Industry Awareness of C-PACE Has "Grown Exponentially"

The finance market for commercial real estate is more complex today than it was five or 10 years ago, as traditional lenders have curtailed their activity in the sector. Fortunately for borrowers, nontraditional sources of debt and equity have come to the fore, and among these is C-PACE (Commercial Property Assessed Clean Energy) financing. At the upcoming Connect Los Angeles 2025 conference, Peter Grabell, head of originations at PACE Loan Group, will be among the speakers taking the stage for the “Financing in Today’s Market” discussion. In advance of the conference, Connect CRE spoke with Grabell. Here’s what he told us. 

 

Q: In 2025, do you and your team find that more CRE industry participants– borrowers and other lenders–are familiar with the concept of C-PACE financing? What needs to happen to increase the use of C-PACE in project capital stacks? 

A: Stakeholder awareness of C-PACE financing has grown exponentially in the past decade. C-PACE is much more a staple of project capital stacks than it was pre-COVID, in large part due to abundant capital available to deploy into the sector and due to its appealing structural aspects: long-term (25-30 years), fixed rate, non-recourse and prepayment flexibility. Most recently, C-PACE deployment into a capital stack has been capped by lenders’ combined Loan-to-Value ratios that limited all project debt to lower thresholds (e.g. 70% combined LTV versus 80% combined LTV pre-COVID). Lenders reverting to higher advance rates and higher combined LTVs should create more room in project capital stacks for C-PACE. 

 

Q: California was the birthplace of C-PACE. As C-PACE has been rolled out across other states, have there been significant differences among state-level programs in terms of how the program is structured? How do differences among state programs affect PACE’s usage and effectiveness? 

A: Virtually no two states’ C-PACE programs are 100% identical. Currently there are over 80 different C-PACE programs across the country, with C-PACE capital providers having to know the differences among each. Significant differences among programs include: (a) term—a 30-year maximum in many states, but a handful capped at 20 or 25 years; (b) qualified C-PACE measures—for example, approved resiliency measures; (c) program project review and approval—some programs undertake a project engineering review while others do not, and the time a program needs to complete its review and approval (often two weeks, but as long as six); and (d) any savings requirements and how to calculate them—some programs impose a minimum Savings to Investment Ratio (SIR) but each one calculates SIR differently. 

These differences can affect C-PACE’s utilization in a project capital stack. For example, a 20-year C-PACE assessment term means a higher annual debt service payment versus a 30-year term, stressing the project cash flow and, as a result, potentially limiting the amount of C-PACE that a project can support. 

 

Q: Has the pullback by traditional lenders encouraged the use of C-PACE financing to help close the financing gap? Are borrowers using C-PACE as part of a package of different financing sources? 

A: Yes, the pullback by traditional lenders has created an opening for C-PACE to fill the gap. Borrowers are pairing C-PACE with other financing types, including tax credits (HTC, NMTC), TIFs, tax abatements and, on occasion, EB-5. 

 

Q: How do you anticipate C-PACE programs will evolve over the next few years? 

A: Ideally, programs will become more uniform nationally as program administrators tweak guidelines based on market feedback and demand. As C-PACE proliferates, program fees could be lowered as administrators find themselves operating more profitably than when they were starting up. And many if not all the 12 remaining states without active C-PACE programs (as of May 2025: AL, AZ, IA, IN, LA, MS, ND, SC, SD, VT, WV and WY) will ultimately enable it as they see its positive job creation and economic development aspects coupled with efficient capital for local projects. 

 

On June 18, join industry-leading experts when they explore the most important topics in today’s CRE markets. Register to attend and hear expert insights first-hand, network with the best in the industry, and sit in on discussions you won’t hear anywhere else. The 9th Annual Connect Los Angeles 2025, June 18 at the Intercontinental Los Angeles Downtown.