Alternative Financing Cheaper than Traditional Mezzanine Debt and Preferred Equity

October 4, 2018

George Smith Partners is working with a private source of CPACE (Commercial Property Assessed Clean Energy) capital to finance ground-up development in California, Colorado, Utah, Texas, and 18 other states. CPACE is a form of long-term, non-recourse mezzanine financing for construction projects. At rates of 6% to 7%, it can fill 10-20% of the capital stack for a 20 to 25 year term. The financing is repaid through a special property assessment and amortizes like debt. CPACE can be used for any asset class, on projects of any size, in the 22 states where PACE has been approved. PACE can be used alongside other forms of financing such as New Market Tax Credits, LIHTC, TIF, EB-5, and traditional senior financing, among others. The main benefit to sponsors is reduced cost of capital – PACE replaces more expensive mezzanine debt or preferred equity in the capital stack.

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