BLENDING C-PACE WITH CONSENTING SENIOR MORTGAGE PROVIDERS CAN CREATE STRUCTURED PRODUCTS THAT SECURE LIQUIDITY , OFFSET RECOURSE RISK AND OFFER A MORE ATTRACTIVE , BLENDED COST OF CAPITAL .
– MATT RAPTOSH assumable and transferable , and they cannot accelerate a foreclosure . Blending C-PACE with consenting senior mortgage providers can create structured products that secure liquidity , offset recourse risk and offer a more attractive , blended cost of capital .
Depending on the state , C-PACE can also be used retroactively to look back at qualifying improvements made to a project and then provide the same financing . Most states feature a two- to three-year lookback from the date a property received its Certificate of Occupancy , allowing developers to reduce the new debt needed to take out their construction financing . In the right situations , C-PACE liquidity can be secured despite challenges posed initially by the pandemic and now by the potential recession .
C-PACE has proven to be a very useful tool for development deals and for distressed projects , and it can be paired with senior mortgages , mezzanine debt , other government lending products and more .
C-PACE continues to pick up momentum : new states are exploring adopting C-PACE legislation and existing states are continually improving their programs to make this financing even more potent and sponsor-friendly .
An example of C-PACE financing success was the gut redevelopment of the
Breakers Hotel & Spa , in Long Beach , Calif ., after the COVID-19 pandemic had interrupted the availability of construction financing for this future Fairmont hotel . A C-PACE loan was paired with a senior mortgage to finance 100 % of total project costs , inclusive of work already completed . Because the two sources of C-PACE and senior debt were nearly identical in size , the sponsor enjoyed a well-priced blended cost of capital .
In summary , C-PACE has proven to be an advantageous product for hotel development , but it is just one of several . In tougher markets , such as today ’ s , sponsors should arm themselves with an array of both conventional and less mainstream executions .
Jan / Feb 2023 hotelsmag . com 63