Innovative Financing Solution for Large Development Projects
Introducing a Game-Changing Financing Option
PACE Equity has recently unveiled an innovative financing solution designed specifically for substantial development projects and recapitalizations. This new offering, tailored for projects seeking $50 million or more, addresses the challenges that come with funding large assets. By providing more competitive pricing and flexible prepayment options, it enables developers to navigate the complexities of the current commercial real estate (CRE) market effectively.
Addressing Financial Needs in the CRE Market
In today's evolving financial landscape, developers are often faced with the need for low-cost, short-term capital that can be readily refinanced. PACE Equity's solution is crucial in addressing this funding need, allowing developers to secure financing without prohibitive exit costs when market conditions shift.
Competitive Features of the Solution
Built upon the established Commercial Property Assessed Clean Energy (C-PACE) framework, this financing option serves as a cost-effective alternative to traditional bridge or mezzanine loans. It offers developers essential features such as fixed rates and the potential to defer payments for up to four years, effectively giving them the flexibility to complete construction, stabilize their assets, and implement business plans without undue pressure. PACE Equity can also provide funds during pre-construction phases, throughout construction, and even up to three years after the certificate of occupancy has been obtained.
Expert Insights from PACE Equity
According to Ethan Elser, the executive vice president at PACE Equity, there is a pressing need for flexible, short-term financing solutions due to the ongoing high interest rates and the imminent maturity of nearly $1 trillion in commercial debt. He emphasizes that their newly developed solution provides a highly attractive option for developers seeking to manage their financial obligations effectively.
Proven Success with a Recent Project
The value of this financing product has already been demonstrated with a successful funding of $63.3 million for a mid-construction luxury hospitality and mixed-use project in Deer Valley. The ambitious project includes a diverse array of amenities such as a golf course, Topgolf hitting bays, a opulent clubhouse, and exclusive community facilities designed to enhance the living experience. This financing represented over 40% loan-to-cost (LTC), showcasing how PACE Equity can bolster significant developments.
Welcoming Accessibility for Developers
As observed by Beau Engman, the president and founder of PACE Equity, the appeal of this financing lies in its scalability and flexibility. It is crafted to support both existing projects that are already underway and new developments that seek funding in today’s challenging capital market environment. This innovative approach helps to open doors for financing that may be otherwise closed for many developers.
Key Features of the Financing Solution
Several notable aspects make PACE Equity's large-asset C-PACE financing solution stand out:
- Flexible Prepayment Options: This product features a flexible exit strategy that allows for a 0% prepayment penalty after five years, with limited penalties applicable in the earlier years.
- Deferred Payment Flexibility: Developers can choose to postpone debt servicing for up to four years, providing critical time to focus on construction and leasing-up.
- Cost-Effective Alternative: The financing model presents a long-term, fixed-rate option at a lower cost, freeing developers from immediate refinancing pressure.
- Attractive Pricing Structures: Competitive spreads start in the high 200s over the 10-year UST, making it an appealing choice for financial planning.
Industry-Wide Momentum for C-PACE Financing
The introduction of large-asset C-PACE financing aligns with a broader shift in the industry, as C-PACE is now available in 40 states, gaining traction across various asset classes. As reported, total lending volume in this area approached nearly $10 billion by the end of the previous year, signaling its emergence as a popular financing route for extensive CRE projects nationwide.
About PACE Equity
PACE Equity stands as a leader in the C-PACE space, promoting direct lending solutions with a proven expertise that assures developers of their capital stack certainty. With nearly $1 billion already funded and a further $2 billion committed, PACE Equity provides long-term, low-cost, non-recourse financing strategies that not only enhance project returns but also help to drive them forward. Their commitment to binding resolutions and comprehensive management has earned them the trust of developers across the spectrum.
Frequently Asked Questions
What types of projects are ideal for PACE Equity's new financing solution?
This financing solution is well-suited for substantial developments and recapitalizations, particularly those with funding needs of $50 million or more.
How does this financing differ from traditional bridge loans?
The PACE Equity financing option offers fixed rates, lower costs, and flexibility in deferred payments, making it a more appealing choice compared to standard bridge loans.
What advantages does the prepayment structure provide?
Developers can customize their repayment strategy to suit their financial situation, with the ability to prepay without penalty after five years, aiding in cash flow management.
Why is C-PACE financing on the rise?
C-PACE financing is becoming increasingly popular due to its availability in 40 states and its ability to offer flexible capital solutions that cater to diverse commercial real estate needs.
How can a developer get started with PACE Equity?
Interested developers can reach out directly to PACE Equity to learn more about the application process and how to access this financing solution.
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