My Lender Said “NO” to CPACE
With more than five years of experience deploying Commercial Property Assessed Clean Energy (C-PACE) capital for commercial real estate projects nationwide, the typical response that I get from new clients is, “we’ve looked at C-PACE, and would like to figure out a way to leverage it.”
This is quickly followed by, “unfortunately, my lender said no.”
As an emerging form of capital, our clients and the consenting lenders who leverage C-PACE are considered to be early adopters of the financing tool. With that in mind, let’s not beat around the bush. Lenders instinctively do not appreciate other forms of financing that impact their risk profile, right? In our experience, the no that lenders give is a knee-jerk reaction that should not discourage real estate owners or developers from pursuing C-PACE. A large percentage of lenders we work with start with no, but we have been able to gain consent from a variety of lenders across the country.
So, what is the trick to getting lender consent?
First and foremost, as the real estate owner or developer, you must be committed to incorporating C-PACE into your capital stack! If C-PACE is just an experiment that you are not fully committed to, lenders will not advocate on your behalf. In order to clearly convey your commitment to C-PACE, we recommend that commercial real estate clients approach lenders with C-PACE pre-baked in the capital stack, appropriately modeled in the proforma, and laid out transparently in the Offering Memorandum. Most importantly, make it clear to lenders that you are requesting financing terms that acknowledge C-PACE.
Next, let your C-PACE capital provider support you. At Lever Energy Capital, we ask for a commitment to C-PACE from our clients but will take on the heavy lifting when it comes to managing the lender consent process. I’d like to note that the topic of C-PACE should not be a contentious conversation with your lender. Generally, as with most professional conversations, all involved parties show an open mind and a willingness to learn.
In our experience, lenders have been open to C-PACE, particularly if it is demonstrated appropriately and will help a lender keep or gain a new business relationship! Further, as Lever scales nationally, we have found more “C-PACE friendly” lenders proactively engaging with us to earn business. These forward-thinking lenders have realized that early acceptance, and understanding of the economics surrounding C-PACE, will give them an advantage.
So, next time your lender says no to C-PACE, consider brushing it off. Even better, give me a call and I can help you position C-PACE appropriately with your lender. Alternatively, I can assist in identifying a lender that is open to consenting to C-PACE. Lever’s C-PACE capital is too accretive to not incorporate into the capital stack, so why not engage experts to implement an effective C-PACE strategy!
I look forward to hearing from you and discussing your next project. Please call me at (720) 219-8340 or email at email@example.com.
About the Author
Joel Poppert serves as the Senior Vice President of Lever Energy Capital, overseeing the company's general strategy as well as deal origination and execution.
About Lever Energy Capital
Lever Energy Capital is a Denver-based Commercial Property Assessed Clean Energy (C-PACE) financier. Through the strong economics of C-PACE financing, the company strives to optimize commercial real estate assets while positively impacting profit, people, and the planet. Among the largest national C-PACE funds, Lever finances commercial real estate across all C-PACE programs in the United States. To learn more about Lever Energy Capital, visit the company’s website at www.leverec.com.