By Amy Sorter
Connect Media | Feb. 19, 2019


Commercial Property Assessed Clean Energy — or C-PACE — provides a capital structure to secure financing for energy efficiency, while making repayments through property bill tax assessments.  Opportunity Zones are being lauded as a unique way to infuse capital into much-needed urban development. And, according to CleanFund, headquartered in Sausalito, CA, both tools can be combined to help develop and/or renovate commercial real estate with less equity commitment.

CleanFund’s recent webinar, “C-Pace in Opportunity Zones,” tapped into insights from KPMG’s Orla O’Connor (an opportunity zone expert); CleanFund’s Woolsey McKernon (who is experienced in C-PACE financing) financial professional Brad Wood, also with KPMG and Terrapin Investments & Management’s Tony Sherman (who will be using C-PACE in an Opportunity Zone property) to discuss the tie-ins and synergies between these two financial methods.

According to webinar moderator Graham Richard with Graham Richard Associates, C-PACE matches Opportunity Zone intent because:

  • Both are investments for the public good, while increasing private returns for investors.
  • Both offer long-term investments and resiliencies.

Combining the Opportunity Zone financing with that of C-Pace combines capital for sustainability with urban renewal, leading to a win-win scenario.

McKernon noted that C-PACE is able to finance up to 100% of hard and soft costs for repositioning, retrofits and new construction projects, with eligible properties including office,  retail, hotels,  multifamily and non-public schools. Meanwhile, O’Connor pointed out that Qualified Opportunity Funds (QOF) support improvements of commercial real estate property, as long as that property is substantially improved during the hold — in other words, the property’s basis needs to be more than doubled. And Wood compared traditional capital stacks with use of C-PACE and senior loans, and use of C-PACE in Opportunity Zones.



Sherman brought a real-world perspective to the discussion, explaining that he is planning to use C-PACE financing to buy land and develop a Home2Suites on the site, which is in Glenwood Springs, CO. Coincidentally, the site happens to be in an Opportunity Zone. “From my perspective,” Sherman said, “I’m not going to buy something in an Opportunity Zone, just because there are some tax benefits. Rather, I want to make sure it will be a profitable investment, and if it happens to be in an Opportunity Zone, there are added benefits.”

In comparing the projects with and without C-PACE financing, Sherman pointed out that the former means a smaller equity raise required from investors, meaning a higher return on profit when the project sells. And, thanks to the Opportunity Zone mandate, a longer-term hold can mean no taxes.



While the KPMG and Terrapin charts provided somewhat different viewpoints of C-PACE/Opportunity Zone projects, both proved the point that the combination of this type of financing would be beneficial to developers and owners. Sherman indicated that the benefits of such a combination include smaller equity requirements and, depending on the length of the hold, no taxes.

“C-PACE is always a smart thing to do, if your lender will let you do it,” Sherman said. While not every lender is familiar with the financing, Sherman noted that, “the ones that are, and that allow it, find it makes sense just about every time.”

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