Property owners and developers now have another incentive to go “green” with their construction projects. Commercial Property Assessed Clean Energy (C-PACE) is a unique financing opportunity for commercial building owners to use on energy upgrades.
Commercial Property Assessed Clean Energy (C-PACE) allows energy efficient building elements and renewable energy components to be financed over periods of 20+ years, and repaid through a special property tax assessment. The assessment provides a stable and fixed source of financing that is likely less expensive than traditional debt or equity alternatives. The C-PACE assessment stays with the property, even if sold.
C-PACE financing may be used on green elements in a rehab, remodel, or new construction project in states with applicable legislation and active C-PACE programs. The program is currently available in Missouri and is being developed in Illinois.
Benefits of C-PACE
C-PACE allows real estate developers and property owners to gain access to funding for key building improvements that will increase the value of their property. Below are a few of the main benefits of the program:
- 20+ years of fixed-rate funding
- Funding for up to 25% of the property’s value
- No payments for up to two years
- No principal repayment required upon sale
- Can pass through tax assessment to tenants
Challenges of C-PACE
The biggest challenge to utilizing C-PACE may be getting all participants on board. If there is a mortgage on the property, C-PACE requires the mortgage holder to consent to the arrangement. This could be difficult in the beginning when C-PACE is not widely used, or if the lender is not familiar with the program. Despite these initial challenges, C-PACE provides an attractive opportunity for developers, owners and contractors.All Insights