Rapidly Increasing Lender Acceptance

We’ve discussed how C-PACE financing can be used for a wide variety of commercial real estate projects. We’ve also shared how it benefits sponsors struggling with cash flow in the wake of COVID-19.  But what about lenders?

Lender acceptance of C-PACE continues to grow.  More than 200 national, regional, and local lenders have partnered with C-PACE providers to successfully capitalize real estate projects. Why have so many lenders consented to C-PACE financing?

Reducing Loan Exposure

As a lender friend of ours likes to say, “the only thing better than putting money out is getting money back.”

• C-PACE solutions can reduce the principal loan balance on projects that are currently in the middle of lease-up, stabilization or facing uncertainty due to COVID-19

• A portion of the proceeds can also be used to replenish the lender’s reserve accounts, further protecting the lender and sponsor from default events at the property

Improved Risk Metrics

C-PACE financing can improve the lender’s LTV, DSCR, and Debt Yield. In a previous post, we showed how a $5.6M C-PACE transaction can save a borrower with a $15M loan balance over $1M in debt service. These savings protect the lender as well.

• In our example, C-PACE also immediately improves Senior DSCR from 0.79x to 1.84x and improves the in-place debt yield from 5.00% to 7.35%

• Even when amortizing C-PACE payments kick in several years out, the property’s DSCR and Debt Yield metrics are far better with C-PACE than without

• Savings in debt service buy time and give the sponsor a greater ability to support operations or otherwise protect the property during an uncertain economic climate

C-PACE is Open for Business

C-PACE lenders are well-capitalized and actively lending despite difficult markets.

• C-PACE can provide passive, accretive restructuring options for existing buildings

• It can also be used to fill out the A-piece of a construction loan where credit markets are otherwise tight or closed

To learn more about C-PACE, prequalify your property, and to discuss de-risking a loan with Construction or Retroactive C-PACE, contact TEC Partners today.