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203.883.6116 info@greenworkslending.com

 * How C-PACE Works
   * What is C-PACE?
   * Project Types
     * New Construction and Gut Rehabs
     * Energy Efficient Upgrades
     * Solar and Renewables
     * Recapitalization for Recently Completed Projects
   * Eligible Properties
   * Available States
   * Case Studies
   * C-PACE for Mortgage Lenders
   * Frequently Asked Questions
 * News & Blog
 * About Us
   * Who We Are
   * Our Team
   * Our Impact
   * Press
   * Diversity, Equity & Inclusion
   * Careers
 * Get Started


Select Page
 * How C-PACE Works
   * What is C-PACE?
   * Project Types
     * New Construction and Gut Rehabs
     * Energy Efficient Upgrades
     * Solar and Renewables
     * Recapitalization for Recently Completed Projects
   * Eligible Properties
   * Available States
   * Case Studies
   * C-PACE for Mortgage Lenders
   * Frequently Asked Questions
 * News & Blog
 * About Us
   * Who We Are
   * Our Team
   * Our Impact
   * Press
   * Diversity, Equity & Inclusion
   * Careers
 * Get Started




HOW INCORPORATING C-PACE CAN BENEFIT HISTORIC TAX CREDIT PROJECTS

by Rebecca Disbrow | Jul 10, 2019 | Blog, Thought Leadership

Greenworks Lending is a specialty finance company that pioneered Commercial
Property Assessed Clean Energy (“C-PACE”) loans, a form of legislation-enabled
clean energy financing that encourages renewable and energy efficient
installations in commercial real estate.  It has become clear in the past few
years that another form of government enabled financing, historic tax credits
(“HTCs”), are a natural complement to C-PACE in advancing the shared mission of
facilitating energy efficient updates on neglected and inefficient historic
buildings via advantageous financing.

Increasing energy efficiency, helping local businesses succeed, rebuilding the
physical infrastructure of communities – this is what we’re all about at
Greenworks, so when presented with the opportunity to provide financing to our
first historic tax credit project in 2017, we were eager to identify an optimal
framework for the two forms of financing to work together.  We have financed
into both single-tier and master-lease structures, providing funds during both
construction and the post-construction compliance period.  As we have gained
expertise in fitting PACE into tax credit structures, we have become
increasingly convinced that the two forms of financing work exceptionally well
together: nowhere is the need for green upgrades more acute than in historic
properties, and the combination of C-PACE and HTCs provides a uniquely
advantageous financing structure that allows for green improvements to be made
within tight redevelopment budgets.

C-PACE As Gap Financing

The most common way in which C-PACE loans are used in HTC projects’ capital
stacks is as gap financing.  In this role, C-PACE can be the final piece that
helps make historic projects financially viable, replacing high-cost mezzanine
debt or equity with a significantly lower-cost, fixed rate C-PACE loan,
drastically improving the financial returns on a project and making way for
green improvements that may not have been financially viable without C-PACE.  In
addition to solar installations, C-PACE can finance many of the existing
qualified rehabilitation expenses (“QREs”) in a historic tax credit project,
including building envelope (doors, windows, insulation, roofing), structural
work, engineering costs, lighting, plumbing, HVAC, and elevators.

Senior lenders appreciate that we can place the full funding amount into an
escrow account at close, reducing concern around the availability of funds.  For
projects that have not yet identified a senior lender, Greenworks has a broad
Rolodex of construction lenders that are well-versed in C-PACE from which we can
make introductions.

C-PACE in Place of Senior Debt

While Greenworks finds it easiest to participate alongside both tax credit
investors and senior lenders, we have also participated in lieu of a senior
lender when projects have sufficient equity or other incentive financing.  Some
developers prefer the simpler financing of C-PACE and enjoy benefits such as the
long, dependable term, lower equity requirements, non-acceleration / transfer
upon sale, and fixed rate for the full term.  Additionally, C-PACE uses a tax
assessment structure which, for some properties, may allow the repayments to be
passed through on triple-net leases and hotel room surcharges.

C-PACE and SNDAs

Greenworks is happy to sign an SNDA for the protection of the master lease and
tax investor.  One nuance with C-PACE is that our SNDA would not apply to
non-Greenworks affiliated entities who take title to the property as a result of
failure to pay the C-PACE Assessment; Greenworks may not control a tax
foreclosure process since our financing is secured by a tax assessment
controlled by a governmental or quasi-governmental agency.  However, in this
case the historic tax credit investor takes the same disturbance risks as they
take with unpaid taxes – if taxes (and C-PACE) are paid, the lease will not be
disturbed by the tax lien / tax foreclosure process.

One mutually beneficial mitigation to this risk is to create a PACE + taxes
reserve fund controlled by the tax credit investor which ensures currency of
PACE and taxes.  It is also worth noting that C-PACE would need to run through
the tax foreclosure / tax sale process which is typically very long (>12
months).  Given this time-frame investors will have ample time to cure any
defaults before the underlying master lease could be in jeopardy.  The
non-accelerating nature of the C-PACE assessment also provides comfort to tax
credit investors because only the amount in arrears would ever need to be paid
off in a foreclosure or to prevent foreclosure.

Underwriting Implications

From the underwriting perspective, we appreciate the additional diligence done
on tax credit deals by the investors themselves and by the National Park Service
who administers the program.  The primary risks are well-aligned between C-PACE,
which has no ability to accelerate in a foreclosure and thus focuses on
achieving construction completion, and HTC investors, who risk not receiving
their tax credits if the renovations are not completed according to plan.  Most
C-PACE lenders, like Greenworks, have no desire to take an active role in a
stalled construction project, as some construction and mezzanine lenders might. 
Rather, the fact that both Greenworks and the HTC investor are solving for the
same risk allows for a more streamlined underwrite and lowered risk assessment. 
Finally, the tax investors’ funds, which must remain in the project for 5 years,
lowers the total debt on the property, helping the project align with C-PACE
underwriting requirements.

At Greenworks, we understand the complications involved in each kind of tax
credit financing and we make a concerted effort to align ourselves with the
project’s existing underwriting and closing diligence process to decrease
overall complexity.  For example, we generally utilize existing disbursement
milestones and documentation, we can be flexible on the first repayment date (up
to 24 months), we can utilize existing third-party reports, and we have an easy
and transparent approval process.

Do you have a historic rehabilitation project in need of capital?  Consider
C-PACE through Greenworks Lending: we hope to provide the capital that can make
your historic project a reality!

Learn more about C-PACE and Historic Tax Credits from one of our case studies!




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 * How C-PACE Works
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   * Project Types
     * New Construction and Gut Rehabs
     * Energy Efficient Upgrades
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   * C-PACE for Mortgage Lenders
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 * News & Blog
 * About Us
   * Who We Are
   * Our Team
   * Our Impact
   * Press
   * Diversity, Equity & Inclusion
   * Careers
 * Get Started

 * How C-PACE Works
   * What is C-PACE?
   * Project Types
     * New Construction and Gut Rehabs
     * Energy Efficient Upgrades
     * Solar and Renewables
     * Recapitalization for Recently Completed Projects
   * Eligible Properties
   * Available States
   * Case Studies
   * C-PACE for Mortgage Lenders
   * Frequently Asked Questions
 * News & Blog
 * About Us
   * Who We Are
   * Our Team
   * Our Impact
   * Press
   * Diversity, Equity & Inclusion
   * Careers
 * Get Started

 


 * How C-PACE Works
 * What is C-PACE?
 * Project Types
 * Eligible Properties
 * Available States
 * Case Studies
 * C-PACE for Mortgage Lenders
 * Frequently Asked Questions

 * How C-PACE Works
 * What is C-PACE?
 * Project Types
 * Eligible Properties
 * Available States
 * Case Studies
 * C-PACE for Mortgage Lenders
 * Frequently Asked Questions

 * About Us
 * Who We Are
 * Our Team
 * Our Impact
 * News & Blog
 * Press
 * Diversity, Equity & Inclusion
 * Careers

 * About Us
 * Who We Are
 * Our Team
 * Our Impact
 * News & Blog
 * Press
 * Diversity, Equity & Inclusion
 * Careers

 * Get Started

 * Get Started

info@greenworkslending.com

203-883-6116

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Greenworks Lending LLC is an indirect subsidiary of Nuveen LLC and Teachers
Insurance and Annuity Association of America (TIAA) and a member of the TIAA
group of companies.

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