C-PACE: The Puzzle Piece You Need to Solve For in Your Capital Stack

Introduction

Constructing the financial structure for a commercial property project is like piecing together a complex puzzle. C-PACE (Commercial Property Assessed Clean Energy) is a unique part of that puzzle, often promoted as an additional source of funds. But it's not just about finding where it fits; you need to ensure it aligns with the rest of your capital stack.

What is C-PACE Financing?

C-PACE financing is gaining traction as an option for commercial property owners looking for additional funds. While it presents opportunities, its effective application requires careful consideration of the entire capital structure.

C-PACE and the Capital Stack: A Small Piece of a Big Picture

C-PACE can be a powerful addition to your financing, but it's a small part of the whole picture. The real challenge comes when integrating it into your capital stack, where it must align with debt, equity, and other financing components.

The C-PACE Promise: Abundant Capital, But Is That Enough?

It's common to hear that there is plenty of C-PACE capital available, an appealing offer for those seeking funding. But here's where the reality sets in: C-PACE, on its own, is just a partial solution. Without a lender, it's no solution. The capital might be there, but it won't translate into viable financing unless the rest of the capital stack, including both debt and equity, is aligned under terms that work for the borrower.

The Senior Lender Dilemma: Alignment Is Key

The challenge often lies in getting senior lenders on board with C-PACE. These are the banks private lenders or other institutions that must agree to include C-PACE in the financing structure. Their buy-in isn't so easy to secure, and without it, C-PACE can't fulfill its promise.

Ask Early: Will C-PACE Fit in Your Capital Stack?

Before embracing C-PACE, communicate with the other players in your capital stack (such as the senior and mezz lenders and investors).

Ask these essential questions:

1. Do they allow C-PACE? Not everyone does.
2. Have they completed transactions with C-PACE in the capital stack? Experience can be invaluable. It's a much different reality when someone says they CAN do it compared to someone who HAS done it already...and ideally more than once.
3. How do they view and underwrite C-PACE? Understanding their approach is key.

Building Your Capital Stack: Communication and Coordination

Integrating C-PACE into your capital stack requires care and expertise. Talk to the other pieces in your capital stack, understand their perspectives, and ensure that everyone is on the same page about how C-PACE will fit into the larger financing structure.

Building a Complete Solution: Collaboration and Strategy

C-PACE has the potential to be part of a successful financing strategy, but it requires a cohesive plan that includes all financing partners. It's not just about having access to C-PACE funds; it's about working with debt and equity partners who will allow it under the terms that meet the borrower's needs.

Conclusion: A Comprehensive Approach to C-PACE

C-PACE financing can be an exciting tool in the financial toolbox, but its application is not without challenges. The key to unlocking its potential is a comprehensive approach that ensures alignment with the entire capital stack.

The conversation around C-PACE is evolving, and the opportunity is real. But the path to success requires collaboration, strategy, and a clear understanding that C-PACE is only a piece of the broader financial puzzle. The challenge is considerable, but with open communication and thoughtful planning, C-PACE can be an integral part of successful commercial real estate financing.

Remember, not every puzzle piece belongs in every puzzle, and that's okay. The goal is to recognize if C-PACE is the right fit for your project and to use it strategically if it is.

Ready to Explore Your Financing Options?

C-PACE might be the perfect piece for your project's capital stack puzzle, or perhaps there are other financing options that suit your needs better. Either way, the path to the perfect capital stack requires thoughtful exploration and expert guidance.

If you're ready to discuss your project and see how C-PACE might be one of several options to assemble the capital stack, schedule a financing strategy call.

Together, we'll explore the possibilities, identify the best fit, and work towards a successful project that aligns with your vision and goals.

Schedule a Financing Strategy Call Today