The Registry | Nov. 19, 2018
Sausalito, CA (Nov 19, 2018) — CleanFund, the leading nationwide provider of Commercial Property Assessed Clean Energy (C-PACE) financing announced today the launch of its Debt Capital Markets Division aimed at deploying mortgage capital from traditional real estate lenders in CleanFund’s C-PACE transactions, which are related primarily to deep property retrofits and new construction.
“Commercial real estate borrowers across the U.S. — having already utilized nearly $800 million in C-PACE financing to date — are increasingly asking CleanFund which banks and private lenders are interested in lending mortgage capital alongside C-PACE. Our new Debt Capital Markets Division will expand our growing base of mortgage lender relationships who see value of C-PACE financing to help their clients save money , and to help local communities achieve economic development and environmental goals,” said Matt Mustaro, who heads Debt Capital Markets for Sausalito, CA-based CleanFund.
CleanFund and industry groups such as PACENation and the C-PACE Alliance, report that most lenders approve C-PACE financings, which is required by most PACE statutes, and is the most accepted practice. Matt Mustaro represents CleanFund as the chair of the Lender Consent Committee at PACENation, which has worked towards programmatic engagement with the lender community and a standardized form of consent.
“New financing solutions require a certain amount of education and industry acceptance. C-PACE is rapidly reaching that point of critical mass where both the property owner-borrowers and their primary debt partners will recognize C-PACE as an important slice of the capital stack,” added Woolsey McKernon, Senior V.P. and Chief Revenue Officer of CleanFund.
For example, last month CleanFund closed a $4.3 million C-PACE financing on a $22 million newly-built hotel with Live Oak Bank as the senior lender.
C-PACE is a form of assessment financing that focuses on electrical, mechanical, plumbing and structural improvements that reduce energy and water usage, and that improve the resiliency of the built environment. The financing is tied to the property, not the current owner, as a voluntary parcel assessment that is billed to the owner as a new line-item on their property tax bill. The commercial real estate side of PACE, called C-PACE, is distinctive from single-family residential version in that C-PACE requires approval by the property’s senior debt holder or bank. Currently, 34 states and the District of Columbia have allowed for PACE financing by law, according to industry association PACENation.
“Energy efficiency and other infrastructure improvements are sometimes cut for budget reasons or ‘value engineered’ out, but C-PACE provides a mechanism to preserve them,” said Mustaro. “CleanFund’s C-PACE financing provides a unique capital structure that works in conjunction with existing forms of capital to offer long-term, fixed rate capital which meets owner’s or tenant’s environmental and sustainability goals.”
C-PACE Financing through CleanFund is applicable across the spectrum of commercial office, retail, industrial, multi-family, hospitality alternative property types, in a number of use cases such as:
— New construction
— Property acquisition & development
— Property repositioning
— Stabilized properties with end-of-life or inefficient mechanical and electrical systems
Among the financial partners who are working with CleanFund are:
— Banks & Credit Unions
— Bridge Lenders including debt funds and CRE CLO vehicles
— Life Insurance Companies
— Securitized lenders in the CMBS market
— Commercial mortgage-backed securities (CMBS)
— Freddie Mac
— Federal Housing and Urban Development (HUD) financing
— Federal and State Historic Tax Credits and New Market Tax Credits
“The key to CleanFund’s success from the beginning has been our focus on relationships. Understanding the credit parameters of our lending partners allows us to target and structure deals that fit the box in an efficient, effective way”, added Mustaro. “We are really excited to continue the partnerships we have formed, to continue to educate folks about C-PACE, and to utilize our financing to solve client needs in a manner that provides better capital for better buildings.”