Nuveen Green Capital aims to make C-PACE a foundational piece of every capital stack

In a year of volatility for CRE lenders, Nuveen Green Capital was writing nine-figure checks for commercial real estate projects in 2023, and they’re just getting started.

The firm’s pioneering C-PACE (Commercial Property Assessed Clean Energy) funding model, which leverages private capital to fund building improvements and new construction, thanks to a special property assessment, has gone from a small piece of a typical capital stack to being the crucial element in getting projects off the ground. 

Heading into 2024, the firm is looking to pump even more capital into the commercial real estate sector with the help of law firms who specialize in commercial real estate. In the third part of our series covering Nuveen Green Capital, we spoke with Aaron Kraus, the firm’s VP of Market Development and Strategy, and a Partner at the law firm Frost Brown Todd, Harlan Robins, to learn how C-PACE funding is reshaping the way commercial real estate construction is funded.

The C-PACE Advantage

Last time we checked in with Nuveen Green Capital, the firm was seeing a rise in demand for their C-PACE financing due to the tightening of the lending market. Since we spoke in June, the Fed has raised interest rates yet again, making programs like C-PACE, with its low cost, long terms and fixed rates, even more attractive to developers in search of capital. 

Thanks to the unique nature of the C-PACE tax assessment structure, Nuveen Green Capital is able to offer competitive rates on loans for qualifying construction projects. 

Key to the financing mechanism is the social responsibility element of C-PACE, which exists to facilitate the transition of the built environment to using clean energy. “To qualify for funding, a project must meet certain water conservation, energy efficiency and renewable energy standards, incentivizing responsible and forward-thinking design at no cost to taxpayers,” notes Robins.

Robins also praises the versatility of C-PACE. While Nuveen Green Capital aims to make its funding a foundational part of new developments and major recapitalizations, C-PACE began as a way to help retrofit existing buildings at a very small scale, facilitating incremental improvements to our built environment by breaking down capital barriers. 

Kraus, who’s worked in the C-PACE industry for over seven years, marvels at the expansion in the program’s capabilities. “What started as a way to do boiler swap-outs in mid-market office buildings for $300,000 has matured and gotten incredibly sophisticated,” he says. “Five years ago, no one would have thought we’d be regularly writing $150 million checks for single deals.”

“We’re the Popular Kid at the School Dance”

All these factors are making Nuveen Green Capital’s C-PACE funding a larger and larger part of making deals happen in the first place. “It’s a very different market than we were in 24 months ago,” says Kraus. “As we look to 2024, getting deals done will require creative and proactive capital stacks. The traditional 65% debt, 35% equity deals just won’t pencil. Sponsors need execution certainty and they want fixed-rate debt in this environment.”

Nuveen Green Capital’s C-PACE funding can be part of a matrix of historic tax credits, state abatements, and other funding methods that sponsors are putting together to fund their projects. “That’s what it’s going to take to get commercial real estate deals done in the next year, and probably for the foreseeable future,” notes Kraus, who says that his firm’s explicit goal is to make C-PACE funding a default financing source for all commercial real estate. 

Nuveen Green Capital has invested billions of dollars of C-PACE capital into the commercial real estate market. The firm’s parent company, Nuveen, has over a trillion dollars in assets under management, which gives Nuveen Green Capital a massive well to draw from when adding to capital stacks around the country.

The firm recently closed the largest C-PACE transaction in Texas history – a Curio Collection by Hilton Hotel in San Antonio, TX. “It’s a ground-up development of a 17-story, luxury, full-service hotel in the city’s Hemisfair District – the redevelopment of the 1968 World’s Fair site,” said Kraus. “In the current lending environment, C-PACE offers the most attractive construction debt in the market and is increasingly being used as the foundation of the construction capital stack. This project is a perfect example of how C-PACE financing can help buildings achieve sustainability goals, while also reducing operating expenses and helping to improve the local community and economy – and all of this is possible at no cost to taxpayers.”

Bring C-PACE to Your Project

C-PACE funding is an increasingly in-demand financial product for developers around the country. Nuveen Green Capital currently lends in 32 states and D.C., with further expansion on the horizon as more states pass C-PACE legislation.

Kraus describes Nuveen Green Capital as “one door” to go into for C-PACE financing, no matter which market you find yourself building in. “The C-PACE guidelines are different in Westchester, New York, and Lexington, Kentucky,” explains Kraus. “We’ve done hundreds of deals across these markets, and our experience and expertise matter to sponsors across the country when they’re looking for funding and certainty of execution.”

Another part of the equation are firms like Frost Brown Todd, which specialize in helping clients secure Nuveen Green Capital’s loans. They’re experts in C-PACE and have even helped draft some states’ C-PACE statutes. When sponsors come to them in search of funding sources, Frost Brown Todd’s offices around the country are increasingly putting them in touch with Nuveen Green Capital, which works with the client to help them qualify for C-PACE funding.

“Every time I’ve come to Nuveen Green Capital and asked them, ‘Could we do this?’ they’ve come back with a solution,” says Robins. “Now we’re trying to get people to think about C-PACE as part of their capital stack from the very beginning.”

If you’d like to learn more about C-PACE financing, visit Nuveen Green Capital’s site or reach out to Aaron Kraus, VP of Market Development and Strategy directly: aaron.kraus@nuveen.com.