When rates were high and liquidity was tight, the CRE industry relied on C-PACE financing to get projects off the ground.
Today, with continued rate volatility, C-PACE has become a foundational building block for CRE capital stacks around the country. Leading C-PACE provider Nuveen Green Capital (NGC) is staying ahead of the competition with record-setting deals and a new partnership designed to help sponsors leverage the advantageous financing source for their projects. TRD sat down with Jessica Bailey, President and CEO of Nuveen Green Capital, for an inside look at the company’s growing C-PACE activity across the country.
Once A Necessity, Now An Attractive Option
As an architect of the first successful C-PACE framework, Bailey has been in the C-PACE space for the majority of the financing method’s existence, and has watched demand for it skyrocket in the low liquidity market of the last few years. With so many traditional lenders pulling back on the leverage they were willing to provide, borrowers were in need of alternative financing sources.
“That allowed C-PACE to come in as a nice complement to traditional bank financing because there’s been more room in the capital stack,” says Bailey.
The CRE industry has become accustomed to using C-PACE when building capital stacks. Now, as the market begins to thaw, borrowers, senior lenders and brokers are entering into this new reality with an increased awareness and understanding of the advantages of C-PACE. Even if C-PACE financing makes up less of a given capital stack in the future, the overall C-PACE market will continue to grow as more capital comes into play and more projects go into development.
“The increase in activity overall is a real tailwind for us,” says Bailey. “We’re starting to see projects that were put on the shelf 18 to 24 months ago because rates were too high that are now coming back to the market.”
Legislators Continue to Fall in Love with C-PACE
Because C-PACE financing is regulated at the state level, an easy way to track its popularity is by checking the number of states that have enacted legislation enabling C-PACE. As of this writing, C-PACE financing is available in 40 states, as well as the District of Columbia.
“The political environment for what we’re doing continues to be quite strong and growing,” says Bailey. “Essentially, C-PACE is a state policy shielded from federal oversight, as programs are established and managed at the state level through state legislation. What is really interesting is that it doesn’t only work in blue states, and it doesn’t only work in red states.
Beyond the environmental and financial benefits fueling demand, it’s also helping to bolster economic development by stimulating job growth, increasing property values, and driving local investment.
“It’s the type of purple policy that can work in any state,” she emphasizes, “whether in Florida for hurricane resiliency, or in California for earthquake hardening, or in Texas for water conservation – it’s continued to receive bipartisan support.”
NGC has been instrumental in not only bringing new states into the C-PACE fold, but also in working with individual jurisdictions to ensure that the regulatory environment for that program works effectively.
“The partnership really allows us to bring an attractive financing solution to the market that will drive growth for both of our businesses, but also drive smart, sustainable infrastructure,” says Bailey.
For example, Massachusetts recently changed its fee structure, making it more economical for a building owner to take advantage of C-PACE; New Jersey recently standardized its C-PACE regulations across the state; and New York amended its C-PACE rules to better meet market needs, including accounting for C-PACE transactions that involve ground leases. All of those changes are expected to remove obstacles and allow C-PACE to be used on a larger scale more efficiently and effectively.
“It’s a type of policy that meets the needs of policy makers on the ground,” explains Bailey.
New Partnership Capitalizes on C-PACE Growth
To capture the increased demand for C-PACE financing, NGC and CDPQ, a Canada-based global investment group, recently launched a $600 million integrated financing program for sustainable commercial real estate development that will combine senior and C-PACE financing. The innovative program will provide a one-stop shop for bridge and construction loans to meet the growing demand for sustainable commercial real estate financing.
“The partnership really allows us to bring an attractive financing solution to the market that will drive growth for both of our businesses, but also drive smart, sustainable infrastructure,” says Bailey.
The competitive, single-source program will provide a substantial source of flexible, committed and discretionary capital for new large-scale construction and bridge financings across key asset classes and markets.
“Developing greener buildings and reducing the carbon footprint of our built environment can create significant value,” says Marc Cormier, Executive Vice-President and Head of Fixed Income at CDPQ. “We are excited to combine our long-term capital with NGC’s extensive expertise to offer a sustainable integrated financing solution that fully aligns with CDPQ’s climate strategy and commitment to decarbonize the real economy.”
Recent Deals Open New Territories, Break Records
The firm recently closed on a $76.2 million financing package for the luxury Bishop’s Lodge Auberge Resort in Santa Fe, New Mexico. The borrower was motivated to use C-PACE to refinance the existing senior loan on the property, and they used the financing to recapitalize energy and water efficiency improvements that were part of the hotel’s $127.2 million renovation, which began in 2021.
The project, which marked the first-ever C-PACE financed deal in the state of New Mexico, is especially significant in light of NGC’s involvement in getting C-PACE put in place in new markets.
“It’s always great for us, once we help to get a policy passed, and all the hard work that goes into the legislative side of that – to then follow that up with a really exciting project,” says Bailey.
NGC also provided $40 million in C-PACE capital to VivaVerse Solutions to finance the conversion of the former Compaq Computers and Hewlett-Packard Enterprise office headquarters in Houston to a data center. As data centers experience a boom driven in part by the proliferation of AI tech, C-PACE funding is positioned to be a crucial piece of ensuring these facilities are built and operated in a sustainable manner.
“Partnering with Nuveen Green Capital has been instrumental in aligning our advanced sustainability objectives with our investment returns, setting a new benchmark for efficiency and performance in data center development,” says Freddy Vaca, President of VivaVerse Solutions.
Most recently, NGC closed a $220 million C-PACE financing deal with Jay Paul Company for 200 Park Avenue in San Jose, California, making the financing the second-largest C-PACE financed transaction in the US to date. The LEED Gold certified class-A office building anchors the city’s cultural district, and the sponsor was able to refinance their existing construction loan with flexible C-PACE financing from NGC and continue to execute their business plan.
“C-PACE has been instrumental in enabling projects that might not have been feasible otherwise,” concludes Bailey. “We’re seeing significant and sustained growth in the C-PACE market. Our efforts as a firm have positioned C-PACE as a recognized solution within the CRE industry, and we anticipate this momentum to continue through 2025. As more lenders reenter from the sidelines and deal volume expands, we’re confident we’ll maintain a meaningful percentage of that deal volume, working with more lenders to provide attractive capital.”
To join the growing list of developers taking advantage of C-PACE’s attractive financing, visit Nuveen.com/greencapital today.