C-PACE Financing Evolves into Capital Stack Heavyweight

With a resume that includes seven years overseeing the California Enterprise Development Authority’s C-PACE program, Peter Grabell has seen C-PACE grow from an obscure tool to fund solar panels into a widely accepted component of project financing. Now Head of Production at PACE Loan Group, Grabell will discuss C-PACE applications as one of the financing experts who will take the stage during the “Financing & The Capital Stack” panel discussion at Connect Los Angeles 2026 on May 28. Grabell shared insights with Connect CRE in advance of the in-person conference. 

Q: C-PACE financing has become a key component in the capital stack. Has this occurred mainly as investors and developers have become more aware of C-PACE’s versatility or have there been other factors (such as regulatory)? 

A: C-PACE awareness has grown significantly among developers, investors/sponsors, and mortgage bankers/brokers as C-PACE financing has gained recognition for its flexibility and accretive influence on most project capital stacks. On the regulatory side, C-PACE has been enabled in 40 states, with the most recent adoption in Alabama. The industry continues to pursue PACE legislation in the states that remain outliers in PACE adoption. 

Q: Are more borrowers becoming aware that C-PACE can extend beyond, say, solar installations to finance improvements in heating, electrical, and plumbing infrastructure? 

A: The initial days of C-PACE were dominated by renewable energy measures such as solar and battery storage. Since the late 2010’s, PACE programs in many states have expanded to include water conservation, energy efficiency, and resiliency as additional eligible measures. In addition, the use cases of PACE have expanded to range from pre-construction to mid- and post-construction recapitalizations. For PACE projects, the MEP budget (Mechanical/Electrical/Plumbing) contains the preponderance of PACE-eligible measures. Particularly with the capital constraints that emerged following COVID, borrowers have become very aware of how extensively PACE can cover building costs. 

Q: Is there a typical C-PACE financing scenario at this point, or are C-PACE transactions different from one another? 

A: Use cases for C-PACE include entering a project’s capital stack pre-construction, during construction (typically due to an unforeseen funding shortfall), and, in many states, for as long as three years following completion to recapitalize a project. In today’s capital markets, securing project debt is the first step many developers and sponsors pursue, followed by finalizing project equity. This contrasts with the dynamics pre-COVID, when sponsors routinely had their equity committed before building out the debt side of the capital stack. 

Q: New construction or retrofitting/redevelopment — which is more likely to involve C-PACE financing? 

A: This depends on both the asset class and use case. For example, seniors housing and hotels are prolific users of C-PACE financing for new construction. On the other hand, multifamily properties utilize C-PACE for new construction less frequently because of the availability of first mortgage financing that can be sufficient to entirely fund a project alongside equity, without the need for C-PACE, mezzanine financing or preferred equity. By contrast, property-use conversions (e.g., office-to-hotel or office-to-multifamily) are prime candidates for C-PACE financing because senior lenders often perceive them as having higher risk profiles. For data centers, the deep need for power and water aligns closely with what can be funded by C-PACE, where we are seeing increasing demand. 

Hear from LA Leadership on May 28.
Gain direct insight from Los Angeles leadership, including Mayor Karen Bass and former Mayor Antonio Villaraigosa, as they discuss policy, growth, affordable housing and the city’s future. Don’t miss this high-level conversation—secure your spot today: www.connectLA26.com