By Mansoor Ghori, CEO, Petros PACE

I just returned from several days at the Structured Finance Association’s annual conference in Las Vegas, where I was on an industry panel discussing the impact of C-PACE financing on sustainability initiatives across the commercial real estate industry.  While I enjoy speaking in these formal settings, I find that the real benefit of attending industry gatherings is in the informal discussions — and we had many, with a range of investors, bankers, sponsors, developers, and other industry players across a range of topics. No subject was more prevalent or urgent than the discussion around the chilling effect of higher interest rates on financing new or existing projects.

The C-PACE industry – the entire structured finance community – has been through a lot these past few years, navigating the impact of the pandemic and resetting with a “new normal.”   In many ways the C-PACE industry emerged post-pandemic stronger than before, as the pull back in traditional lending sources combined with a renewed vigor around ESG and sustainability initiatives drove increased awareness and acceptance of the benefits of C-PACE financing.  At Petros, with our large and incredibly strong balance sheet, we reaped the benefits of the increased importance on certainty of close and financial flexibility.  C-PACE came of age.

Today’s environment – full of page-one stories of large scale commercial real estate bankruptcies and failed refinancings – presents yet another test for the industry.  What lessons can we learn from the pandemic and from previous tight credit environments?  How can developers, owners, and lenders work to mitigate the potential risks of refinancing the capital stack?  How can underwriting standards be improved?

Here are a few tips I offered to those in Las Vegas:

• Where you build is as important as what you build. Invest in and develop properties in growth markets. Too many deals unable to be refinanced are located in areas with demographic and economic headwinds.
• Choose your partners carefully. In these times, it’s critical to work with experienced developers, lenders and contractors in specific regions and asset classes. This is the opposite of the “one size fits all” approach.
• Think through the worst case. By modeling a number of different stress scenarios and circumstances, you will be prepared for most outcomes – and armed to overcome any hurdle.
• Government programs can be life savers. There are a slew of municipal and state initiatives – many of them tied to sustainability – that provide financial flexibility and access to capital. These can provide crucial support in trying times.

And of course, I made the point that C-PACE financing provided by blue-chip partners – with its long-term, fixed interest rates and unique repayment characteristics – is a durable and effective solution for initial construction and refinancing assets in turbulent economic periods.  At Petros, we are engaged in very active discussions with owners and developers looking for support navigating this challenging rate environment.  We are confident that C-PACE financing will emerge from this period stronger and further equipped to support the growth initiatives of the real estate industry.

By Mansoor Ghori, CEO, Petros PACE

For the CEO of any successful organization, the beginning of a new calendar year is a moment for disciplined reflection on the current state of the business, a look backward to glean what lessons can be learned and pitfalls to avoid repeating, and perhaps most importantly, an opportunity to focus a sharp light on what’s ahead and how best to deliver value to important stakeholders across our ecosystem.

This inaugural blog – the first in a new series of thought pieces that I will pen and share over the course of 2023 – offers a glimpse into our informed perspective as the market leader in C-PACE financing, one of the most dynamic, fastest-growing, and relevant new sectors in structured finance.

So, what happened in 2022?  By any measure, 2022 was a breakthrough year for C-PACE financing.  Petros led the way, bolstered by the industry’s strongest balance sheet, our robust relationships, our commitment to close, and ability to serve our customers across geographies and industries.   We achieved several milestones such as blowing through the $1 billion threshold of directly originated deals and closing the largest deal in C-PACE history, amongst others.

The industry continues to grow and evolve by leaps and bounds and by all respects, C-PACE has come of age.  Fueled by strong and persistent ESG tailwinds, improving alignment with traditional lenders, and recognition from larger developers and property owners across the country, C-PACE is now accepted by many of the nation’s largest, most successful and sophisticated commercial real estate owners and institutional lenders as a mainstream financing solution for complex capital stack needs.

As we look ahead into 2023 and beyond, we see a number of conflicting forces at play:  the continued momentum of C-PACE financing solutions juxtaposed against the impact of significantly higher borrowing costs, a much tighter credit posture from traditional lenders and fears of a recession that could dampen enthusiasm across a number of development projects across all asset types.  In this stressed environment, the reputation and credibility of the industry will be tested; customers will seek quality and safety and we at Petros know that sticking to our commitments, delivering certainty to close, and being a trusted financing solutions partner will never be as important.

In these times, our industry has an opportunity to rise to the occasion and emerge from this period of uncertainty stronger and more integrated into the financing toolkit than ever before.  Here’s what we are focused on at Petros:

• Review and playback the lessons learned from past recessionary and high interest rate environments
• Intensely focus on quality, customer service, and discipline
• Actively work to expand C-PACE’s role in the capital stack
• Tirelessly educate the market on the benefits of C-PACE
• And of course, delivering on the commitments made.

With these guiding principles in mind, we are confident we won’t just navigate but we will lead the industry with increased innovation, service, and certainty during these uncertain times.  I look forward to sharing industry observations and progress in the months ahead.

By Mansoor Ghori, CEO, Petros PACE

Detroit Landmark Epitomizes the Fulfillment of the C-PACE Vision

Petros PACE Finance closed one of the first Commercial Property Assessed Clean Energy (C-PACE) transactions in Michigan. The low-cost, long-term financing enabled the owner of a historic Detroit landmark to invest in the critical energy efficiency improvements needed to make the 123-year-old building and its signature fine dining restaurant both environmentally and fiscally sustainable.

Five years and many transactions later, The Whitney remains one of my favorite Petros projects in part because I love beautiful old buildings, but also because it so clearly epitomizes how C-PACE financing has lived up to its promise. Unaffordable with traditional financing, the energy efficiency retrofits that Petros funded were a gamechanger for this civic-minded property owner and the historic building that he bought to preserve, protect and share with the community.

The High Cost of Inefficiency

The Whitney represented the height of luxury when it was completed in 1894, but by the time Bud Liebler bought the 52-room mansion in 2007, it had fallen far behind modern standards for comfort and sustainability.

Cold air seeped through the old storm windows lining the dining rooms, prompting customer complaints and table changes. The 30-year-old heat pump system needed to be replaced and, with no central air conditioning, the portable units brought in each summer often proved inadequate for the dining rooms and special event spaces.

With just 40 percent of the 21,000-square-foot building properly climate controlled, Liebler’s company was spending $100,000 on operations and maintenance annually and another $115,000 for utilities. 

“We had to get the building up to modern standards, but as a small business owner, there was no way I could afford to do what had to be done,” said Liebler. 

A New Type of Affordable Financing

In 2016, Newman Consulting Group advised Liebler that he could fund a wide range of energy efficiency improvements with no out-of-pocket expenses with Commercial Property Assessed Clean Energy (C-PACE) financing. Currently available in 37 states, the program allows commercial property owners to retrofit their buildings with renewable energy and energy efficient systems by borrowing money from a private lender and repaying the financing via a special assessment on their local property tax bill. 

With the qualifying planned projects estimated to save his company a net $450,000 in utilities, operations, and maintenance expenses over the fixed-rate, 20-year term of the fixed-rate assessment, Lieber thought it sounded too good to be true. It wasn’t.

A short time later, his company The New Whitney Real Estate, LLC closed on a $863,130 C-PACE assessment with Petros through Michigan’s Lean and Green C-PACE program. 

Over the next 12 months, Liebler installed a new HVAC system and two high-efficiency stoves. He upgraded the building’s electrical system, replaced 214 storm windows and converted 1,865 incandescent light bulbs to more efficient and longer lasting LED lighting.

From Skeptic to True Believer

Liebler estimates that his company saved thousands of dollars in the first few months on heating costs alone. Just as importantly, the upgrades enabled him to open the large portion of the building previously closed off due to high heating and cooling costs.

Today diners and special event guests can move about and comfortably experience different areas of the mansion for drinks, dinner, and desert regardless of the weather while additional prep stations provide kitchen staff with more room to work. 

“I believe it’s paid off big time,” Liebler said. “I’m a big proponent of the C-PACE program and have personally recommended it to others. The biggest advantage is that you don’t have to take money out of your pocket. You have 20 years to pay it back, and you’re paying it back through cost savings on utilities.” 

Signed,
Mansoor Ghori

By Mansoor Ghori, CEO, Petros PACE and Jessica Bailey, CEO, Greenworks Lending

Budding finance strategies sometimes require industry participants to adhere and execute to appropriate best practices to assure their long-term efficacy for the marketplace. Such is the case for one of the fastest-growing financing tools for energy efficiency, water efficiency, renewable energy and resiliency of commercial real estate buildings, called Commercial Property Assessed Clean Energy (C-PACE).

Enabled by state legislation across 35+ states C-PACE makes it possible for owners and developers of commercial properties to improve the energy, water, or resiliency performance of their buildings using low-cost, long-term financing which is paid back through an annual assessment on the organization’s property tax bill, similar to other capital improvements with public benefits. Characterized neither as a loan nor debt/equity, C-PACE financing is structured as a special property tax assessment similar to other well-established public benefit assessments such as sewer and water services, road improvements and the like. This enables upfront financing to be provided for capital intensive improvements such as chillers, boilers, solar systems, and batteries with no initial cash outlay for property owners and paid for as an affordable incremental annual assessment stretched out over decades.

C-PACE Growth Tops $1.5 Billion in Climate-Friendly Improvements

With market adoption accelerating, C-PACE total financings topped $1.5 billion in investment in commercial building upgrades through 2019, according to CPExecutive. Underpinning the growth of C-PACE has been smart policy, which balances the aforementioned benefits with risks of nonpayment. To balance these concerns, the vast majority of the C-PACE states statutorily limit the acceleration of C-PACE assessment payments not yet levied or due on the property while also requiring the building owner to obtain the acknowledgment or consent of their senior lender to participate in the C-PACE program. This requirement helps ensure C-PACE assessments are not oversized compared to the value of a property while also protecting the senior lender from exposure to the C-PACE assessment over and above the benefits achieved by the property each year the improvements are in place. This requirement has helped instill confidence in this innovative financing tool with all constituents — borrowers, public officials, regulators, financial institutions, Wall Street and other players. Over 200 individual lending institutions have consented to C-PACE assessments on over 2,000 properties in the past several years.

Although most states have adopted lender acknowledgment provisions as a core premise in their C-PACE programs, there are still a few that don’t specifically require it. Though not required in these states’ regulations, obtaining the consent of the senior lender has become a best practice and an important underwriting component in the growth of this industry. As leaders in this industry, we are concerned that an increasing number of transactions potentially being completed under those lax conditions could become a threat to the hard-earned confidence in C-PACE. In speaking with our industry ecosystem partners, including our investors, bankers, lawyers, and rating agencies, all have expressed a like-minded approach to lender acknowledgment.

Through last year, over 200 lenders have approved C-PACE financings on properties on which they hold the mortgage. However, many of our industry participants are expressing concern that failing to work with our mortgage lender partners could hamper the exciting growth of the industry. Our experience working with senior lenders of all sizes suggests that they are willing partners to allow C-PACE to be used by their customers when engaged in the process.

Reversing C-PACE’s Rise Threatens Cost-Effective Climate-Friendly Gains

Threats to C-PACE financing are threats to the phenomenal benefits it provides to property owners, to local communities, and to the planet. As a widely popular policy with support from both sides of the aisle, C-PACE is emerging as a critical tool in the fight to combat climate change and reduce energy consumption from America’s built environment.

What’s at stake? C-PACE is growing in popularity because it facilitates the reduction of greenhouse gas emissions by making the shift to clean energy sources a financial reality. It also plays a vital role in supporting state and local governments in their initiatives to drive sustainable, efficient upgrades within their community’s infrastructure. All of this is accomplished while reducing costs for building tenants and enhancing property values for building owners and developers. During the pandemic, C-PACE was a particularly important tool for building owners and developers in providing much needed capital and liquidity giving them the breathing room to keep operating through the uncertainty. In addition, we worked with the active participation of banks in completing capital stacks for key economic development projects across the country. We encourage our colleagues in the industry to work with us to grow this industry with long view and best practices in mind – with the partnership of our mortgage lender colleagues.

Signed,
Mansoor Ghori
Jessica Bailey

It’s been a busy year so far at Petros. Over the past few months, demand for C-PACE has continued to grow, despite the economic downturn. In Asset Securitization Report’s May cover story, I explained how the tightening lending environment is driving more borrowers to seek C-PACE as an alternative source of capital for funding construction and shoring up capital stacks. A DBRS Morningstar report published in June also highlighted a positive outlook for C-PACE assets, despite ongoing economic effects of COVID-19 on the U.S. economy.

At Petros, our pipeline has doubled since the beginning of the year and we have more deals expected to close in the coming months. We have recently closed a number of C-PACE transactions, including new construction projects for a hotel in Florida and a senior living facility in Ohio.

2020 is also shaping up to be an active year for expanding the C-PACE market footprint. New markets from coast to coast are progressing toward active C-PACE programs. Washington State signed C-PACE enabling legislation into law this spring and we are hopeful an administrator model will be running to allow financings by the end of the year. C-PACE recently launched in Massachusetts, while, in New Jersey, C-PACE enabling legislation recently passed in one house of the state’s legislature. Additionally, we are encouraged by ongoing efforts to get New York City’s C-PACE program operational soon. As I shared in a Commercial Property Executive article in May, we expect  New York to become a huge market for C-PACE.

While states across the U.S. are beginning to reopen their economies, many unknowns remain. At Petros, we are working diligently to find new ways we can provide solutions to aid in economic recovery. To that end, we are developing and preparing to launch new financing products that will allow borrowers to plan for both the short-term and long-term and that will complement our existing C-PACE offering.  We will have more news to share soon about our new offerings.

We are also expanding our firm’s team to accommodate our growth. Petros recently welcomed Connor Murch as Vice President of Business Development, along with John Gamm and Katy Crocker as Vice Presidents of Legal. Their combined market knowledge and experience will enable us to maintain our high level of execution as the market grows.

We are proud that Petros can play a role in helping the commercial real estate industry move forward at this critical time in the economy. We understand that circumstances are changing rapidly. We are grateful for our customers and everyone we work with as we continue to provide efficient capital solutions that enable development. What we’ve been able to build so far is impressive and it would not be possible without so many hard-working partners and customers.  We will continue to build on that this year and beyond!

Mansoor Ghori
CEO, Petros PACE Finance

We are here to help by deploying C-PACE assessments to bolster capital stacks that may come under stress or experience shortfalls in the near-term. Our lending approach and underwriting standards remain unchanged.

During these uncertain times, we are moving forward at full speed and will continue to work diligently to meet the financing needs of the clients we serve. Petros is seeing an increase in applications for retroactive financing, which can help commercial property owners and developers shore up capital stacks and access liquidity at any point in the economic cycle, but becomes especially beneficial during periods of capital market constriction.

In some states, projects that have completed construction in the past 12-36 months can secure retroactive C-PACE financing for efficiency measures to replace higher cost debt or equity with low-cost, long-term funding to generate liquidity, lower annual payment obligations, and defer payments for up to two years.

Petros has funded retroactive C-PACE projects of varying sizes across the U.S., including a recent transaction providing $9.9 million in C-PACE funding for a hotel in New York. Visit our website to learn more about retroactive C-PACE financing eligibility.

While it’s still too early to know what the long-term effects of COVID-19 will be, Petros is well-positioned to continue building on the progress we’ve made so far in growing the C-PACE market. Since the beginning of this year, we’ve entered two new states, with the first C-PACE deals in Oklahoma and the largest C-PACE deal to date in New York state. We announced our seventh privately rated securitization in February and plan more securitizations this year to accommodate the rapid growth in the volume of our business. Demand for C-PACE financing from Petros is up 10-fold from just two years ago.

Overall, the C-PACE market is not experiencing the same extreme squeeze as other areas of the capital markets. C-PACE financing is built to perform well in a downturn, as a lower-cost alternative to other sources of capital that can be utilized for a wide variety of projects to boost equity returns, free up capital or generate cash flow – all while incentivizing sustainable building improvements that help communities meet their clean energy goals.

As we go forward, we’ll be sure to keep everyone updated. In times like these, we remain focused on the well-being of our customers and employees. We hope that you and your family stay safe and healthy. Meanwhile, our firm also remains committed to the success of our clients and the C-PACE industry. We are grateful for all our customers and partners and look forward to chart a path forward together to continue to deliver on the promise of C-PACE as a game-changing tool for sustainable development finance, even in these unprecedented times.

We WILL get through this!

Mansoor Ghori
CEO, Petros PACE Finance

This was a big year for Petros and the C-PACE industry. As the year comes to a close, I’d like to reflect on the progress we’ve made and what’s next for us. I’d also like to express my gratitude for the hard work that’s made it possible.

We are now at an inflection point where the stage is set for exponential growth.

C-PACE passed $1 billion in volume this year. At Petros, we’re seeing growth in the size of PACE projects and more developers and property owners seeking us out. Our deal pipeline has more than tripled in size over last year.

Petros provided $8 million in C-PACE financing for the ground-up development of the KC Hyatt House in Kansas City, Missouri.

This year, we closed projects introducing C-PACE to new markets. We marked a milestone with Ohio’s first Opportunity Zone project to include C-PACE financing. We closed deals with repeat customers. Ground-up development projects increasingly drove growth, while original staples of the PACE industry like rehab projects remained strong.

We expect this growth to continue. New markets establishing PACE programs will only continue the rapid growth of the C-PACE market, as sustainability and energy efficiency increasingly become must-have building features. With lending standards tightening and foreign investment in flux, sponsors and operators will also be looking to C-PACE as an alternative source of financing in the capital stack.

As origination volume has grown, so has our team.

Strategic additions to our senior leadership team will enable us to expand the reach of C-PACE more broadly into diverse types of projects and markets.

We hired PACE industry veteran Andy Meyer as Senior Vice President to help continue to scale our business.  Michael Wallander joined as SVP of Solar Financing to run Petros Energy Solutions as part of our acquisition of his solar financing company Demeter Power Group, Inc. Our solar lease product will be launching soon.

We also have had many other new hires that strengthened our origination, underwriting and transaction teams, improving our ability to quickly close complex transactions and to seamlessly integrate PACE with other types of financing such as Historic Tax Credits, New Market Tax Credits and Tax Increment Financing.

We’ve built out an efficient platform for securitization to fuel growth and deliver returns for investors.

We’ve now developed a systematic process with our partners at T-REX, ING, DBRS Morningstar, and Wilmington Trust to efficiently complete securitizations, closing our sixth and seventh privately rated securitizations this year. Nailing down this process is critical to accommodate the exponential growth in origination we anticipate. We also expect demand for asset classes like C-PACE to continue to grow, as more firms seek to incorporate sustainability into their investment strategy.

The industry is taking note of C-PACE’S attractive financing features and benefit as a tool for promoting economic development and sustainability.

The New York Times highlighted the Capitol District mixed-use project that Petros financed in an article about the growth of C-PACE.

C-PACE attracted increasing attention this year. The New York Times highlighted the growth of C-PACE as a tool for developers to go green and lower their cost of capital in an article that featured Petros and the Omaha Capitol District project we financed.

NYC’s Climate Mobilization Act put a spotlight on C-PACE as a way to reduce the financial burden of complying with green building codes that more cities and states are enacting – without dipping into public coffers.  A July Morningstar report forecast huge growth for the C-PACE market driven by NYC.

A report published by Berkeley National Laboratory in June found remote risk of nonpayment for C-PACE assessments.

Petros remains committed to education efforts to steer the C-PACE industry through this exciting time.

Education remains crucial to building the C-PACE marketplace and members of our executive and senior leadership team traveled across the country this year to attend and speak at events furthering the conversation about C-PACE.

Petros was proud to serve as Summit Event Sponsor for this year’s PACENation Summit, hosted here in Austin. We look forward to the next PACENation Summit in Columbus, Ohio. We also became a national sponsor of the Council for Development Finance Agencies (CDFA) this year.

The C-PACE Alliance continues to serve as a critical resource for local governments designing C-PACE programs, releasing five white papers this year promoting industry best practices.

CFO & Co-founder Jim Stanislaus and SVP – Sales Rachel Davis spoke at the 2019 PACENation Summit.

Lastly, I want to thank all of our partners. It takes a lot of talented people working hard to close these complex transactions, as we build a new marketplace.

We’ve assembled an all-star team at Petros who have worked hard to bring in and close some big deals this year. We’ve also been fortunate to work with savvy property owners and developers, government officials, and other industry partners to close projects that help promote PACE as an increasingly necessary part of the financing toolkit for smart development.

And we also have a Board of Directors who’ve continued to open doors and provide invaluable guidance as we expand our business and pursue strategic partnerships.

I’m very proud of what we’re building together and look forward to seeing what we accomplish as a company and an industry in the next year.

Mansoor Ghori
CEO, Petros PACE Finance

That past few months have been exciting for Petros PACE Finance and the C-PACE market.

More developers are seeking C-PACE for new construction, as state and local initiatives to fight climate change drive demand for energy efficient buildings. I spoke with the New York Times about the growth of C-PACE in an article published in August. The article highlighted the Omaha Capitol District mixed-use project that Petros financed last year as an example of how C-PACE helps developers meet green building requirements.

More cities and states are embracing C-PACE, as education efforts eliminate concerns. Only one commercial building owner in the U.S. has ever defaulted on a PACE assessment, according to the report published by Berkeley National Laboratory, and there have been thousands of deals funded to date. In addition, a Morningstar report predicted that the Climate Mobilization Act New York City passed earlier this year will drive the growth of C-PACE.

As a result of broadening awareness in the market, the diversity and quality of the deals we are seeing continues to increase. Over the past few months, Petros has financed a student housing facility, senior living facility, two YCMAs, a shopping center, an office building, and hotels.

Petros continues to play a leadership role in promoting C-PACE as a tool for financing economic development and sustainability. We recently became a national sponsor of the Council of Development Finance Agencies (CDFA) and we look forward to participating in the CDFA National Development Finance Summit on November 6th. You can catch our SVP – Sales, Rachel Davis, moderating a panel on C-PACE at the event.

The Petros team continues to grow. Most recently, C-PACE industry veteran, Andy Meyer, joined as SVP. Andy joined from Twain Financial Partners, where he started and oversaw Twain’s C-PACE platform. Other additions include Sarah Christian as VP – Legal, Ariel Ritchie as Underwriting Account Manager, Brett Weir as Underwriting Manager and Baltazar DeHoyos as Transaction Senior.

With billions in committed capital and strategic additions to strengthen our origination, transaction and underwriting operations, Petros is well-positioned to meet the growing demand for C-PACE across the country. To date, Petros has unlocked $465 million in lifetime savings for property owners and developers, with more projects in the pipeline and a huge potential market.

I’m proud of what our team and all our partners have accomplished so far this year and look forward to achieving more industry-defining milestones as we continue to build the C-PACE market.

Mansoor Ghori
CEO, Petros PACE Finance

Petros had a busy April!

PACENation Summit: We kicked off the month with the PACENation Summit here in Austin for the first time. Petros PACE Finance was proud to serve as Summit Event Sponsor at this exciting time for the C-PACE industry. I enjoyed seeing so many familiar faces. Every team member at Petros PACE Finance contributed to making the summit a success.  Jim Stanislaus, Tommy Deavenport, Rachel Davis and Josh Smith all moderated or participated in panel discussions and you can find session slides from all those panel discussions here.

Petros team members at the PACENation Summit.

It was an enlightening three days that yielded some valuable takeaways. We saw an increasing growth and focus on the commercial side of PACE. Key priorities for the industry moving forward include continuing to educate mortgage lenders for consent and raising awareness among commercial real estate developers and owners.

ICYMI:  You can listen to my interview with Debtwire Radio’s ABS podcast discussing growing investor interest in C-PACE as an asset class here.

I also spoke with Global Capital at the Information Management Network’s (IMN) Green & SRI Investing Symposium about how new construction will drive C-PACE growth this year and why C-PACE is emerging as an alternative for new construction finance.

VP Josh Smith spoke at the PACENation Summit.

Josh Smith spoke with Debtwire about how projects in Opportunity Zones can leverage C-PACE and the $1.2 million Toledo, Ohio transaction Petros closed in an Opportunity Zone in March.

Deals: This month we continued to break new ground with the first PACE deal in Lincoln, Nebraska, providing $1.7 million for the Lincoln Sports Facility. The deal was originated by Rob Shear and incorporated C-PACE into a complex capital stack alongside both TIF and NMTC funds. Read more.

New Team Members: The Petros team continued to grow, welcoming back Kyle Peczynski to serve as the Vice President of Underwriting and bringing on Marcia Leigh as assistant controller. These additions will help us continue to execute efficiently as we continue to build momentum.

Up next: We have some exciting projects in development. We’ll soon be launching a new solar PACE Lease product in the coming months through Petros Energy Solutions that will let commercial developers use the PACE mechanism to finance solar projects. This innovative new product will make solar projects more attractive for owners.

Education remains crucial to building the C-PACE marketplace and I’m looking forward to the Michigan PACE Summit tomorrow, where I’ll be discussing the anatomy of a PACE deal.

Mansoor Ghori
CEO, Petros PACE Finance

CFO Jim Stanislaus and SVP Rachel Davis spoke at the PACENation Summit.

The Petros PACE Finance team continues expanding this week.

Kyle Peczynski will serve as Vice President of Underwriting and Marcia Leigh joins as Assistant Controller.

Kyle returns after a year at The Nature Conservancy, where he managed the organization’s work on stormwater finance in Detroit.

Kyle previously served as a business development officer at Petros PACE Finance focused on building the firm’s business across the Midwest and in other select PACE markets across the country.

“I’ve always enjoyed working with everyone at Petros PACE Finance,” said Peczynski. “They have an unparalleled record of industry leadership and I look forward to helping them continue to shape and build the PACE marketplace.”

Marcia also joins Petros as Assistant Controller, bringing 17 years of senior financial experience.

“As we continue to build momentum, these two additions will help Petros PACE Finance ensure we continue to execute efficiently on behalf of our clients,” said Mansoor Ghori, Petros PACE Finance CEO. “We’re excited to welcome Kyle back as a team member. Kyle was integral in getting PACE off the ground and closing our first deals in several states.”

As we head into the PACENation Summit here in Austin, I’d like to reflect on how far we’ve come since this time last year and what lies ahead for us as an organization and an industry.

From funding deals to securing a multi-billion capital commitment, the past year has been game-changing for Petros PACE Finance. We now have critical foundation in place to ensure we can continue executing efficiently and shaping the future of C-PACE every day during a time of rapid growth for the industry.

Last fall, we closed 2018’s largest publicly-announced C-PACE transaction for $24.9 million in Omaha, Nebraska, the fifth C-PACE funding in the state for a total of $31.2 million, all funded by Petros. The second largest transaction of 2018 was a $16.3 million project also funded by Petros in Columbus, Ohio that closed last week, marking our first time to close a deal in Ohio—a robust market we are excited to enter.

On top of our record-setting transactions, we announced in November that we had secured a multi-billion capital commitment from institutional investor partners for funding C-PACE transactions nationwide. The capital commitment further enables us to fund massive new construction and gut rehab projects nationally and, most importantly, provides property owners and developers the certainty of close they need on projects with unlimited funding requirements.

Earlier this year, we continued to chart a path toward greater innovation with the acquisition of Demeter Power Group, a solar PACE innovator bringing scalable financing of solar and distributed energy projects to the commercial and industrial sector. Petros Energy Solutions, a new affiliate, will focus on bringing tax-efficient energy finance solutions to Petros’ customers nationwide.

Additionally, Petros forged ahead, transacting in four new markets during the year including Florida, Nebraska, Maryland, and Ohio, solidifying its position as the leading C-PACE provider with the most significant market footprint of 11 states including the District of Columbia.

As we all know, education is typically one of the most significant obstacles faced by new project offerings. To help foster growth and speed adoption of C-PACE, the team was actively involved in educational opportunities across the country throughout the year to help our clients understand the ins and outs of C-PACE. Team members attended conferences and served as subject matter experts on webinars and panels for organizations such as the Urban Land Institute (ULI), CDFA, NAESCO, Better Buildings Energy Summit, and many others. Multiple team are also sharing their insights on panels at the summit this week.

On top of all these industry milestones, in October we also received a private rating on a pool of C-PACE assets originated and funded by us. This rating is subsequent to another private rating issued earlier this year for Petros on a single asset C-PACE transaction—the first single asset C-PACE transaction ever to receive a rating in the country.

Petros’ impact on the market is undeniable, and the future of the C-PACE market continues to grow brighter. Moving forward, we stand committed to helping commercial property owners and developers obtain the financing they need to undergo necessary energy upgrades and complete their capital stacks for developments with efficiency components.

As co-chair of this year’s PACENation Summit, I’d like to welcome everyone visiting to Austin and look forward to an exciting exchange of ideas. This year marks the first time the national event dedicated to convening members of our industry will be here in Austin. Petros PACE Finance is the Summit Event Sponsor and every team member here is playing a role. From panel participation to event support, I’m proud of our team’s commitment to working harder every day to build the PACE marketplace.

In closing, and most importantly, I want to thank all of you… our clients, team, and partners, for supporting Petros PACE Finance. We’ve had an exceptional year of growth and could not have done it without each of you. I hope to see you at the summit!

Mansoor Ghori
CEO, Petros PACE Finance

Delaware Governor John Carney signed Senate Bill 113 into law on Wednesday, August 29, enabling Commercial Property Assessed Clean Energy (C-PACE) financing in Delaware. Once implemented, PACE will offer a new method for financing commercial energy efficiency and renewable energy projects.

Last week, Delaware Governor John Carney made Commercial Property Assessed Clean Energy (C-PACE) available in his state when he signed Senate Bill 113, and I commend him for taking this important step forward.

Gov. Carney said that offering another method of financing for energy projects will help Delaware improve its economic development, lower energy costs and greatly reduce greenhouse emissions.

This a major victory for commercial properties pursuing critical energy upgrades in Delaware, as they can now be backed by an investment mechanism that offers 100% financing. Not only will this C-PACE program create jobs for the people of Delaware, it will also enhance the state’s clean energy portfolio as more commercial properties adopt C-PACE financing.

I look forward to watching Delaware join the ranks of other established PACE programs, as it builds its program design county by county. Delaware joins other states in the Mid-Atlantic region that are embracing C-PACE, including Pennsylvania and North Carolina.

As these states continue to establish C-PACE programs, Petros PACE Finance will be there along the way to facilitate financing and provide resources for C-PACE best practices.

Mansoor Ghori
CEO, Petros PACE Finance

Rendering of the boutique hotel in Omaha, Nebraska financed by Petros PACE. It’s the first C-PACE transaction in the state.

This week marks the 5-year anniversary of Petros PACE Finance. Since our company’s inception, we’ve quickly become a leading financier of Commercial Property Assessed Clean Energy. We’re proud of not only the projects we’ve closed to date, but also of the impact we have made in the advancement of the industry. Needless to say, we are excited for what the future holds for the C-PACE market.

Originally founded in 2013, Petros PACE Finance has dedicated all its resources to providing long-term PACE financing to commercial property owners across the country. In the last two years we’ve closed over 40 deals, saving commercial property owners close to $100 million in energy costs. More importantly, the last two years have also allowed us to achieve several industry firsts.

1. We have played a major role in helping to develop process and standardize documentation for many PACE programs across the country. This ensures PACE programs are institutionalized, allowing other market stakeholders to participate and grow those markets. Because of that work, we were the first to close commercial PACE transactions in four states.
2. We have also expanded our footprint rapidly across the country. To date, we have closed transactions in 10 states of the 19 active C-PACE markets… leading the industry in that achievement.
3. Last year, we facilitated another major milestone for our industry. Petros co-financed the largest deal in C-PACE history… a $40 million transaction where we funded $20 million of the total. This transaction broke down many barriers and set a precedent for how C-PACE financing can be used for much larger and more ambitious projects than what it was traditionally used for in the market. The funds will go towards mandatory seismic upgrades to the company’s 11-story, 357-bed Seton Medical Center. The PACE project ensured Seton would continue to serve the San Mateo County for decades to come mitigating the risk of an earthquake destroying the property.
4. We were also the first in the industry to get a rating from an independent credit rating agency on a single-asset-backed C-PACE transaction. DBRS gave us this private rating which helped set industry precedence and opened the market for others to get C-PACE transactions and pools rated.
5. Finally, we were the catalyst behind the creation of the C-PACE Alliance… an industry coalition focused specifically on the C-PACE market and funded exclusively by C-PACE industry stakeholders. The C-PACE Alliance published a white paper detailing best practices on what is required to make a C-PACE program successful. These best practices are used extensively by new programs coming online to structure their guidelines. In a very short period of time, we have made a significant impact on the industry… with the best yet to come!

Our impact on the market has been significant and the future of C-PACE looks bright. We stand committed to helping commercial property owners get the financing they need to undertake energy upgrades and help make the world a more sustainable place. To the next five years…

Mansoor Ghori
CEO, Petros PACE Finance

The first multi-tenant office building C-PACE deal in Houston at 1225 North Loop West.

Petros PACE Finance Blog

Commercial Property Assessed Clean Energy (C-PACE) is in its first decade of turning commercial properties into energy savers. As the United States continues to go green, this creative finance solution—100% financing of all upfront costs— makes energy upgrades, that otherwise might go unfinished, even more compelling to execute for property owners and developers. Scientific American Magazine even called C-PACE a top 20 world changing idea for it’s ability to make sustainable and affordable changes in commercial real estate’s energy initiatives. What is C-PACE exactly, and how can it save energy and capital?

C-PACE is rapidly spreading across the country since it was first introduced in 2007. C-PACE allows property owners to pay for energy efficiency and renewable energy projects through an addition to their property tax bill, overcoming high upfront costs that prevent most property owners from investing in energy upgrades. C-PACE is essentially a long-term (typically 10 to 30 year), low-cost assessment for such improvements including mechanical systems (HVAC), renewable energy, lighting and seismic strengthening (to name a few).

Last year, we closed the first multi-tenant office building C-PACE deal in Houston. As the finance provider, we were excited about this project. The property, built in 1983, had 35-year-old chillers and an outdated control system. The energy upgrades were going to be costly, and to eliminate upfront capital the property management turned to C-PACE to finance the project. Since we provide 100% financing, it quickly reduced that burden. The project was a success and will provide $3.66 million in savings over the 20-year term. The reduction of CO2 emissions from this project is the equivalent of 29,000 tree seedlings grown over 10 years. It shows the power of C-PACE to improve the bottom line and help conserve energy. This is one example of many successful C-PACE projects we’ve closed over the years.

As C-PACE continues to go mainstream—18 states currently have active programs with others in the pipeline—the Petros PACE Finance team is eager to share insights we’ve picked up along the way after closing deals in 10 of those states.

We want to be an advocate for C-PACE programs and showcase how easy and affordable it is to finance vital improvements to commercial properties that will not only increase the property value, but also decrease the environmental impact. We’re launching our Petros PACE Finance Blog to help educate other market stakeholders on this new tool that can help save energy and capital.

Mansoor Ghori
CEO, Petros PACE Finance