C-PACE for Senior Lenders | Texas C-PACE Program

C-PACE: A Proven and Secure Financing Tool for Commercial Lenders

Commercial Property Assessed Clean Energy (C-PACE) financing has been widely adopted as a secure, effective, and lender-friendly financing tool for commercial real estate. With established legal frameworks and a strong track record in the market, C-PACE has been proven to work seamlessly alongside traditional mortgage lending, preserving senior lender positions while providing borrowers with a valuable capital solution. C-PACE has been successfully integrated into thousands of commercial real estate transactions, offering banks a structured and effective financing solution. The industry-wide recognition of C-PACE as a safe and predictable funding mechanism has led to its growing adoption by lenders and developers.

With backing from CREFC, NAIOP, the U.S. Department of Energy, and leading commercial lenders, C-PACE is widely accepted as a reliable, lender-friendly financing tool.

Next Steps for Lenders

Commercial Property Assessed Clean Energy (C-PACE) financing has been widely adopted as a secure, For more information on how banks can incorporate C-PACE financing into their capital strategies, lenders can reference CPACE primers, toolkits and research provided by organizations such as:

By leveraging C-PACE financing, banks and commercial lenders can offer their clients a low-risk, capital-efficient financing alternative while continuing to drive sustainable development in commercial real estate.

Senior lender consent is required for all C-PACE transactions. As property owners look to alternative capital sources, it’s critical that senior mortgage holders understand and embrace this important financing tool. To date, more than 350 senior lenders have consented to C-PACE.

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Bank and Commercial Lender Benefits

Preservation of Senior Lender Rights

Senior lenders maintain all rights and remedies associated with their loan agreements when a C-PACE assessment is in place, ensuring their interests are protected.

“C-PACE is non-recourse financing that cannot be accelerated, preserving the bank’s lead position in the event of loan defaults.”
Source: CREFC – C-PACE: A Lender’s Perspective

Low Fixed Rates and Extended Amortization Periods

C-PACE financing provides borrowers with long-term, fixed-rate financing, often with terms up to 30 years. This structure results in lower monthly payments, enhancing the debt service coverage ratio (DSCR) and improving overall project feasibility.

“With C-PACE, building owners and operators can typically get long-term, fixed-rate, non-recourse financing for up to 30 years for real estate projects that increase energy or water efficiency.”
Source: Morgan Lewis – C-PACE Financing: Exploring the Benefits and Risks

Risk Mitigation Through Escrow Arrangements

C-PACE assessments can be escrowed alongside property taxes and insurance, ensuring timely payments and reducing the risk of default.

“Escrowing for PACE payments is recommended alongside escrow for insurance and taxes. This helps ensure that the PACE stays current and security position is maintained.”
Source: U.S. Department of Energy – C-PACE Toolkit

Conservative Loan-to-Value Ratios

C-PACE financing is typically capped at a maximum of 35% of the property’s appraised value, ensuring a conservative loan-to-value ratio that protects both lenders and borrowers.

“C-PACE is in heavy demand because it’s a fixed-rate product, starting in the mid-single digits. It also can be up to 35% of the capital stack.”
Source: Peachtree Group – C-PACE: An Affordable Solution for Mid-Construction Capital

Cost-Effective Alternative to Mezzanine Debt or Preferred Equity

C-PACE serves as a low-cost alternative to mezzanine debt or preferred equity, offering favorable terms that enhance project viability without diluting ownership stakes.

“C-PACE can be ideal rescue/gap financing and as spreads have come down, it is even more competitive to mezzanine and private debt from bank-competitors.”
Source: Bayview PACE – Eight Reasons Why Banks Are Consenting to C-PACE Financing

Non-Recourse and Non-Accelerating Financing

C-PACE assessments are non-recourse and non-accelerating, meaning the repayment obligation is tied solely to the property and does not accelerate upon default. This feature preserves the senior lender’s position and mitigates risk.

“C-PACE is non-recourse financing that cannot be accelerated, preserving the bank’s lead position in the event of loan defaults.”
Source: Bayview PACE – Eight Reasons Why Banks Are Consenting to C-PACE Financing

Enhancement of Property Value and Cash Flow

Investments financed through C-PACE can lead to improved energy efficiency, resulting in increased property value and enhanced cash flow, thereby strengthening the lender’s collateral position.

“C-PACE energy improvements are paid for out of the savings that the project creates. Borrowers should realize improved cash flow, leaving them less encumbered and able to repay the financing.”
Source: Connecticut Green Bank – C-PACE for Mortgage Holders

Transferability Upon Sale

The C-PACE assessment is attached to the property, not the owner, and can transfer automatically upon sale. This feature offers flexibility for property owners and assurance for lenders regarding the continuity of repayment obligations.

“C-PACE assessments ‘run with the property’ and are automatically transferred to the new owner upon sale unless they are prepaid.”
Source: Plante Moran – About C-PACE Financing: Pros and Cons of Energy Efficiency Loan Programs

Appeal to Environmentally Conscious Borrowers

C-PACE financing aligns with the sustainability goals of environmentally conscious borrowers, making it an attractive option that can help lenders secure more deals in the growing green finance market.

“C-PACE is transforming the landscape of commercial real estate finance by providing a flexible and innovative tool for funding commercial real estate construction projects at varying stages of development.”
Source: Nuveen Green Capital – Leveraging C-PACE Financing Across All Stages of Commercial Real Estate Construction

Alternative to Syndicated Bank Participation

In situations where legal or relationship lending limits constrain traditional financing, C-PACE offers a viable alternative, allowing lenders to participate in projects without overextending their exposure.

“C-PACE in the capital stack enables banks to continue the lending relationship with valuable clients while maintaining a healthy deposit-to-loan balance.”
Source: Bank Director – Six Reasons Banks Are Consenting to C-PACE Financing

Bank and Lender FAQ

How is a C-PACE assessment secured?

A C-PACE assessment is secured as a voluntary assessment that is recorded on the property’s title, similar to a municipal special assessment or property tax. Because the financing is tied to the property and not the borrower, repayment obligations remain with the property even if it is sold.

The security of C-PACE financing is reinforced by:

– Lender consent requirements, ensuring that mortgage holders approve the financing before it is issued.

– Non-accelerating status, meaning only the portion of the assessment that is past due can be enforced, preventing full balance acceleration.

What happens in the event of default or foreclosure?

In the event of default, C-PACE assessments function similarly to property tax obligations:

– The property owner remains responsible for paying any overdue assessment amounts.

– Only the missed payments are due, as C-PACE cannot be accelerated, meaning the entire loan does not become immediately due.

– Senior lenders retain all foreclosure rights and remedies in accordance with their loan agreements.

Since C-PACE assessments improve utility savings, most projects generate increased cash flow, reducing default risk.

Does C-PACE impact a lenders’ ability to foreclose?

No, C-PACE does not interfere with a senior lender’s foreclosure process or their foreclosure rights. Senior lenders maintain full control over their collateral in the event of a borrower default.

Key protections include:

– No impact on foreclosure proceedings – C-PACE does not accelerate, meaning only past-due assessments are enforceable.

– Senior lenders retain their first lien position, as C-PACE assessments are structured as non-disruptive obligations that sit alongside property taxes.

Which senior lenders have consented to C-PACE?

Hundreds of banks, credit unions, life insurance companies, and private lenders have consented to C-PACE financing across the country. This includes major national lenders and regional financial institutions.

Some leading lenders that have approved C-PACE financing include:

– Wells Fargo
– JPMorgan Chase
– KeyBank
– Capital One
– Bank of America
– MidCap Financial

These lenders recognize C-PACE as a valuable capital solution that supports borrower liquidity, reduces operating costs, and enhances property value. A nationwide list of consenting institutions can be found here.

Why should I consent to C-PACE?

Senior lenders benefit from C-PACE financing because it:

✔ Preserves mortgage priority – C-PACE remains a non-accelerating assessment, ensuring mortgage lenders maintain first lien rights.

✔ Increases property value and borrower liquidity – Improvements funded through C-PACE financing reduce energy costs, enhance property cash flow, and increase collateral value.

✔ Supports borrower financial stability – With fixed, long-term repayment structures, C-PACE financing does not disrupt borrower cash flow or increase traditional loan burdens.

✔ Mitigates risk through lender-required escrow – Many lenders require C-PACE payments to be escrowed alongside taxes and insurance, ensuring the assessment remains current.

As commercial real estate financing becomes more competitive, lenders that consent to C-PACE can maintain key borrower relationships while ensuring sustainable, energy-efficient investments.

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