“Navigating Financing in an Uncertain Market” is the topic of a panel at Wednesday’s Orange County event, and PACE (Property Assessed Clean Energy) financing has emerged as a viable solution. Among the industry experts discussing this subject on Sept. 27 is Bali Kumar, COO of PACE Loan Group. In an interview with Connect CRE, Kumar shared his insights on the current state of PACE financing.
Q: Are borrowers becoming more receptive to PACE financing and do they have a better understanding of its benefits?
A: Yes, there has been increased awareness and acceptance towards PACE financing among borrowers. However, education still plays a crucial role as many are unfamiliar with it or view it as complicated due to its unique structure.
Despite this challenge, the market for PACE continues to grow rapidly every year. During times when traditional lending options are limited or expensive due to market conditions, borrowers turn to using PACE in their capital stack for more favorable terms.
For instance, we recently closed deals where banks were only willing to provide 55% loan-to-cost (LTC), but by utilizing both bank debt and additional funding from our program up until 70% LTC was achieved – bridging that gap between what banks would lend versus what borrower needed without having any equity dilution whatsoever!
In contrast during bullish markets where liquidity isn’t scarce anymore; people use our product not just because they need money but also because they want leverage! We’ve seen cases where lenders who would typically offer loans at say 70% LTC now allow their clients access up till even higher levels like say ~80%, thanks again largely thanks too us!
During COVID-19 pandemic specifically we had many inquiries about using our rescue capital aspect which allowed property owners reimburse themselves retroactively for work already completed such as energy efficient upgrades etc., freeing up cash flow & reserves while paying off over extended periods instead! This helped them stay afloat during these tough times. We have also seen an increase in inquiries for office buildings as well, where owners are looking to use PACE financing as rescue capital.
Q: So it seems like PACE has many advantages beyond just clean energy upgrades?
A: Absolutely! Our program offers the same benefits of traditional commercial real estate finance but with a “clean energy tint”. Interestingly, we don’t see many clients approaching us saying they want to do LEED Platinum projects; rather they come with their plans and specifications asking if they qualify for our program and how much funding can be secured through it. It’s worth noting that most developers nowadays build above code anyway so unlocking this additional source of capital is always welcomed!
Q: Do you anticipate wider adoption of PACE financing within the next year or so?
A: It’s difficult to predict at this time given the current state of commercial real estate market due COVID-19 pandemic. However, we believe that more people will become aware and utilize our product especially when faced with limited lending options in future.
Connect Orange County event will take place on Sept 27th at VEA | Newport Beach Marriott concurrently alongside Connect Healthcare Real Estate on Sept 27th & 28th respectively . Click here to register for Connect Orange County , while registration link for Connect Healthcare Real Estate can be found here .
