Innovative commercial developers and property owners have learned the benefits of CPACE financing to fill the gap in their capital stack or replace more expensive forms of capital. CPACE can significantly impact lowering a borrower's weighted average cost of capital.
Unlike traditional financing, CPACE is repaid through a property tax assessment, providing long-term, fixed-rate financing without requiring upfront capital. This structure allows owners to undertake substantial property improvements that reduce operating costs and enhance property values.
The benefits extend beyond immediate financial relief; by lowering energy costs, CPACE-financed upgrades can significantly improve a property's bottom line over time.
A standout feature of CPACE financing that is relatively less known is its ability to be applied retroactively.
Retroactive CPACE operates similarly to standard pre-project funding, with the key advantage that 100% of the loan proceeds can reimburse property owners for costs already incurred. This is particularly beneficial for hotel owners who have recently completed upgrades or energy-efficient projects and are looking to improve cash flow or refinance existing loans on better terms.
CPACE offers other compelling benefits, such as:
- Non-recourse and transferable
- Low-cost alternative to mezzanine debt or equity starting at 7.0%
- No principal repayment required upon sale
- Funding for up to 35% of the appraised property value (varies by state)
- Funding for up to a combined LTV of 95% (CPACE + senior)
- Up to 30-year fixed-rate funding
- Ability to delay first payment until after stabilization (up to three years after the funding date)
- CPACE payments are secured by the property and are repaid through a special tax assessment
- Ability to pass through tax assessment to tenants or hotel guests
Learn more about CPACE Financing or contact the Peachtree CPACE team.
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The following is an example of a capital stack using CPACE.
