Redefining Partnership: How C-PACE Became the Lender's Best Friend

For years, C-PACE lived in the shadows of commercial real estate finance. Banks viewed it with suspicion – if they understood it at all. "Another lender trying to take our deals," was the common refrain.

But something fundamental has shifted. Commercial lenders across the country are discovering that C-PACE isn't competition – it's the solution to some of their biggest operational challenges.

What changed? The industry finally understood what C-PACE really is.

 

The Consent Process: Your Deal, Your Rules

Unlike some sub-debt structures, C-PACE can't happen without your explicit consent. This isn't just a courtesy – it's built into the structure.

The consent process typically involves:

• Initial review: Term sheet analysis and deal assessment
• Documentation phase: Risk evaluation and structure confirmation
• Final coordination: Consent execution and closing logistics

 

Compare that streamlined approach to:

• Finding a participation bank: 4-8 weeks (if you can find one)
• Structuring mezzanine debt: 6-10 weeks
• Preferred equity: 10-20 weeks

 

Real Partnership in Action: The Stella Landmark Case

Consider the recent Stella Landmark Tower conversion in downtown St. Paul. PLG Senior VP Matthew McCormack worked with developers transforming a historic office building into 350+ apartment units – a $75M+ project.

"This was a uniquely complicated transaction with a variety of capital sources and one where the C-PACE exceeded the bank financing," McCormack explained.

The bank partner's experience? They maintained their senior position while C-PACE provided the majority of capital for essential building systems: envelope, windows, HVAC, plumbing, lighting, and mechanical systems. All improvements required for the conversion anyway.

The result: A transformative community project that brings over 1,200 new residents to downtown St. Paul, with $1.2M in annual energy savings.

 

Why Commercial Lenders Are Embracing the Partnership

Today's lending environment creates multiple challenges: more conservative credit committees, smaller check sizes from banks, and clients need increasingly creative capital solutions. 

 

C-PACE partnerships allow banks to:

• Work within existing credit parameters rather than pushing beyond comfort zones
• Serve larger relationship clients without exceeding internal check size limits
• Maintain senior lender control while reducing overall risk exposure
• Access valuable deposit relationships that often accompany C-PACE transactions
• Address DSCR constraints through improved borrower cash flow from energy savings
• Differentiate from competitors through innovative problem-solving

 

The Operational Reality

C-PACE works because it respects banking realities. When credit committees approve higher leverage ratios but check size constraints create obstacles, C-PACE fills that gap while keeping the bank well within their credit box.

It's not about expanding risk – it's about managing it more effectively while serving client needs.

 

Looking Forward

As C-PACE continues gaining traction nationwide, early-adopting lenders are positioning themselves as problem-solvers rather than rate competitors. They're discovering that the real competitive advantage isn't the cheapest capital – it's the most complete solution.

The question isn't whether C-PACE will become mainstream – it's whether your institution will be known as an innovative partner or just another lender.

 

Ready to explore how C-PACE partnership could work for your institution? Contact our team to discuss specific scenarios and see how the structure might address your current deal challenges.