How C-PACE Financing Can Be Part of an EB-5 Project’s Capital Stack

The C-PACE program incentivizes developers to think about a future with clean energy

C-PACE, or Commercial Property Assessed Clean Energy, is a financing tool that originated in California in 2008 and has spread to over 30 states across the United States. Its purpose is to encourage developers to make eco-friendly and cost-efficient upgrades to commercial buildings by offering an alternative route to obtaining financing. C-PACE funding can be used to upgrade existing buildings, finance new construction, and make renewable energy more affordable through tax credits and other incentives to business owners. C-PACE is not a standard loan. Rather, it uses the existing local property tax system to collect loan repayments on fixed-rate, fixed-term financing. Because it is managed by the municipality where the building is located, not a commercial lender, C-PACE financing has fewer restrictions and is linked to the property, not the owner.


C-PACE is an increasingly popular and attractive funding option for developers for a number of reasons. It is capital that is managed as an assessment alongside a building’s property tax. This means there are none of the usual covenants and restrictions found in a standard development loan. Instead, the owner of the building—the developer in most cases—gets the capital from private sources and then repays it by making monthly payments in addition to their usual property tax payment. Financing is available with no down payment and, as a fixed-rate loan, it is repaid over a 20- to 30-year period (annually or semi-annually)—with no other requirements. C-PACE capital in general can also be repaid without penalties. The process is quicker and easier than typical mortgage agreements and, if the building is sold during the loan payback period, the remaining balance of the loan is figured into the sale of the building and becomes the responsibility of the new owner.


C-PACE has another benefit for EB-5 investors. With C-PACE financing, some projects will not need a senior developer loan or other financing. This makes the EB-5 loan the most senior debt and, if there is liquidation of assets, the EB-5 fund has first rights to the assets of the business.

The program is approved in 30+ states. C-PACE financing is nonrecourse to the borrowers which means the capital provider cannot make a claim on assets other than the building, and it cannot be accelerated which means the provider of capital cannot demand early payment due to specific covenants. This is part of the reason default on C-PACE financing is extremely rare. Since 2008, only one project out of about 1,870 C-PACE-financed projects has ever defaulted.

Eco-conscious construction not only benefits the planet by promoting energy conservation and green technologies but also saves a building project money, which improves the developer’s internal rate of return.


Over the pandemic, C-PACE funding has seen particular growth in the hospitality business. The use of C-PACE financing doubled from $800 million in 2020 to over $1.5 billion by May 2021, with 25 states having active ongoing projects. In one case written up in Commercial Observer, an industrial building on Long Island, NY, used $1.7 million in C-PACE funds for a solar panel project, which turned an empty rooftop into a $72,000/year revenue generator, in addition to the tax benefits the solar panels provide.

All in all, C-PACE is an established and quickly growing type of funding that benefits EB-5 investors. Investing capital in a project that pays for improved, forward-thinking technology can increase the economic performance of the project itself. What’s more, this form of financing comes without the liens and conditions that could negatively impact the EB-5 fund’s loan.

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