In order to meet the demand for green buildings, developers need to stand up


“The financial industry recognizes that PACE will persist as a form of commercial real estate finance,” said Lain Gutierrez, CEO of CleanFund based in Sausalito, California. “Apart from the public order benefits, it has an intrinsic value.”

In Columbus, Ohio, the developer Michael Tomko puts the finishing touches to the $ 22 million preservation of the $ 22 million Hayden, two adjoining office buildings vacant since 1869 and 1901 in Downtown Plaza, with government tax credits on historic buildings, tax breaks, and other funds.

“The challenge with these projects is to find all sources of funding,” he said. “But PACE was a big part of the package and it was a great fit.”

The momentum behind PACE is also attracting buyers for the loans. Like commercial mortgage-backed securities, PACE loans are pooled, rated by rating agencies, and sold as bonds to institutional investors. Nuveen, the asset manager of giant insurance and investment company TIAA, has acquired $ 225 million in PACE loans comes from Greenworks.

“PACE checks many boxes – it is a safe and secure investment, and its long-term maturity is well suited to fund our long-term debt,” said Chris Miller, Nuveen’s Director of Private Investments. “Nuveen and TIAA are also very advanced when it comes to things like energy savings and green issues.”

However, how PACE bonds would perform in an economic downturn is unknown. Given the expectation of an economic slowdown and the early stages of the PACE bond market, this is a current concern.

However, because PACE is valuation finance, it puts a lien on property, which means that the PACE loan takes precedence over a senior mortgage, said Kenneth Cheng, Senior Vice President, Morningstar Credit Ratings. Even if a PACE borrower defaults, senior mortgage holders, who have a much larger stake in the property than PACE lenders, have an incentive to pay missed reviews in order to maintain their collateral interest in the asset.


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