C-PACE financing

How C-PACE works

A state passes enabling legislation; a county or city opts in and sets up a program; a private capital provider funds the project; the local government levies a special assessment on the property; the owner repays it in installments with property taxes. When the property sells, the remaining assessment usually stays with the property.

PACENation reports $13.5 billion³ of cumulative C-PACE investment across 3,837 projects³ through December 2025, with 55%³ of the investment in energy efficiency. Legislation exists in 40 states plus D.C.², but a program has to be active in your county before you can use it.

What it can pay for

Typically eligible	Typically not eligible
HVAC, chillers, boilers, controls	Ordinary repairs with no efficiency gain
Building envelope: roof, windows, insulation	Furniture, fixtures and tenant equipment
Lighting and electrical upgrades	Land and acquisition cost
Solar, storage and other renewable systems	Work outside the program’s eligible list
Water efficiency
Resiliency measures such as wind, flood or seismic hardening, where the state allows

Eligibility is set by each state statute and program. An engineering or energy report usually documents what qualifies.

Worked example: C-PACE in a construction capital stack

Illustration only. Costs, rates and terms are assumptions.

A developer builds a $50,000,000 hotel. The construction lender will fund 60% of cost, or $30,000,000. Of the $20,000,000 gap, $7,000,000 is qualifying building systems.

Layer	Without C-PACE	With C-PACE
Senior construction loan	$30,000,000	$30,000,000
C-PACE	none	$7,000,000
Mezzanine or preferred equity	$7,000,000	none
Sponsor equity	$13,000,000	$13,000,000

At an assumed 7.00% fixed over 25 years with annual installments, the $7,000,000 assessment costs about $600,700 a year, a fixed, fully amortizing cost with no balloon. Replacing a higher-cost subordinate layer with that is the usual C-PACE case. The catch is that the installment ranks with property taxes, so the senior lender must agree and will count the installment when it sizes its own loan. Model the blend in the blended rate calculator and the payment schedule in the amortization schedule calculator.

Terms to compare

Term	What to ask
Rate	Fixed for the full term? Any capitalized interest during construction?
Term	The maximum allowed by the program and the useful life of the improvements
Size cap	Each state caps the assessment against property value; the cap differs by state
Prepayment	Premium or yield protection in early years, set by the capital provider
Pass-through	Whether your leases let you pass the installment through to tenants as a tax
Consent	The senior lender’s consent form, and whether it asks for any change to the loan

What capital providers and programs check

1. Eligibility of the improvements against the program’s list, documented by an engineer.
2. Property value against the state’s cap on the assessment.
3. Mortgage lender consent for every existing mortgage.
4. Property tax payment history and no outstanding tax liens.
5. The owner’s ability to carry the installment along with the mortgage.

Common deal killers

• No lender consent. Some senior lenders, including some securitized loans, will not accept a senior-ranking assessment.
• No active program in the county, even where the state allows one.
• Ineligible work. Cosmetic upgrades and tenant fit-out usually do not qualify.
• Assessment above the state cap relative to property value.

Where it wins and where it loses

C-PACE wins on new construction and major renovation where qualifying systems are a large share of cost, and for owners who want long fixed-rate money with no balloon. It replaces some of the mezzanine or preferred equity that would otherwise fill the gap above a construction loan. It loses when the senior lender will not consent, when the owner plans to sell soon to a buyer who will not accept the assessment, and on small projects where program and engineering costs eat the benefit.