The unique assessment structure of CPACE provides numerous benefits for property owners and developers. It can spread out the upgrade costs, free up your yearly budget, realize dramatic energy cost savings, and reduce your credit risk.
100% financing of hard and soft costs with no out-of-pocket
Displaces higher cost mezzanine and equity capital
Fixed-rate financing with up to 30-year terms and interest only options
Increases net operating income and property value
Decreases utility and maintenance costs
Ability to recover as an operating expense
Facilitates sustainable building design
Promotes economic development and urban revitalization
Benefits for Owners
Retroactive financing with CPACE can help commercial property owners and developers shore up capital stacks and access liquidity at any point in the economic cycle, but it becomes especially beneficial during periods of capital market constriction and economic uncertainty like we are experiencing today. Retroactivity is generally available as follows:
No Upfront Costs
Efficiency projects financed by traditional loans or through equity might not meet internal
PACE provides 100%, long term financing of hard and soft costs with no out-of-pocket expenses
Frees up operating and capital budgets
Cash flow positive from Day 1
Non-Recourse, Non-Accelerating
Most traditional forms of financing and energy performance contracts are recourse to the owner and accelerate upon sale or foreclosure.
PACE is non-recourse to owners
Interest rate and payments are fixed over the 10-30 year term and under no circumstance, even default or bankruptcy, can they accelerate
Transferable Payment Obligation
Owners are typically hesitant to invest in long payback efficiency measures if it is possible they will sell the building before recovering their investment.
PACE liens attach to the property and “run with the land”, automatically transferring from one owner to the next so the building owner only “pays for what he uses”
Underwriting based primarily on the property
Immediately Cash Flow Positive
Capital constrained property owners may not have budgetary capacity for efficiency projects with long payback periods.
Long repayment periods (10-30 years) means the annual PACE payments are typically lower than savings generated by efficiency project
Energy savings generated outpace project costs plus the cost of financing (total PACE assessment) from Day 1
Owner keeps any tax credits and/or rebates as a result of the project
Solve Split Incentive Lease Structures
Under many lease structures, when corporate capital is used to fund projects, savings generated go directly to the tenant’s bottom line resulting in negative cash on cash return for the owner
Due to the assessment mechanism, PACE is often passed to tenants for recovery in the same manner as property taxes
Tenants receive utility savings that outweigh the property tax assessment
Aligns property owner and tenant interests
Increased Property Value
Some property owners might wonder what value will these improvements add to their property
PACE improvements extend the life of the building
Building becomes more desirable to tenants
Addresses deferred maintenance issues
Reduced Operating Expenses
U.S. businesses spend almost $200B/yr. on utilities, at least 30% of which is unnecessary
Lower utility bills
Reduced maintenance expenses
Increases net operating income (NOI)
