C-PACE Gains Ground on Mortgages

Commercial Mortgage Alert | September 15, 2023

Continued sluggishness in the lending market is setting the stage for an increase in Property Assessed Clean Energy financing.

The outcome, market professionals believe, is that C-PACE capital will come to represent ever-larger portions of the debt on existing properties and, especially, new projects - in some cases rivaling the sizes of senior mortgages.

Several factors are at play. Property owners and developers are under mounting pressure from current and prospective tenants to improve sustainability standards. But rising interest rates and falling property avlues have sharply constrained the availability of traditional financing since early 2022. C-PACE financing, meanwhile, often has been used in place of more-expensive mezzanine loans - which in turn are almost always smaller than senior mortgages.