GlobeSt.com | May 22, 2019
Sausalito, CA -- Demonstrating the increasing appeal of commercial property-assessed clean energy (C-PACE), CleanFund was awarded GlobalCapital’s 2019 Esoteric ABS Securitization Award earlier this month. The award was for the best alternative / esoteric asset-backed securitization transaction closed in 2018, based on more than 1,000 votes cast across the securitization industry.
The origination platform’s CLEAN 2018-1 securitization, the first 144A securitization of C-PACE assets, was recognized on a number of fronts. Some of those included the AAA rating it achieved for class-A notes, which were backed by a pool of $115 million assets involving 82 individual parcel tax assessments from coast to coast. CleanFund’s securitization team involved other industry award winners including Credit Suisse, for its role as sole underwriter and structuring agent.
C-PACE is a tool that can finance energy efficiency and renewable energy improvements on commercial property, according to the US Department of Energy. Like other project financing, C-PACE uses borrowed capital to pay for the upfront costs associated with energy efficiency or renewable energy improvements. Unlike other project financing, the borrowed capital is repaid over time via a voluntary tax assessment. The security provided by the tax assessment, a long used and well-understood mechanism, results in several compelling features, including longer term financing and transferability of the repayment obligations to the next property owner. In turn, C-PACE strengthens the business case for investment in longer payback and deeper building retrofits beyond what is possible with traditional financing.
“Simply put, C-PACE is a popular alternative source of capital for commercial real estate financing,” Cliff Kellogg, executive director, C-PACE Alliance tells GlobeSt.com. “In new construction projects, C-PACE is less expensive than traditional mezzanine debt or preferred equity. In renovation and retrofit projects, C-PACE increases a building’s traditional financing limits. C-PACE financing proceeds pay for any building element that improves energy efficiency and, in some programs, water efficiency, safety or storm resiliency. Over 1,800 commercial property owners and developers have closed C-PACE projects in 23 states and the District of Columbia. GlobalCapital’s award to CleanFund for their securitization of C-PACE assets demonstrates that capital markets are taking notice too.”Indeed, the national trends for C-PACE financing continue to be positive, suggesting increased volume and average transaction size in existing markets.
“In 2019, new C-PACE programs will launch in such major markets as Illinois, Pennsylvania, New York City and Virginia,” Kellogg tells GlobeSt.com. “The C-PACE Alliance represents the interests of C-PACE capital providers and transaction experts to develop new markets and advocate for industry best practices that attract private investment and foster transaction volume. Without question, C-PACE is at an inflection point in growth.”
CleanFund originated the portfolio of C-PACE assets through its nationwide network of channel partners as well as direct relationships with commercial property owners. The pool contained a diverse group of assets across six different states and was comprised of multiple property categories including office, retail, industrial, hotels and alternative property types.
“Being named a GlobalCapital deal of the year is also recognition of C-PACE’s increased popularity among property owners as a standardized real estate finance tool, endorsed by Wall Street and institutional investors,” says said Greg Saunders, CleanFund’s chief financial officer. “CleanFund’s innovative transaction will help pave the road for future 144A C-PACE securitizations, enabling investors to support reductions in the carbon footprint of commercial properties nationwide while enjoying the long duration and credit quality inherent in C-PACE assets.”