C-PACE (Commercial Property Assessed Clean Energy)
A financing mechanism that allows commercial property owners to fund energy efficiency, renewable energy, water conservation, and seismic improvements through a voluntary property tax assessment. C-PACE financing is repaid over 20-30 years through the property's tax bill, survives transfer of ownership, and is senior to the mortgage in the tax lien position. It requires consent from existing lenders and is available in states with enabling legislation. C-PACE can reduce the equity required in a capital stack by funding eligible building components that would otherwise come out of the construction or renovation budget.
Related Terms
Capital Stack
The layered structure of capital used to finance a real estate investment, arranged by priority of repayment. From lowest risk to highest: senior debt, mezzanine debt, preferred equity, and common equity. Each layer has different risk/return profiles. Understanding the capital stack is essential for structuring deals and evaluating investment opportunities.
Senior Debt
The primary mortgage loan that has first priority claim on a property's cash flows and collateral. Senior debt sits at the top of the capital stack with the lowest risk and lowest cost of capital. Senior lenders are repaid before any subordinate financing or equity in case of default or sale.
Construction Loan
Short-term financing used to fund the development of new commercial real estate projects. Construction loans are disbursed in draws as work is completed, with interest accruing only on funds advanced. They typically feature floating rates, 18-36 month terms, and require personal guarantees. Upon completion, the loan is paid off through permanent financing or sale.
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