A Closer Look at Energy-Focused Financing for Multifamily

Green energy lenders discuss C-PACE’s growing popularity over the past year and how the program can further strengthen the apartment market.
StoneCreek Real Estate Partners’ assisted living and memory care community in Littleton, Colo. Image courtesy of Colorado C-PACE

StoneCreek Real Estate Partners had just completed its new 92-bed, 74,000-square-foot assisted living and memory care facility in Littleton, Colo., and was ready for lease-up when the COVID-19 crisis hit. Like many multifamily, senior and student housing owners and developers during the pandemic, the company turned to Commercial Property Assessed Clean Energy funding (C-PACE) for $3.8 million in retroactive financing to cover energy-efficient construction costs.

“You’re able to go into a recently constructed building and provide liquidity in a very difficult time like a COVID pandemic,” said Eric Alini, managing director of Connecticut-based Counterpointe Sustainable Real Estate (CounterpointeSRE), which provided the $3.8 million C-PACE loan.

The same developers turned to CounterpointeSRE for $2.8 million in C-PACE financing when it was constructing a 108-bed senior housing community in Houston. The project featured energy-saving and water conservation measures, and StoneCreek wanted to improve its capital position.


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Both transactions were examples of the kinds of C-PACE multifamily financing deals that were keeping CounterpointeSRE and other green energy lenders busy since the onset of the pandemic.

From 2009 through the end of 2020, there were nearly $200 million C-PACE multifamily deals out of more than $2 billion dollars invested across the U.S., according to PACENation. Out of 10 property categories tracked by the group, multifamily placed fourth. Mixed-use, which often includes multifamily components, placed seventh on the list with $144 million in C-PACE deals since 2009.

Retroactive Boom

Retroactive C-PACE financing saw a significant boost last year across asset types. Currently, 37 states and Washington, D.C., have enacted authorizing legislation for C-PACE, although programs are not yet active in all. Most states allow retroactive capitalization, although rules vary.

At Ygrene, a C-PACE provider in Petaluma, Calif., multifamily represents roughly 15 percent of its commercial business, with retroactive multifamily loans accounting for about 14 percent in the last 12 months of C-PACE financing.

Mike Lemyre, head of commercial and senior vice president, government affairs at Ygrene, told Multi-Housing News the firm has offered a retroactive product for at least four years. Ygrene services California, Florida and Missouri, and its multifamily portfolio generally centers on small-to-midsized multifamily apartments, townhouse condo and assisted living properties with deals ranging from $250,000 and $500,000 to more than $20 million.

“It’s become very significant,” Lemyre said of the retroactive business, adding it increased Ygrene’s overall C-PACE funding between 200 and 300 percent per year in the last three years.

Image by Free-Photos via Pixabay

Andrew Zech, head of originations at Greenworks Lending, which was recently acquired by Nuveen, said recapitalizing past PACE-eligible work “was a huge piece of our 2020 growth story” and expects it to continue into 2021.

He also noted the firm has closed multiple projects in the past 12 months across all multifamily asset classes including market-rate, agency-financed multifamily, senior housing and student housing.

“Our volumes are increasing rapidly,” Zech told MHN. “We’ll probably double volume again in 2021 versus 2020, which was more than double in volume in 2019, which was double in volume off 2018.”

Multifamily represented about 12 percent of Greenworks’ C-PACE transactions for the first quarter of 2021. According to Zech, multifamily deals generally fluctuate between 10 and 20 percent of the C-PACE business.

Completing the Capital Stack

Greenworks’ 2020 multifamily business was strong due to pullback both in leverage and overall lending appetite from some of the traditional lenders that serve the market. “So we were called into complete the capital stack on a whole number of multifamily projects all across the country,” Zech said.

Often the C-PACE financing became the difference in projects getting done or not getting done. Zech cited a garden-style, ground-up development in a rapid growth suburb of Dallas that prior to the pandemic would have no problem getting financing.

“During COVID-19, their longtime banking partner was still enthusiastic about the deal but at a lower percentage point and they did not have the appetite to go out and raise additional equity,” Zech said. “It probably would have cost them a double-digit interest rate and diluted their ownership stake. But instead, we were able to come up with mid-5 PACE financing and all of the structural benefits that come with that.”


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Mansoor Ghori, CEO of Petros PACE Finance in Texas, said the firm closed 19 multifamily—including senior and student housing—C-PACE deals in 2020, with apartment communities representing the majority of the transactions. While Petros’ overall commercial business funded more than $100 million in refinancing transactions in the past year, Ghori said none of them were multifamily deals. However, he is currently looking at several multifamily refinancing deals mainly for senior living or other healthcare-type projects.

Ghori said 2021 is off to a strong start with new construction, gut rehab and retrofit deals. Typical deals have ranged from $500,000 to more than $20 million, but there are larger deals in the pipeline. In California, seismic and resiliency upgrades “have been the primary use of the PACE money,” he noted.

Ygrene does a lot of resiliency work for seismic upgrades in California and in Florida, where C-PACE can be used to protect buildings from hurricanes. The seismic business for multifamily properties is expected to grow in the future, Lemyre said as more municipalities enact mandates.

Getting Ready for NYC

Mandates, like the Climate Mobilization Act & Local Law 97 in New York City, are spurring increasing use of C-PACE. Local Law 97, passed in 2019 along with C-PACE enabling legislation, is expected to become active very soon.

Ghori, Zech and Alini said they and their firms are all anxiously waiting for NYC C-PACE to go live. The Urban Green Council has estimated there will be a $20 billion retrofit market opportunity in New York City because of the building emissions law. The law requires owners of large buildings, including multifamily properties, to cut greenhouse gas emissions significantly starting in 2030.


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“The market is significant, and people there really want to use PACE,” Ghori said, noting that his company has transactions ready to go once the program is active.

56 Leonard in Manhattan. Image courtesy of Veronica Grecu

In addition, both Alini and Zech said their firms are getting inquiries and putting out proposals.

“They issued their program guides so that’s a big step,” Alini said. “I feel it’s very, very close.”

CounterpointeSRE is the program administrator for Chicago, and Alini noted it can take a long time to get the program off the ground because of all the stakeholders including tax collectors, property appraisers and legal offices.

Greenworks is now active in Chicago and Philadelphia, which also recently started its C-PACE program.

Looking to HUD, Federal Government

Alini, Zech and other lenders have joined with PACENation and its Executive Director Colin Bishopp in recent months to work with the U.S. Department of Housing and Urban Development to increase the number of C-PACE deals with HUD as well as with the U.S. Department of Agriculture.

According to Zech, there is a huge overlap between HUD’s mission and C-PACE’s mission. “We’re trying to work with HUD to make sure that that kind of financing box they’re comfortable with is wide enough to fit a lot of these PACE projects,” he said.

The main problems appear to be bureaucratic and are slowing down President Joe Biden’s goal of retrofitting millions of homes in the U.S. For example, HUD requires a state attorney general to issue a letter for each project and rules can change from state to state. Bishopp said the guidance from the federal agencies needs to be clarified and updated to move the deals forward, noting that only a handful of C-PACE deals have been approved in recent years by HUD.

When asked by Multi-Housing News for a comment, a HUD spokesperson referred to the guidelines which were approved in January 2017 to combine C-PACE financing with multifamily buildings that have HUD Multifamily Housing financing or rental subsidy.

“To date, four Multifamily Housing properties have received approval for utilizing PACE financing. (The Office of) Multifamily Housing is willing to work with any property owners and lender that find issues with the HUD guidance,” according to the HUD statement.