How C-PACE Plus USDA Kept a Senior Housing Project on Track

This financing package can resolve the funding crunch for developers, writes Bayview's Anne Hill.

Developers and investors across the U.S. are discovering a little-known financing package that solves many of today’s funding challenges.

By combining Commercial Property-Assessed Clean Energy financing with U.S. Department of Agriculture loans, borrowers are getting higher leverage vs. standard bank loans, and there’s strong availability of capital. The total volume for the USDA lending has grown significantly year over year whereas bank construction lending has decreased. 

Many borrowers are surprised to find that they qualify for USDA lending aimed for use in “rural” America. According to Federal estimates, some 97 percent of the U.S. is rural and includes suburbs of major metros. That’s quite a lot of commercial real estate.

Similar to Small Business Administration loans, USDA lending programs are government-guaranteed loans that private lenders can utilize nationwide.

The USDA Rural Development program for Business and Industry can apply to commercial, industrial, manufacturing, hospitality, healthcare, Assisted Living/Memory Care, energy and infrastructure as well as mixed-use projects. While senior living facilities qualify, traditional multi-family does not.

Lenders can obtain up to an 80 percent loan guarantee at origination after certain conditions have been met, on amounts up to $25 million per project.

For example, on a $27 million debt-stack for the new 124-unit Mesa Verde senior living community in Durango, Colo., we provided $6 million in C-PACE while a local community bank provided a $20.9 million USDA-guaranteed loan.

The deal was originally structured as a traditional construction loan, but after switching to USDA financing, the lender was more comfortable with higher leverage and with the PACE component. In sum, the project sponsor achieved much better terms.

Powerful combination

Mesa Verde is now under construction about four miles from downtown Durango in a popular neighborhood directly adjacent to the region’s only major hospital, Centura Mercy Hospital. Durango’s 2024 population was just over 20,000 people, while its SMSA regional population is over 56,000.

The 105,000 square-foot Mesa Verde will offer 92 assisted/transitional living units spread across studio, one-bedroom and two-bedroom configurations, and also 32 memory care studio-units. Amenity spaces will include multiple dining rooms, exercise facilities, a beauty salon/barber shop, library, activity rooms, computer room, theatre auditorium and a coffee shop/deli.

Bayview’s C-PACE financing offers favorable and cost-effective terms for qualified improvements in energy, HVAC, electrical, lighting, plumbing and water systems, building envelope and other resiliency components, and it can be applied to new construction as well as renovations. C-PACE is active in 38 states and the District of Columbia.

Packaging of C-PACE with a USDA loan offers a compelling advantage over traditional financing in today’s capital markets. For commercial real estate projects in rural America including many city suburbs, it can be a linchpin that helps move projects forward.

Anne Hill is senior vice president of Bayview Asset Management and Bayview PACE. Bayview PACE is a division of Silver Hill Funding, LLC, NMLS# 1564077.

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