Mortgage Holders

RI Commercial Property Assessed Clean Energy (C-PACE) is a financing program for commercial, industrial, agricultural, non-profit and multifamily (with 5 or more units) properties. C-PACE gives building owners owners access private-sector financing to upgrade their building with energy efficiency, clean energy, and water efficiency improvements. With C-PACE, building owners receive up to 100 percent financing with attractive repayment terms consistent with the useful life of the improvements (up to 25 years). This typically enables them to undertake larger building modernization projects that addresses multiple deficiencies.

In well-designed C-PACE projects, the energy cost savings exceed the PACE payments, creating a cash-flow-positive project. By using C-PACE, building owners can reduce their operating costs, improve the value and competitiveness of their building, meet energy performance goals, and increase their cash flow. C-PACE is also available to developers with new construction projects if they design their building to exceed current energy codes.

Repayment is facilitated through the municipal property tax assessment process. A voluntary assessment (similar to a sewer district assessment) is placed on the building owner’s property tax or other municipal bill. The assessment is repaid over the financing term (up to 25 years, project dependent) and the annual energy cost savings will, in most cases, exceed the annual assessment payment. As a result such projects are typically cash flow positive in the first year. Because the C-PACE assessment obligation runs with the property, the assessment automatically transfers to the next owner when the property is sold.

C-PACE project financing is repaid via a voluntary assessment (lien) placed on the property by the municipal tax assessor and assigned to the financial institution that provides financing for the energy efficiency improvement project.  Since the C-PACE assessment has priority lien status, similar to a sewer assessment, the existing mortgage holder will be asked to provide its consent to the C-PACE financing. Such consent is entirely voluntary on the part of the mortgage holder.

There are multiple steps that will involve the mortgage holder:

1. Once a building owner determines that a building modernization project may enhance their building’s asset value (collateral) and cash flow (improved mortgage repayment ability), he or she will seek a preliminary meeting with the mortgage holder to review the opportunity.

2. At this first meeting, the owner and a representative of the C-PACE program administrator, will describe the program’s requirements and answer any questions. In particular they will discuss the 3^rd party technical review process to validate the projected energy savings and related key financial metrics associated with the project.

3. Assuming the mortgage holder does not object, the C-PACE program administrator will collaborate with the owner and the owner’s C-PACE registered contractor to develop and optimize the project to ensure it meets program requirements. See C-PACE Program Guidelines for more information.

4. The project development and optimization process includes the creation of a C-PACE Project Finance Report. This report is the culmination of a comprehensive process that includes input and reviews by the owner, contractor and the program administrator. The end product is a carefully designed, optimized project that meets all the requirements of the program.

5. At a second meeting with the mortgage holder this Project Finance Report will be reviewed in detail and a formal request for consent will be made by the owner.

The majority of C-PACE projects generate positive cash flow based on the energy savings. For this reason C-PACE projects typically have a positive impact to a mortgage holder’s key questions – What is the project’s impact to:

• Borrower’s repayment ability?
• Collateral value?

To support mortgage holder project evaluations, the C-PACE program administration team provides an independent 3rd party review of the technical and financial projections. Such review is consistent with industry best-practice methodology as defined in the Environmental Defense Fund’s Investor Confidence Project protocol. Moreover, the C-PACE team leverages its proven project optimization tools and extensive “project experience” databases to facilitate quality assurance across the project development life cycle.

Given the cash flow generating characteristics of C-PACE projects, over one hundred and fifty mortgage lenders nationwide have consented to C-PACE projects as of July 2017.  See a list of consenting lenders from a PACENow Lender Consent Study.

Under the RI C-PACE Statute, the C-PACE special assessment is subject to the same penalties and the same procedures in the case of delinquency as is provided for through ad valorem (i.e. property) taxes. The C-PACE assessment has priority over all private liens on the property, is of equal priority to other special assessments, and is junior in priority to general property taxes.

After a competitive bidding process, the RIIB selected Sustainable Real Estate Solutions, Inc. (SRS) to be the RI C-PACE program administrator.

While many building owners need to upgrade their buildings, too often financial constraints get in the way.  C-PACE financing solves the financial issues by providing: 100 percent financing for a term consistent with the useful life of the improvements, generally up to 25 years. The benefits include:

• Competitive, fixed interest rates
• Zero out of pocket expense
• Qualification for financing is based on the building’s financial health, and, as a result, the owner is not required to sign a personal guarantee
• Decreased utility expenses from reduced electricity, fuel and water usage produce cash flow positive projects
• C-PACE assessment payment obligation transfers to the new owner when the property is sold

Given the extraordinary benefits of C-PACE financing, owners and contractors can expand any energy related plan to include renewable energy equipment, water conservation measures, asbestos abatement and other related environmental health and safety improvements.

No. C-PACE uses private capital to fund every project.  Visit the Capital Providers page of this website for a current list of capital providers participating in the C-PACE program. The cost to administer the program is paid by program participants through a Program Administration fee that is included in the total cost of each project.

Building owners are encouraged to consult their accountants on this matter.

There has been no specific ruling by the Financial Accounting Standards Board on this issue.

Upon closing of C-PACE financing, the program administrator instructs the municipal tax assessor to record an assessment (lien) on the municipality’s land records

Yes. Owners who choose not to participate remain unaffected.

Qualifying for C-PACE financing is based on the property, and not the owner. The C-PACE program administrator will look at:

• The property’s estimated market value (assessed or appraised)
• The amount of the owner’s equity in the property
• The owner’s recent mortgage and property tax payment history
• The dollar value of the proposed energy and/or water-saving improvements.

Visit the Participating Municipalities page for a current list of municipalities participating in the C-PACE program. The program administrator can accept applications only from owners with properties located in a municipality that has opted in to the C-PACE program. If you have questions about getting any municipality to join C-PACE, email info@RI-CPACE.com.

C-PACE projects typically range from $200,000 to more than $1 million. Constraints on the amount are driven by the financial health of the building and include:

• Building financials
• Loan-to-value percentage (<80 percent LTV is preferred)
• Other considerations of the mortgage holder.

To ensure the best possible terms, including interest rate and other fees, the building owner can review term sheets from multiple private capital providers, facilitated by the program administrator, to select the best fit.

Repayment periods can be 10, 15, 20, or 25 years, depending on the owner’s preference, and are limited by the weighted average effective useful life (EUL) of the financed improvements.

Property owners are encouraged to pursue available federal investment tax credits (ITC), utility rebates, and all other available incentives. All or a portion of total incentives may be subtracted from the amount financed under the C-PACE program.

Each C-PACE participating private capital provider sets its own terms, including pre-payment, in its financing agreement with the building owner. It is common for C-PACE capital providers to include a pre-payment fee schedule.