PACE Loan Group’s Matthew McCormack: “Filling Gaps Where the Bank Used to Be”
At Connect Texas Multifamily, taking place August 22 at Virgin Hotels Dallas, capital markets leaders will discuss the investment climate and what’s in store for the debt and equity markets, as well as other topics. Among our panel of experts will be Matthew McCormack, SVP, originations with PACE Loan Group (PLG), who will provide insights into the benefits of PACE (Property Assessed Clean Energy) and C-PACE (Commercial Property Assessed Clean Energy) financing. We spoke with McCormack to set the stage; his responses appear below.
Q: We’ve been hearing more about PACE and C-PACE financing. Have owners become more knowledgeable about the nuts and bolts of this financing, or do they still require education when they come to PLG?
A: Owners have become more knowledgeable, absolutely. There is still a lot of education required. Each state (and sometimes each county/city) has their own program that has unique requirements and qualifying standards. C-PACE is becoming more well known/widely used in CRE financing. We are lending on all commercial asset classes, from Alaska to Florida, for development, retrofitsand refinances.
Q: For multifamily projects in particular, is qualifying for PACE financing when the project is built more cost-effective than qualifying by retrofitting?
A: Interest rates, legal fees, etc. will be relatively the same no matter the type of project. C-PACE can finance the construction and renovation of new and existing CRE assets. In many states we also have a lookback period to recapture PACE eligible items. C-PACE’s relative cost of capital is becoming increasingly more attractive as bank/lender liquidity is scarce. We are filling gaps where the bank used to be.
Q: Is borrower interest in clean energy driven more by the desire to have competitive product or by government incentives (or mandates)?
A: We’re finding our clients qualify for PACE whether they intend to or not. A class A product today is naturally more energy efficient than what local construction code requires. For instance, the State of Oklahoma is relying upon an energy code from 2006 as their baseline. If you build a class A building there today, you’re going to be far more efficient than what the state requires you to build. Therefore, we’re being used as a structure product to increase returns, blend down the cost of capital and/or increase leverage.
Connect Texas Multifamily 2023 will take place on Aug. 22, 2023 at Virgin Hotel in Dallas. Click here for more information and to register.
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