Greenworks Lending is a specialty finance company that pioneered Commercial Property Assessed Clean Energy (“C-PACE”) loans, a form of legislation-enabled clean energy financing that encourages renewable and energy efficient installations in commercial real estate.  It has become clear in the past few years that another form of government enabled financing, historic tax credits (“HTCs”), are a natural complement to C-PACE in advancing the shared mission of facilitating energy efficient updates on neglected and inefficient historic buildings via advantageous financing.

Increasing energy efficiency, helping local businesses succeed, rebuilding the physical infrastructure of communities – this is what we’re all about at Greenworks, so when presented with the opportunity to provide financing to our first historic tax credit project in 2017, we were eager to identify an optimal framework for the two forms of financing to work together.  We have financed into both single-tier and master-lease structures, providing funds during both construction and the post-construction compliance period.  As we have gained expertise in fitting PACE into tax credit structures, we have become increasingly convinced that the two forms of financing work exceptionally well together: nowhere is the need for green upgrades more acute than in historic properties, and the combination of C-PACE and HTCs provides a uniquely advantageous financing structure that allows for green improvements to be made within tight redevelopment budgets.

C-PACE As Gap Financing

The most common way in which C-PACE loans are used in HTC projects’ capital stacks is as gap financing.  In this role, C-PACE can be the final piece that helps make historic projects financially viable, replacing high-cost mezzanine debt or equity with a significantly lower-cost, fixed rate C-PACE loan, drastically improving the financial returns on a project and making way for green improvements that may not have been financially viable without C-PACE.  In addition to solar installations, C-PACE can finance many of the existing qualified rehabilitation expenses (“QREs”) in a historic tax credit project, including building envelope (doors, windows, insulation, roofing), structural work, engineering costs, lighting, plumbing, HVAC, and elevators.

Senior lenders appreciate that we can place the full funding amount into an escrow account at close, reducing concern around the availability of funds.  For projects that have not yet identified a senior lender, Greenworks has a broad Rolodex of construction lenders that are well-versed in C-PACE from which we can make introductions.

C-PACE in Place of Senior Debt

While Greenworks finds it easiest to participate alongside both tax credit investors and senior lenders, we have also participated in lieu of a senior lender when projects have sufficient equity or other incentive financing.  Some developers prefer the simpler financing of C-PACE and enjoy benefits such as the long, dependable term, lower equity requirements, non-acceleration / transfer upon sale, and fixed rate for the full term.  Additionally, C-PACE uses a tax assessment structure which, for some properties, may allow the repayments to be passed through on triple-net leases and hotel room surcharges.


Greenworks is happy to sign an SNDA for the protection of the master lease and tax investor.  One nuance with C-PACE is that our SNDA would not apply to non-Greenworks affiliated entities who take title to the property as a result of failure to pay the C-PACE Assessment; Greenworks may not control a tax foreclosure process since our financing is secured by a tax assessment controlled by a governmental or quasi-governmental agency.  However, in this case the historic tax credit investor takes the same disturbance risks as they take with unpaid taxes – if taxes (and C-PACE) are paid, the lease will not be disturbed by the tax lien / tax foreclosure process.

One mutually beneficial mitigation to this risk is to create a PACE + taxes reserve fund controlled by the tax credit investor which ensures currency of PACE and taxes.  It is also worth noting that C-PACE would need to run through the tax foreclosure / tax sale process which is typically very long (>12 months).  Given this time-frame investors will have ample time to cure any defaults before the underlying master lease could be in jeopardy.  The non-accelerating nature of the C-PACE assessment also provides comfort to tax credit investors because only the amount in arrears would ever need to be paid off in a foreclosure or to prevent foreclosure.

Underwriting Implications

From the underwriting perspective, we appreciate the additional diligence done on tax credit deals by the investors themselves and by the National Park Service who administers the program.  The primary risks are well-aligned between C-PACE, which has no ability to accelerate in a foreclosure and thus focuses on achieving construction completion, and HTC investors, who risk not receiving their tax credits if the renovations are not completed according to plan.  Most C-PACE lenders, like Greenworks, have no desire to take an active role in a stalled construction project, as some construction and mezzanine lenders might.  Rather, the fact that both Greenworks and the HTC investor are solving for the same risk allows for a more streamlined underwrite and lowered risk assessment.  Finally, the tax investors’ funds, which must remain in the project for 5 years, lowers the total debt on the property, helping the project align with C-PACE underwriting requirements.

At Greenworks, we understand the complications involved in each kind of tax credit financing and we make a concerted effort to align ourselves with the project’s existing underwriting and closing diligence process to decrease overall complexity.  For example, we generally utilize existing disbursement milestones and documentation, we can be flexible on the first repayment date (up to 24 months), we can utilize existing third-party reports, and we have an easy and transparent approval process.

Do you have a historic rehabilitation project in need of capital?  Consider C-PACE through Greenworks Lending: we hope to provide the capital that can make your historic project a reality!

Learn more about C-PACE and Historic Tax Credits from one of our case studies!