Tapping a convenient financing product to
save on energy costs isn’t ‘too good to be true’
Commercial property assessed clean energy, or C-PACE, loans, are an innovative
financing mechanism designed to help commercial building owners and real estate
developers fund energy-efficiency projects. If they haven’t already, it’s likely that your
customers will soon ask for your help with a C-PACE assessment lien.
Across the country, a growing number of lenders have not only consented to this
funding mechanism, but also are stepping up to finance these deals, which they can
then package and sell on the secondary market. Here’s what commercial mortgage
brokers need to know about this emerging opportunity. ➤
31 Scotsman Gude Commeca Edton ScotsmanGudecom Septembe2017
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borrower has more cash to pay their
■ ■ An increase in the value of the collateral, since the project will modernize
The rest instruct their contractors to,
in essence, duct-tape the equipment
until it finally fails.
A meaningful solution requires
equipment replacements with longer
payback periods. Since long-term
financing options, lasting 15 to 25 years,
To date, many, but not all, C-PACE
projects have been financed by
specialty-capital providers. Recently,
some mortgage lenders have chosen
to finance C-PACE projects in-house.
Most of these financings have been for
projects in the $100,000 range, which
fills a financing gap as specialty-capital
providers typically prefer to fund larger
amounts in excess of $100,000.
Banks providing C-PACE financing
have found a ready secondary market
to sell such loans — as the Connecticut
Green Bank did in 2014, when it sold
the C-PACE industry’s first portfolio,
valued at $30 million. It is noteworthy,
however, that the Connecticut Green
Bank served as a warehouse fund for
these projects for more than a year
before aggregating them.
The market for clean-energy financing
is growing and seems to present little
risk. “We are looking at it through the
lens of how much credit risk are these
assessments going to have, and do we
have enough protection for investors
in the notes that are backed by these
assessments,” Morningstar Credit Ratings
Managing Director Brian Grow said this
past February. “From that perspective,
there is very little credit risk.”
The bottom line is that a growing number
of building owners and property developers are turning to C-PACE financing.
Partnering on these deals lets commercial
mortgage brokers expand their product
lines, meet their borrowers’ needs, and
fund attractive, finance-ready projects.
It’s worth looking into. n
“A meaningful solution requires capital-intensive,
energy-consuming equipment replacements
with longer payback periods.”
What is the market outlook?
Pent-up demand to replace capital-intensive, outdated energy-consuming
equipment in commercial and industrial
buildings continues to grow. Each
year, equipment failures drive about
20 percent of building owners to
undertake improvement projects.
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