Not long ago, a C-PACE lender showing up as an A-note—the senior, first-priority financing on a deal—would turn heads. Now such financings are commonplace. C-PACE is no longer financing tucked in after the fact. Increasingly, it's filling an important tier in the capital stack.
"Because we can lend at a pretty solid percentage of the total project cost, we're able to make a competitive product offering versus other financing," says Sean Ribble, senior director of originations at Nuveen Green Capital. "We're blending down the cost of capital because of where we're pricing."
The appeal is straightforward: C-PACE is patient, non-recourse capital. Lenders have no claim on the sponsor's other assets, only on the property. And because repayment is made through property tax assessments over 20 to 30 years, there's no pressure to refinance or stabilize on a lender's timeline, an advantage for sponsors navigating complex deals with longer time horizons.
Rewriting the Stack
C-PACE operates in 40 states plus the District of Columbia. In many states, C-PACE can cover 35% to 40% of a project's stabilized value, enough to replace the expensive mezzanine debt or preferred equity issued by conventional bank loans to reduce their weighted-average cost-of-capital.
C-PACE can also bring smaller lenders into deals they couldn't otherwise touch. A community bank with a $25 million lending limit can't lead a $50 million deal. But with C-PACE absorbing a large slice of the financing, the same bank can participate.
"We blend in alongside them and bring our non-recourse capital," explains Christopher Ellis, senior director of originations at Nuveen Green Capital.
First Call, Not Last Resort
A recent Florida development with Cleveland-based Stark Enterprises is a case in point. Nuveen Green Capital came in at roughly 35% of project costs, with Ohio-based Huntington Bank filling the rest of the senior debt at the same amount. The sponsor contributed 30% equity. As a result, the project needed no expensive subordinate financing.
Another part of C-PACE's appeal is patience. The financing carries no maturity cliffs, no cash flow covenants and fewer of the default triggers that can put a sponsor in a difficult position mid-project, explains Aidan McLaughlin, director of originations.
"Larger projects take longer," McLaughlin says. "C-PACE removes the pressure that a bank [loan] ordinarily has."
Beyond the Usual Suspects
C-PACE has long been associated with multifamily, office and hospitality. But the list of asset classes is expanding. Nuveen recently closed deals on a senior living project outside Austin, TX; a bourbon distillery in Kentucky; a retail recapitalization, and hotel new construction in Franklin, TN; and an office-to-residential conversion in Youngstown, OH. Data centers, with their heavy cooling and energy demands, are a natural fit as well, given C-PACE's original mandate to finance energy improvements.
"We're pretty fluid in how we can work," Ellis says.
What's more, deals are getting larger and more complex. Ellis points to office conversions with historic tax credits, mixed-use projects with layered capital stacks and institutional-scale financings that conventional bank debt alone can't absorb.
For sponsors navigating a capital-constrained lending environment, C-PACE can increasingly fill the void. "A lot of conventional bank lenders and senior lenders backed out of the space," McLaughlin says. "We leaned in."
"Our firm's advantage is rooted in its fully vertically integrated platform, where all underwriting, legal, and asset management functions are executed in-house, ensuring seamless and expert transaction management from start to finish. With well over 700 deals closed across the country, NGC's deep execution experience — combined with the ability to originate directly onto its balance sheet and close within 30 to 60 days of a signed term sheet — gives us an unmatched speed and certainty of execution that competitors simply cannot replicate," says Ribble.
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