As more and more commercial property owners and investors are discovering, PACE funding is here to stay. Lenders, too, are using the financing tool to help their borrowers, and are innovating how capital stacks are built.
What started as a local financing tool for green building improvements has become a multi-billion-dollar market and a crucial piece in capitalizing many developments. Bayview PACE, an affiliate of Bayview Asset Management, LLC, has become a leader in the C-PACE industry thanks to its ability to fully fund major projects from its own balance sheet. Along with sharing the latest updates on this popular program, we’ve included case study breakdowns on a pair of landmark Bayview PACE projects that represent how far this financing tool has come as a key tool for commercial real estate funding.
Proven finance tool gaining fans
C-PACE is a locally-administered financing mechanism that allows commercial property owners to borrow capital for a variety of commercial building improvements, building upgrades and resiliency components from private lenders, and pay that back through a special assessment on the property’s tax bill. C-PACE funding does not involve government sources.
While initially designed to finance small-scale upgrades like rooftop solar arrays, the use of C-PACE (Commercial Property-Assessed Clean Energy) financing has expanded thanks to lower interest rates and longer repayment terms compared with other financing options.
The PACE industry roared to life in the mid-2010’s as more states passed legislation enabling its use. Simultaneously, other financing methods became less attractive as interest rates spiked, making PACE even more desirable by comparison.
“The continued growth in C-PACE lending—especially the $2.5 billion transacted in 2024 alone—underscores the increasing confidence that property owners and capital providers have in the program,” says Cliff Kellogg, former Executive Director of the C-PACE Alliance. “Since its inception, C-PACE financing has now surpassed $9.8 billion, a milestone that highlights its expanding role in the market.”
A mature market
With average transaction sizes growing substantially larger, “it’s marking the market’s maturity and the growing adoption of C-PACE for larger, more complex projects,” as Kellogg puts it.
Bayview PACE stepped into the market with confidence, becoming a top provider in the space. As an affiliate of Bayview Asset Management, LLC (BAM), a 32-year-old investment management firm with over $21 billion in AUM—Bayview PACE benefits from BAM’s resources and expertise.
“For PACE to make sense for the borrower, it’s got to be accretive, in that we’re either increasing the leverage, lowering the cost of capital, or filling the hole in the capital stack,” explains Anne Hill, SVP and Head of CPACE at BAM. “We saw this as a very attractive opportunity that drew upon resources already existing within Bayview’s platform.”
Breaking records in Cocoa Beach
Bayview PACE is on the frontlines of partnering with banks, which prefer PACE to widely marketed loan syndications. This advantage was on full display with the Westin Resort & Spa in Cocoa Beach, FL, a landmark development poised to become an iconic destination on the Space Coast.
For this ambitious $420 million development, Bayview PACE provided $137 million in C-PACE financing, working alongside City National Bank (CNB), which contributed $70 million in senior construction financing. This allocation marks the largest-ever C-PACE deal in Florida, and the third largest in the U.S. hospitality sector.
“PACE is becoming more institutionalized in development deals due to dislocation in the capital markets,” says David Steiner, Partner, Managing Director of Capital Markets for Driftwood Capital, the project’s sponsor. “CNB had done PACE in the past and was collectively able to structure the deal to apply PACE dollars through tranches.”
The use of tranches was a key innovation in the Cocoa Beach deal.
“We funded our $137 million over five different tranches,” explains Hill, “which effectively helps the borrower reduce their interest expense on the deal significantly.”
This approach, which is becoming increasingly common in larger PACE deals, demonstrates Bayview PACE’s flexibility and commitment to providing efficient financing solutions for their clients by minimizing interest carry costs.
Bayview PACE makes projects happen
In a tight financing market, PACE can be the deciding factor in a project getting off the ground in the first place. Take The Renegade, a $127 million student housing complex located next to Florida State University in Tallahassee, FL.
The project sponsor needed a smart capital structure for the development to reduce the weighted average cost of capital. Working with their broker to analyze several debt and equity options, the team elected to work with the wider Bayview group to close a critical gap in funding for the project with blend of a $15.5 million C-PACE loan from Bayview PACE and a $48 million construction funding from Oceanview Life and Annuity Co., an affiliate of BAM. Because the project was already eligible for the program, PACE financed the components of the project related to energy usage and efficiency without requiring any design changes.
“We believe there are a number of companies facing delays if not hitting ‘pause’ on their projects,” said Matthew Philip, the NY-based Head of Commercial Lending for BAM. “Our loan-combination can help optimize the financing structure and get things back on track.”
This combined approach, representing approximately 60% of the loan-to-cost, streamlined the draw process thanks to being provided by one servicer, facilitating the timely completion of the complex to ensure that it was ready for the 2023/2024 school year.
Looking forward
PACE has become a mainstream financing tool across the country, with more banks consenting to use it and the average deal size growing each year.
In June 2024, North Carolina became the 40th state to allow C-PACE. New Hanover County officially opted in and other jurisdictions are following suit. Additional states are eyeing C-PACE as well.
“This ongoing momentum signals that C-PACE is becoming a key part of commercial real estate financing strategies nationwide,” says Kellogg.
To learn more about Bayview PACE, visit the company’s website.
About Oceanview Life and Annuity Co. Oceanview Life and Annuity Company (“Oceanview Life”) is an insurer based in Phoenix, AZ rated A- by AM Best and is a wholly owned subsidiary of Oceanview Holdings Ltd. Oceanview Life provides high-quality retirement products and services to its policyholders and maintains financial protection over the life of their policies. Oceanview offers fixed annuities that are distributed through networks of agents, banks, and broker-dealer intermediaries in select states. Oceanview Life takes a low-operating-cost approach, and follows a thoughtful and opportunistic investment approach emphasizing US residential and commercial mortgage markets.
About Bayview PACE Bayview PACE offers creative financing solutions that combine construction, bridge and CPACE lending. Unlike most PACE-only providers, Bayview PACE works with commercial property owners and developers to provide a full capital stack solution. Bayview PACE is a division of Silver Hill Funding, LLC. NMLS# 1564077 www.nmlsconsumeraccess.org Please visit www.bayviewpace.com.