Unlocking Capital with Garden State C-PACE: A Developer's Guide
Commercial Property Assessed Clean Energy (C-PACE) is transforming the capital stack for New Jersey developers. By allowing property owners to finance energy efficiency and resiliency improvements through a special assessment on their tax bill, C-PACE offers long-term, non-recourse capital that can replace more expensive mezzanine debt or equity.
What is Garden State C-PACE?
Administered by the NJEDA, Garden State C-PACE allows owners of commercial, industrial, and multifamily (5+ units) properties to access financing for eligible improvements. Unlike a traditional loan, the financing is attached to the property as a tax assessment, meaning it transfers to the new owner upon sale.
Key Benefits for Developers
- 100% Financing: Covers hard and soft costs for eligible improvements.
- Long Term: Amortization up to 30 years (based on useful life of equipment).
- Non-Recourse: No personal guarantees required.
- Off-Balance Sheet: Often treated as an operating expense rather than debt (check with your accountant).
- Cheaper than Mezz: Rates are typically lower than mezzanine debt or preferred equity.
What Costs are Eligible?
The scope is broader than many developers realize. It's not just for solar panels. Eligible improvements include:
- Energy Efficiency: HVAC systems, lighting, windows, insulation, roofing.
- Water Conservation: Low-flow fixtures, irrigation systems.
- Renewable Energy: Solar, geothermal, wind.
- Resiliency: Flood mitigation, backup generators, storm hardening.
For new construction, C-PACE can finance a significant portion of the capital stack—often 15-20% of the total project cost—by covering the energy-related components of the build.
How it Fits in the Capital Stack
C-PACE is senior to the mortgage but billed like a tax. Because of this "super-priority" lien status, mortgage lender consent is required. While this used to be a hurdle, many national and regional banks are now comfortable with C-PACE, recognizing that the improvements increase the property's value and cash flow.
Typical Capital Stack with C-PACE
By inserting C-PACE, you reduce the need for expensive equity or mezzanine debt, blending down your weighted average cost of capital (WACC) and boosting your cash-on-cash returns.
The Application Process
- Feasibility Study: An energy audit (for retrofits) or energy model (for new construction) is required to demonstrate savings or compliance.
- Lender Consent: Engage your senior lender early.
- NJEDA Approval: Submit project details to the Authority.
- Closing: C-PACE capital provider funds the project.
Is C-PACE Right for Your Project?
I help developers evaluate C-PACE feasibility and secure lender consent. Let's optimize your capital stack.
About the Author
Ryan Goldfarb is a real estate development advisor specializing in New Jersey projects. He helps developers navigate complex financing structures, including C-PACE, to maximize returns.