Pete Morgan Discusses Possibilities in C-PACE Financing for Owners with Law360

Winston & Strawn partner Pete Morgan spoke with Law360 to discuss refinancing possibilities for owners in commercial property-assessed clean energy (C-PACE). C-PACE is a financing mechanism that allows building owners to fund clean energy upgrades, energy efficiency improvements and resiliency renovations, recouped via a special assessment on annual property tax bills and then repaid by municipalities to private lenders. Although the financing tool for commercial real estate has been around since 2009, the macroeconomic conditions ushered in by the pandemic have led to a surge of interest in C-PACE.

Pete told Law360 that the appetite for C-PACE grew as construction lenders pulled back. Senior lenders limited in the total capital they could put to work but eager to keep clients active, began warming to C-PACE, he added. Previously senior lenders had been wary of the tool, which is repaid ahead of any existing mortgage liens, even though it cannot be accelerated.

“A lot of the reticency to even consider C-PACE turned in that environment,” he said. C-PACE adoption began gradually during the pandemic, then kicked into high gear when regional banks were pushed to shore up their capital requirements amid higher interest rates, he noted.

In the more than 25 states that allow it, property owners can retroactively secure C-PACE financing if they have completed renovations or new construction with components or upgrades that qualify under the state’s enabling legislation. Some cash-constrained borrowers are also relying on retroactive uses of C-PACE to cash out.

“That's been a dynamic we’ve seen is people doing cash-outs with C-PACE, basically being able to monetize those improvements by pulling money that was invested by equity into a C-PACE financing and then allowing them to have some money to either reinvest in the property or to go work on another project,” he said.

Read the full article.