Which Lenders are Allowing C-PACE?!

So one of the most common questions I get asked, and probably the most important is....

"Which lenders are allowing C-PACE?!” 

And the answer is...IT DEPENDS.

Let me explain. 

It’s like asking what lenders allow mezzanine financing or pref equity or ground lease financing. For a strong sponsor and project that fits the lender’s focus, it’s much more likely to have things considered in the world of creative financing. And then there are other profiles of lenders that simply won't allow any type of creative financing. 

The other 80%:

C-PACE on its own is a partial solution. On a typical project, C-PACE may qualify for up to 20-25% of the total project, which is quite a bit. But if you don't have a senior lender that's willing to get C-PACE in at that level you want, well then it's really not a solution yet. So it's really important to have a commercial pace provider with a C-PACE friendly senior lender. And one way to do that is to be able to ask your C-PACE provider who they've closed business with as a senior lender and who they think is a good fit for the deal. 

Reality check:

Now, if you have a project that's going to be a real struggle to get done and you don't know if there's even going to be a lender at that level that you're hoping for bringing C-PACE into the equation probably isn't going to make it much easier. 

However, if you have a strong profile project, you've got a strong sponsor that has great experience. You know this is something that there's going to be a number of lenders competing over at the leverage you want. That's an ideal fit to be able to introduce C-PACE and try to take your already great deal to the next level. 

C-PACE is really meant to make good deals even better. It's not meant to take bad deals and make them good.

 After being in this C-PACE world for over 2.5 years, I’ve seen senior lenders do a complete shift in attitude towards C-PACE going from not allowing it at all to then allowing it to replace some of their debt to then allowing it up to a higher combined leverage determined by a comfortable all-in senior + c-pace basis and take-out. This is certainly the case with non-banks/debt funds although your lower cost life cos and banks are starting to follow suit.

I have seen that today most non-bank / debt funds are at least willing to replace their more expensive debt for C-PACE, some will be more aggressive than others.

A couple years ago when I just was getting into the weeds of the business, that was not the case -- most non-bank bridge/construction lenders simply said not allowed BUT, like a lot of things, competitive pressure and losing a deal or two oftentimes gets people to pay closer attention to what the market is asking for....

AND the market wants C-PACE!

Why? Simple answer

It’s lower cost capital available for a significant portion of a construction project. 

If you have specific questions on lenders, send me a message. Overall, a great C-PACE provider should be able to give insight into lenders. They should be able to share who might be interested in a specific property type or class and/or who has closed similar deals in that geographic market.  

Alternatively, if you have your senior lender aligned but they’ve not yet consented to C-PACE financing on one of their projects, your C-PACE capital provider can work the senior lender credit committee to understand the position of C-PACE in the capital stack as well as the value being built into deal. We've done that on pretty much all of our deals.

***PRO TIP***

A capital advisor really is beyond helpful when it comes to using C-PACE most effectively because they have a good sense of what hundreds of lender profiles generally can do well or not including which ones can be more aggressive with mixing in C-PACE for the right deals than others. Some lenders do higher leverage better, some do creative structures better, some do hotels or assisted living, co-living, short term rentals, others do certain markets, others are more comfortable with foreign borrowers, etc, etc. 

Getting a capital advisor to run a process and match lenders that fit best with your project and then get them to mix in C-PACE as much as possible is the best recipe for success. Too many borrowers I'm finding try to go at this on their own and I think it creates more challenges. Pay the success fee to the capital advisor for getting you the awesome deal. It's worth it's weight in gold. Everyone wins….but I digress.

Send me a message if you would like to download guidance from a couple of the C-PACE industry organizations that provide research including lender consent information, a list of previously consenting banks, and a sample consent form.