Clean Energy Backs a $103M Securitization

The first securitization backed exclusively by Commercial Property Assessed Clean Energy (C-PACE) property assessments closed last week as a $103-million, AAA-rated note was issued. In the view of Sausalito, CA-based CleanFund, which issued the note, the securitization represented a watershed moment.

“As a pioneer of the C-PACE industry, CleanFund has demonstrated its vision to help reduce the environmental impact of commercial properties through structured finance,” said CleanFund CEO Greg Saunders. “Tapping the public markets should open the door for follow-on transactions that bring more investors to our industry and provide our customers even more competitive and robust financing options for office, retail, industrial, multi-family and other commercial property.”

CleanFund came into the C-PACE market in 2009, a year after California introduced this financing structure. C-PACE enables commercial property owners to obtain low-cost financing on qualifying improvements that reduce energy and water usage or provide resiliency. Last month, CleanFund introduced a SolarPACE partner program intended to finance solar energy installations.

C-PACE authorizes municipalities or counties to work with private capital providers such as CleanFund to provide the upfront financing on qualifying improvement projects. The jurisdiction then collects the repayment through annual or semi-annual assessments on the property’s tax bill.

The PACE financing term may extend up to 30 years in some jurisdictions. The result for property owners, says CleanFund, is utility and other cost savings that typically exceed the amount of the assessment payment.

Since California pioneered the concept, C-PACE has been authorized by 34 states and the District of Columbia, up from 16 states just two years ago. Unlike residential PACE financing on single-family homes, mortgage lenders on prospective C-PACE properties provide approval of each transaction, sometimes requiring confirmation that the additional debt imposed by the C-PACE financing won’t hurt the property’s credit rating.

That level of rigor in the underwriting underpinned Saunders’ belief in 2016 that energy efficiency loans could eventually serve as the sole collateral for securitizations—a belief that has now been borne out. “We believe that commercial is going to ultimately be a more sustainable finance mode for PACE because of the ability to get buy-in from commercial lenders,” Saunders told American Banker magazine two years ago.

The note in the $103-million CleanFund securitization was backed by $115 million of C-PACE assessments on 82 properties in six states in the West Coast, Midwest and East Coast, including State House Square in Hartford, CT (pictured). Credit Suisse served as the exclusive advisor and structuring agent for the transaction.

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