest in the property.
Alternatives to C-PACE: Private lenders might consider other forms of energy efficiency financing that do not involve a senior lien position, such as unsecured loans, energy service agreements, or on-bill financing programs.
Risk Assessment: Private lenders need to carefully assess the risk of lending on properties with C-PACE financing, considering factors like the impact on loan-to-value ratios, the creditworthiness of the borrower, and the potential for increased property value due to the financed improvements.
Market Trends: It's important to stay informed about how C-PACE is being adopted and viewed in the market, as this can influence both the risks and opportunities associated with this type of financing.
Regarding the first point about the leasehold repayment structure, it's indeed a critical consideration. The fact that C-PACE loans are attached to the property tax bill and have priority over existing debt can be a sticking point for some lenders. However, the energy savings and potential increase in property value can be attractive to both property owners and lenders.
If you're looking for more in-depth discussions or case studies on C-PACE, the WSO forums are a great place to explore. You can find threads where professionals in real estate and finance share their experiences and insights on this topic.
Sources: PACE Financing, Are private debt funds getting fucked right now?, Private Debt/Direct Lending Exit Opps?, https://www.wallstreetoasis.com/forum/credit/private-credit-will-it-hold-up?customgpt=1, Restructuring --> Direct Lending / Private Credit
Interested as well, especially for ground-up new development.
Haven’t looked into it much and missed the presentation one of them gave our shop, GSE Lender. Interested as well as people seem to be creating unique products more and more
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