Hybrid C-PACE Taking Hold as CRE Financing Strategy: Marcus & Millichap
June 20, 2023
The increased use of Commercial Property Assessed Clean Energy (C-PACE) financing as an alternative debt strategy is taking on more creativity in a blended form.
Hybrid C-PACE financing, which combines C-PACE loans with senior mortgages, is gaining steam with sponsors seeking lower borrowing costs in a higher interest rate environment, according to a new report from Marcus & Millichap’s Institutional Property Advisors (IPA) division. The report was shared exclusively with Commercial Observer.
The strategy involves raising a subset of funds to originate senior financing to go on top of the C-PACE financing.
“It gives you another arrow in your quiver to potentially put together a stack that may be relatively more difficult to raise in the more traditional financing market,” Steven Buchwald, senior managing director at IPA and author of the report, told CO. “As rates have gotten higher and higher, it’s become a more and more reasonable alternative to utilize.”
The properties are approximately one mile apart and are offered for sale as individual assets or as a portfolio.
Buchwald noted that lenders in a hybrid C-PACE deal can benefit from a higher yield in the partnership, which can enable lenders to take on a little more risk on the senior piece of the deal. He said the trend began to take hold in late 2022, especially for construction loans or renovation projects.
Read the full story in Commercial Observer
Hybrid C-PACE financing, which combines C-PACE loans with senior mortgages, is gaining steam with sponsors seeking lower borrowing costs in a higher interest rate environment, according to a new report from Marcus & Millichap’s Institutional Property Advisors (IPA) division. The report was shared exclusively with Commercial Observer.
The strategy involves raising a subset of funds to originate senior financing to go on top of the C-PACE financing.
“It gives you another arrow in your quiver to potentially put together a stack that may be relatively more difficult to raise in the more traditional financing market,” Steven Buchwald, senior managing director at IPA and author of the report, told CO. “As rates have gotten higher and higher, it’s become a more and more reasonable alternative to utilize.”
The properties are approximately one mile apart and are offered for sale as individual assets or as a portfolio.
Buchwald noted that lenders in a hybrid C-PACE deal can benefit from a higher yield in the partnership, which can enable lenders to take on a little more risk on the senior piece of the deal. He said the trend began to take hold in late 2022, especially for construction loans or renovation projects.
Read the full story in Commercial Observer
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About Institutional Property Advisors (IPA)
Institutional Property Advisors (IPA) is a division of Marcus & Millichap (NYSE: MMI), a leading commercial real estate services firm in North America. IPA’s combination of real estate investment and capital markets expertise, industry-leading technology, and acclaimed research offer customized solutions for the acquisition, disposition and financing of institutional properties and portfolios. For more information, please visit www.institutionalpropertyadvisors.com.