Not too long ago, if you mentioned C-PACE in a commercial real estate context, you’d have to explain what it meant. Times have changed.
We’re in the moment: C-PACE has gone mainstream. Developers, owners, even traditional lenders now view it as a fixed-rate, non-recourse, low-cost capital solution that has the flexibility to serve as a bridge or permanent financing piece. It’s incredibly versatile and complements almost any capital stack. It’s an attractive tool, but there’s a lot more to it than just low-cost financing.
Petros PACE Finance has evolved over the past several years to become one of the nation’s leading C-PACE lenders, not because the product is a magic bullet, but because we remain discerning, collaborative, creative, and laser-focused on delivering maximum value and certainty of close to our borrowers and our deal partners like co-lenders, mortgage brokers and consultants.
Today, C-PACE is incorporated more frequently in the capital stack. But the real question is: Is it being deployed to its highest potential?
C-PACE is powerful, but it isn’t plug-and-play or one-size-fits-all. Maximizing its value requires deep real estate and financial structuring expertise – the kind that understands where it fits in a capital stack, how it supports a business plan, how it interacts with co-lenders and how to use it to amplify ROI. It’s real estate financing that anticipates and meets the needs of clients and partners. And this approach has roots in what has become one of our most active and high-potential sectors — hospitality.
There’s no mystery as to why C-PACE resonates in hotel development. As HotelBusiness.com notes:
“As developers seek to mitigate the challenges of higher interest rates, CPACE financing has become increasingly important…The growth of CPACE in hotel lending has led senior lenders to incorporate it into their capital stacks, thereby reducing their risk exposure while supporting energy-efficient projects.”
Petros began to see an uptick in hospitality volume around 2020, and the trend shows no signs of slowing. Today, hospitality represents approximately one third of our total volume, and our work in the sector has included some standout transactions. Each presented unique challenges and opportunities that demanded real structuring expertise, allowing us to deploy C-PACE in a more meaningful and effective way. Two recent examples illustrate how thoughtful use of C-PACE can unlock substantial value.
Marriott/Sheraton Palmetto – New Construction and Rebrand
For the Palmetto Marriot Resort & Spa in Palmetto, Florida, C-PACE played a central role in both the economics and the execution of the project, from initial construction and through a rebrand. The original transaction financed a portion of the new construction of the 252-room Sheraton property, with $30.6MM in eligible efficiency measures supported through C-PACE financing, roughly 36% of the cost to build, along with the balance of the debt provided by a regional bank.
During construction, the business plan shifted, requiring additional funds to effectuate the upgrade of the property flag to a Marriott Resort & Spa. Our ability to work with our engineering partners to identify additional eligible C-PACE measures within the new scope and provide a second funding created a solution that worked for both the borrower and the in-place mortgage lender. Not only were they better positioned to generate a higher RevPAR, but they were also able to maximize C-PACE as the lowest-cost capital in the stack, helping to minimize equity infusion and move the project forward without delaying construction.
Results included:
- Secured lower-cost construction-to-perm capital that is non-recourse upon completion.
- Locked in a more efficient capital stack and long-term interest rate hedge for enhanced stability.
- Installed energy-efficient measures that boost investor appeal while meaningfully reducing the project’s carbon footprint.
AC Hotel Knoxville – Our First Unitranche Deal
For the new 161-key AC Hotel by Marriott in downtown Knoxville, Tennessee, Petros partnered with construction lender, MidCap Financial, to deliver our first-ever unitranche structure – a single-source stretch senior financing solution combining both C-PACE and first mortgage execution for 75% total loan-to-cost. This coordinated approach simplified sizing, structuring, pricing, and diligence, accelerating the process for all parties and demonstrating our commitment to product innovation and collaborative, custom structuring.
To better align with the construction schedule and anticipated draw down of funds, C-PACE funded in tranches, helping to also reduce interest carry.
Results included:
- Cost-effective, non-recourse construction debt aligned with development and operational goals.
- Seamless sourcing and execution of the stretch senior financing along with coordinated disbursements during construction.
- Energy-efficient measures that lower operating costs, minimize water waste, and reduce the carbon footprint.
As we look back across our hospitality transactions, the checklist of objectives met is long. But the shorthand is simple: C-PACE enables Petros to deliver affordable, flexible capital – and our structured real estate expertise transforms that capital, using it to optimize our clients’ borrowing experiences and project outcomes.
We dig into each project, determine where C-PACE can unlock the greatest value, and build a custom structure around it. That creative layering doesn’t happen by accident; it comes from a team that understands real estate and capital markets inside and out.
Yes, everyone has heard of C-PACE now. But C-PACE on its own isn’t the secret weapon.
Execution by an experienced, knowledgeable team is.