Why do banks get  involved with C-PACE?

C-PACE provides banks with a newfound credit alternative through the construction and stabilization cycle of a property: as a part of the original capital stack, to augment the stack mid-construction, or to recapitalize a project post-completion. 

While bank financing is the most common form of debt that C-PACE partners with, C-PACE can come into the capstack alongside less traditional lenders, including debt funds and family office.

Benefits for banks working with C-PACE

RISK MANAGEMENT

Reduce exposure by blending down bank financing

RELATIONSHIPS

Allows banks to continue lending while maintaining a healthy deposit flow

 PLG can become your participant/syndicate partner

BLEND DOWN COST OF CAPITAL

Rate and term hedge: C-PACE can reduce debt service volatility through long-term, fixed-rate financing

How C-PACE differs from bank financing

Special assessment lien that’s collected alongside real estate taxes, versus monthly debt service payments
Not secured by a mortgage or UCC
Non-accelerable: Only the delinquent payment is due upon default
Cannot foreclose or impede a mortgage lender’s foreclosure rights

PACE financing reduces mortgage debt and eliminates mezzanine debt from your capital stack.  

C-PACE financing provides banks a new asset.

Why senior lenders consent to C-PACE

C-PACE assessments cannot be accelerated. Only the past due portion is senior to a mortgage lender’s claim, which is typically only 1-3% of property value. Some senior lenders also require property owners to escrow annual C-PACE payments monthly in a similar manner to property tax escrow requirements, helping mitigate risk associated with failure to pay the assessment when due. In case of a default on senior debt, C-PACE financing does not restrict a senior lender’s foreclosure rights. There is no required intercreditor agreement with a senior lender.

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