Sustainability Street: C-PACE Comes Into Its Own

Commercial Property Executive

Welcome back to Sustainability Street, our podcast on the intersection of commercial real estate and the world we live in. Therese Fitzgerald's guest for this episode is Ethan Elser, executive vice president of PACE Equity LLC.

The Commercial Property Assessed Energy Program, otherwise known as C-PACE, was launched 15 years ago to provide property owners with low-cost, long-term financing for sustainability and efficiency improvements, with borrowers repaying their loans through a special tax assessment.

But the program was still pretty niche until the pullback in capital—first during COVID-19 and then when interest rates spiked—sent borrowers looking for creative financing solutions. Today, C-PACE can be found in an increasing number of borrowers' capital stacks and the project sizes are getting larger. Meanwhile, on the investor side, the ESG-driven program has caught the attention of some of biggest names in real estate like Nuveen, CDPQ and Carlyle.

As the capital markets loosen, can C-PACE's streak continue? Elser thinks it can.

"There's actually 40 cities around the country—most major metropolitan areas," he said, "who all have higher standards and then fines if you're not complying with certain emissions criteria. And so, we're seeing more interest in C-PACE being a solution for that. I think that'll be a bigger part of the marketplace going forward."

Here are some of the topics Elser and I covered:

• Esler's journey to sustainable finance (2:03)

• C-PACE explained (4:17)

• Simultaneous objectives (10:08)

• 38 separate C-PACE programs (13:11)

• Busting myths about C-PACE (15:54)

• The future of C-PACE (22:22)