Signals of a turning tide from Western States CREF conference

Three of PACE Loan Group’s originators attended last week’s Western States Commercial Real Estate Finance conference, which always provides a leading indicator for YE transaction volume and a first look toward the next year.

Robbie Pinkas, Matthew McCormack, and Ina Montejo met with mortgage brokers to share how the expansion of C-PACE programs and the product’s flexibility can blend down the cost of capital or replace a senior position.

“The overall mood was positive, and everyone is hoping rates will come down,” said Pinkas.

“In my 6+ years working in C-PACE originations, the options for how to use it in the cap stack change with interest rates and other financing options,” said  McCormack. “Today, borrowers can use it more of a senior A-note rather than a replacement of other mezz/pref/or equity sources. With the long-term maturities, C-PACE money is a good balance for the shorter traditional loans that are more expensive.”

According to Montejo, the ability to use C-PACE retroactively is not only one of the best ways to use it but also the most unknown. “More brokers are starting to understand the flexibility of C-PACE and see it as an effective way to leverage already completed improvements.”

Key takeaways:

• Deal flow is beginning to increase with anticipated rate cuts by year-end. Most deals are getting done but take twice as much time.

• Brokers are seeing the advantage of using PACE to blend the cost of capital but need to further understand the mechanics (including that PACE is non-accelerable.) They also had many questions about how PACE enforcement works.

• Retroactive PACE is an effective tool to refinance maturing debt, but many brokers remain unaware of the benefits. More people are willing to consider PACE for refinancing or bridge-to-stabilization

• Even when interest rate cuts happen, bank lending volume is still anticipated to be lower.