Green Loans and C-PACE Financing in Commercial Real Estate: Loan Structures, Principles, Guidelines
Alternative Financing to Meet Increasing Sustainability Standards for New Construction and Renovation Projects
Course Details
- smart_display Format
On-Demand
- signal_cellular_alt Difficulty Level
Intermediate
- work Practice Area
Real Property - Finance
- event Date
Tuesday, April 9, 2024
- schedule Time
1:00 p.m. ET./10:00 a.m. PT
- timer Program Length
90 minutes
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This 90-minute webinar is eligible in most states for 1.5 CLE credits.
This CLE webinar will explore the recent growth and trends in green lending in commercial real estate and how commercial property owners are using this alternative form of financing in today's challenging market to meet increased sustainability standards. The panel will discuss commercial property assessed clean energy (C-PACE) financing structures and other types of green loans available for both new and existing structures and provide an overview of the market principles and guidelines that allow a loan or project to be categorized as "green."
Ms. O’Malley leads the firm’s multidisciplinary commercial PACE (C-PACE) team, which to date, claims national C-PACE experience in 15 of the 29 states with active C-PACE programs, plus the District of Columbia. She is widely recognized nationally for her contributions to the C-PACE field and actively participates in the development of the Virginia C-PACE market. Ms. O’Malley provides guidance to C-PACE capital providers and property owners on all aspects of a C-PACE deal, including financing structures, real estate due diligence, negotiation, and compliance matters. With extensive knowledge of C-PACE in various jurisdictions, she is a valuable advisor for local governments and program administrators throughout the lifecycle of C-PACE projects. Notably, Ms. O’Malley was involved in several C-PACE funding “firsts:” the first C-PACE-funded office construction project in the United States; the first new construction C-PACE transaction in the District of Columbia; and the first rated, C-PACE securitization in the country.
Ms. Johnson is Executive Director and founder of the Virginia PACE Authority (VPA) and President of Abacus Property Solutions (Abacus). Since 2012, she has specialized in PACE financing, advising commercial building owners, lenders and public sector clients in PACE project and program development. Ms. Johnson has been instrumental in developing PACE programs around the country through crafting of PACE legislation, creating program guidelines, and launching and administering PACE programs. In her capacity as an advisor, she works with building owners to develop “PACE-able” projects, structure PACE within the capital stack, and source senior debt as needed.
To address concerns about climate change and the effect that lending and investment decisions may have on the environment, commercial real estate lenders and investors are seeking ways to not only face the oncoming challenges and perils of climate change but also to satisfy new (though increasingly common) legislation demanding that commercial property owners reduce the environmental footprint of their buildings. Green loans and C-PACE financing are part of a critical strategy to address sustainability demands while also meeting an owner's investment objectives and financial returns.
A green loan is defined as any type of loan instrument made available exclusively to finance or refinance, in whole or in part, new and/or existing eligible green projects. This includes term loans, revolving credit facilities, and working capital facilities. To establish guidelines to ensure consistency across the wholesale green loan market, the Loan Market Association (LMA), together with the Asia Pacific Loan Market Association (APLMA) and the Loan Syndications and Trading Association (LSTA), published the Green Loan Principles (GLP) and Guidance on GLP. The GLP establishes a framework of market standards and voluntary recommended guidelines for a loan to be categorized as "green."
C-PACE financing generally provides upfront funding for clean energy projects for building property owners in the commercial, multifamily, and nonprofit sectors. To date, 40 states including the District of Columbia have adopted some form of C-PACE financing legislation. These programs use property liens to allow consumers to repay the funding on their property taxes over the long term, and they permit transferability of the assessment upon sale of the property.
C-PACE financing may be administered by state governments, local governments, or third-party administrators and can be layered in with other forms of financing, such as mortgage loan financing and historic tax credits. C-PACE debt typically cannot be accelerated and does not affect a lender's foreclosure rights and remedies.
Listen as our authoritative panel discusses the evolving landscape of green lending and C-PACE financing in commercial real estate. The panel will examine the various types of loans available and the underlying principles and guidelines required for these loan products and programs.
- Overview: trends in local legislation requiring decarbonization and sustainability measures for commercial buildings
- Green loans
- Definition
- Role green loans play in today's real estate financing market
- LMA, APLMA, and LSTA's GLP and Guidance
- Four components of a green loan: use of proceeds, process for project evaluation and selection, management of proceeds, and reporting
- C-PACE financing
- Uses for C-PACE financing
- How C-PACE financing is secured
- Advantages
- Layered with other forms of financing
- Other forms of green financing available for new construction and renovation projects to meet new building standards and requirements by local and state governments
- Key takeaways
The panel will review these and other relevant considerations:
- What are green loans?
- What are the LMA, APLMA, and LSTA's GLP and guidelines?
- What is the typical C-PACE program structure and what are the benefits of this type of financing?
- What types of projects are generally eligible for green loans and C-PACE financing?
