C-PACE FAQ's
STANDARD UNDERWRITING CRITERIA
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The property must have clear title with no liens and taxes must be current.
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The borrower should have no bankruptcies over the last five years.
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The project must have a useful life longer than the term of the projected financing.
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Savings should be greater than C-PACE assessment cost over the term of the loan.
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C-PACE funding for up to 25% of the property’s appraised or assessed value
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No existing environmental issues.
Borrower
Private Developer LLC
Typically the borrower is a private, special purpose entity which owns the land and project. No borrower qualification, credit or guarantees are needed as the C-PACE financing amount is attached to the property and Project.
PACE Program
Regional PACE Program
In California the PACE program is sponsored by the California Statewide Communities Development Association, a joint powers authority sponsored by the California State Association of Counties and the League of California Cities. Each participating state, county and city has their own entities managing the program.
Special Assessment
Self imposed tax assessment
The PACE financing will be secured by a special assessment placed on the property and paid just like property taxes.
PACE Funds
Used for qualified building expenses
Funds will be provided in exchange for the Program placing a Special Assessment on the property, with the Special Assessment Financing approved costs, including: installation of clean energy, energy efficiency, water conservation, and other qualified retrofits to the property; new property construction, or a portion thereof; paying applicable costs of securing the Assessment.
Repayment
Just like property taxes
Repayment is made by the Property Owner through a Special Assessment on the property which will be collected with all real estate and municipal taxes for the duration of the PACE Assessment Term.
PACE Assessment Amount
Roughly 25% of LTV
In California, due to Title 24 requirements, often up to 25% of a projects completed value is eligible subject to verification of project measure eligibility
Purpose(s) of Assessment
Ground up development and retrofit of hospitality, commercial and multifamily projects are excellent uses of the assessment and a portion of financing can be passed onto hotel guests, added to NNN or similar strategies.
New construction or retrofit
Collateral
Collateral for the Special Purpose Assessment will be the property.
The property
PACE Assessment Term
Typical PACE Assessment Terms range from 20-25 years with flexible early repayment and full transferability on sale.
Long term financing
Indicative Interest Rate
Interest is a simple fixed interest rate on the PACE Assessment. Rates range from 5.5% - 6.5% based on project type, size and treasury rates.
Simple & fixed
PACE Payment
The estimated payment on the PACE Assessment Amount are paid semi-annually (or whenever property and municipal taxes are due) and inclusive of all fees. Often these payments are delayed until the project has completed construction and reached stabilization.
Semi-annual
Guarantors
No personal or corporate guarantors are required as the Special Assessment is tied to the property.
None
Fees
Upfront fees include only those determined by the Program and PACE provider. Typically fees range from 3.5% - 5% of the PACE Assessment Amount to cover program related expenses. Prepayment fees are also applicable and charged agains the then-current Assessment Balance.
Low & negotiable
Assumability
Any purchaser of the Property will assume the Assessment unless the seller chooses to prepay the Assessment in accordance with the optional prepayment terms of a Assessment agreement.
Completely
Mortgage Lender Consent
All existing mortgage lenders must consent to the Special Assessment and becoming more and more accepted by traditional and senior lenders in the marketplace.
Required