As interest rates rise, many developers are looking for low-cost capital acquisition alternatives. This is where PACE funding can help with new multifamily construction projects. In the past, PACE loans were for energy efficient improvements on existing buildings. Now, you can use PACE funding for new construction projects that meet a few minimal guidelines. If you are planning on constructing a new multifamily complex, consider using PACE financing as part of your financing options. Take a look at this general guide to CPACE loans for new multifamily construction.
What is PACE Funding?
PACE funding is a capital acquisition option in the form of a property tax assessment. Therefore, interest rates for PACE loans are significantly lower than mezzanine financing or equity. It can lower the cost of capital by as much as 20%, which makes it an attractive financing option. Additionally, PACE funding repayments are added to your property tax statement and are seen as an operating cost. Therefore, this financing option doesn’t count as debt for a property. It is especially appealing for multifamily construction, as CPACE loans are transferrable if you decide to sell your property later on.
How Do PACE Loans Benefit Multifamily Development?
CPACE loans offer a lot of value to multifamily developments. First and foremost, it offers low-cost capital for your construction project. Additionally, you can use this financing for a wide variety of things, like construction materials, equipment, and building features that tend to lower operating costs. For example, you can use CPACE funding for electrical and plumbing systems, insulation, roofing, building management systems, and even electric car charging stations on your property. More and more, tenants are looking for these features when choosing a rental unit. Therefore, these features can add value to your property by drawing in more renters and reducing your overall costs during and after construction. PACE financing requirements are flexible enough that you can use it for both renovations and new construction projects for multifamily properties.
How Do I Receive PACE Financing?
If you already have a plan for your multifamily development, you should speak to a PACE lender about how you can meet your local PACE requirements. Generally, these standards require you to:
- Be up to date on property tax payments and have no current liens
- Have no bankruptcies listed in the last 5 years
- Show that the savings of your project will exceed the cost of the PACE assessment over the life of the loan
- Provide evidence that your project’s value will last longer than the loan term
- Submit a Phase I Environmental Report to your PACE program administrator
Typically, your CPACE lender can help you navigate these requirements and processes to help you receive PACE funding. They can also work with your current plans to meet requirements for PACE loans. Therefore, you should work with a lender who knows the ins and outs of this program to set your construction project up for success.
At Stonehill PACE, we have unparalleled experience in the PACE lending industry. Our specialists work with developers and property owners to help new construction projects and major retrofits receive CPACE funding, submit the necessary paperwork, and guide you through the PACE process. Our engineers can help you maximize your proceeds without changing the scope or adding costs to your construction project. Additionally, we maintain strong relationships with program administrators to ensure a smooth qualification process. Call us today at (678) 823-9313 to begin your approval process. We are here to serve you.