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A niche form of commercial real estate financing is surging as traditional bank lending remains constrained, CNBC writes.
Commercial Property Assessed Clean Energy, or C-PACE, financing, which allows building owners to fund energy efficiency, resiliency and major upgrade projects through long-term assessments added to property tax bills, is seeing record deal activity nationwide. The structure allows loans to be repaid over 20 to 30 years, often at fixed rates, making large capital projects more affordable and attractive in a higher-for-longer interest rate environment.
The sector hit a milestone this month when Nuveen closed a $465 million C-PACE deal for a major office-to-residential conversion in Washington, D.C., the largest such financing on record. Cumulative C-PACE investment has reached nearly $10 billion, with growth accelerating over the past five years as more states adopt enabling legislation and investors seek alternatives to traditional CRE debt.
Lenders and developers are increasingly using C-PACE not only for energy upgrades, but also for climate resiliency and recapitalization, positioning it as a growing tool in today’s tight capital markets.
