C-PACE Use for Multifamily: Q&A with EcoSmart Solution’s Lucas Nagy

Features March 7, 2025| | Amy Wolff Sorter

Commercial Property Assessed Clean Energy (C-PACE) financing was introduced in California in 2008 through the passage of Assembly Bill 811. Since then, other states have passed their own C-PACE legislation. C-PACE financing is available in 33 states, and five more have approved enabling legislation.

Connect CRE recently asked Lucas Nagy, vice president of structure finance with EcoSmart Solution (Taurus Investment Holding’s energy platform), to discuss the connection between C-PACE financing and multifamily construction and improvements.

Connect CRE: How does C-PACE differ from other forms of financing, such as banking, private funds or mezzanine loans?

Lucas Nagy: Unlike other types of property-secured debt, C-PACE is, by statute, property assessment financing. Property assessments run with the land, with principal repayments non-accelerating. These features provide accounting and transactional flexibility for multifamily property owners. In fact, C-PACE is helpful for multifamily projects, as it can provide 100% project financing with amortization and rate terms similar to mortgage financing but without having to refinance a senior mortgage.

Additionally, C-PACE can be used for new construction in most states. The financing can enhance project leverage, while repayment structuring options can improve proforma equity returns. For example, think 10-year interest-only followed by 20-year amortization.

Connect CRE: What are the typical projects that C-PACE financing covers?

Lucas Nagy: In most states, C-PACE is approved for energy efficiency, renewable energy projects, building modernization and climate resiliency. For example, in California, C-PACE can be used for improvements to boost wildfire and earthquake resiliency and sustainability enhancements such as water-use reduction, geothermal exchange for HVAC and onsite solar electricity generation.

Connect CRE: Are there challenges associated with C-PACE?

Lucas Nagy: The primary barrier is that most states require senior lender consent for voluntary property tax assessments. If the lenders view C-PACE-funded improvements as increasing their collateral value after reviewing the projects, they often approve assessments. Other good news is that the list of C-PACE-approving vendors continues to expand. Additionally, C-PACE financing starts making sense for projects above $2 million.

Connect CRE: What else can you add?

Lucas Nagy: First, property NOI is enhanced for any multifamily energy efficiency and solar project in which the annual cost of the C-PACE assessment is less than the energy savings those improvements provide.  NOI enhancement means potentially higher property value. If the numbers make sense,  don’t wait to implement your improvements; any delay might leave money on the table.

Second, while C-PACE is considered long-term financing, it can be refinanced in most states. One beneficial strategy in high-interest rate environments is negotiating better prepayment terms after 36 months.