C-PACE or commercial property assessed clean energy financing is increasing in popularity among Southern California owners. Adding a C-PACE component to the capital stack can help to curb the costs of energy upgrades and adaptive reuse projects, according to Jon Spelke of CleanFund. The company has financed several properties, including The Garland creative office development in Downtown Los Angeles.

“Commercial PACE financing continues to gain steam in Southern California as more owners and developers are utilizing it as a component to lower their overall blended cost of capital on energy and seismic upgrades, adaptive re-use projects and new construction,” Spelke, managing director at CleanFund, tells GlobeSt.com. “With rates in the low 6% range, as compared to mezzanine and private lenders offering 8% to 14%, C-PACE has become a valuable option in bridge, construction and permanent financing scenarios.”

Although it is rising in popularity, C-PACE isn't a new program. It was first introduced in California in 2008. “C-PACE was introduced in California as a form of voluntary parcel tax assessment financing to fund qualifying improvements that reduce energy and water usage, and other resiliency benefits including seismic enhancement and retrofits,” says Spelke. “Furthermore, with California's strict energy code including Title 24 and Green Build requirements, simply “building to code” generates sufficient qualified and eligible improvements under the C-PACE financing program.”

CleanFund is one of the leading providers of C-PACE financing. In total, CleanFund has financed more than $170 million, and the majority of the demand is for projects in Southern California. “The transactions were closed with private lenders and C-PACE served to reduce the blended overall cost of capital,” adds Spelke. “The product-type and applicability are truly wide-ranging, and CleanFund is closing financings across the U.S. that could also apply to Southern California as well.”

While CleanFund has funded projects large and small, from $2.6 million for an office building in Sherman Oaks to $800,000 for HVAC, solar and energy storage at the Camelot Theatre in Palm Springs, developer Presidio Bay's The Garland is among the more significant projects. The developer secured $7.8 million though CleanFund for the project, which will include 50,000 square feet of creative office and 3,200 square feet of ground-floor retail. The development, which should open at the end of the year, also includes the Globe Theater. “For the Garland, C-PACE provided competitive long-term fixed-rate non-recourse financing for energy and resiliency improvements including HVAC systems, electrical, elevators, interior daylighting, weather sealing, water system improvements and a seismic retrofit,” explains Spelke. “The Garland is a perfect case-study on the intent of the C-PACE program to encourage building owners and developers to improve the energy and seismic efficiency of commercial buildings through the use of competitive long-term fixed rate non-recourse financing.”