Commercial Property Assessed Clean Energy (C-PACE) financing allows property owners to fund energy efficiency, renewable energy, and water conservation improvements with long-term, low-cost capital — repaid through a property tax assessment. PeerSense connects you with C-PACE lenders and helps you stack it with other financing.
C-PACE (Commercial Property Assessed Clean Energy) financing funds energy efficiency and renewable energy upgrades for commercial buildings. It offers 20–30 year terms, non-recourse structure, and repayment through a property tax assessment — meaning no personal guarantee and no impact on existing mortgage covenants.
Written by Ed Freeman, Capital Advisory — PeerSense. Updated April 2026.
Commercial Property Assessed Clean Energy (C-PACE) is a financing mechanism that allows property owners to fund energy efficiency and renewable energy improvements through a special property tax assessment.
C-PACE financing was created through state-level legislation that enables local governments to offer long-term, fixed-rate financing for qualifying energy improvements on commercial properties. Rather than borrowing from a bank, property owners receive funding from a private C-PACE capital provider. Repayment is structured as a voluntary special assessment on the property tax bill, typically over 20 to 30 years. This structure gives C-PACE several advantages that conventional financing cannot match.
The assessment lien is tied to the property itself, not to the borrower. If the property is sold, the remaining C-PACE obligation transfers to the new owner automatically. This means property owners can make significant energy upgrades, benefit from reduced operating costs during ownership, and pass the remaining obligation along at sale without triggering a balloon payment or prepayment penalty. The new owner inherits both the improvements and the assessment, which is typically offset by the energy savings those improvements generate.
Because C-PACE is repaid through the property tax system, it carries a senior lien position relative to the mortgage in most states. In practice, this means C-PACE assessments are collected alongside property taxes and have the same priority. However, the actual C-PACE lien typically sits behind the first mortgage in the capital stack from a practical underwriting perspective. Most C-PACE programs require that the property have sufficient equity and that the improvements deliver measurable energy savings, verified through a third-party energy audit.
C-PACE is not a government grant or subsidy. It is private capital deployed through a public framework. The local government or a designated C-PACE program administrator facilitates the assessment, but the actual financing is provided by private lenders and capital providers who specialize in C-PACE. PeerSense works directly with these capital providers to match your project with the right lender, structure the financing, and guide you through the approval process from energy audit to closing.
For commercial property owners exploring energy upgrades, C-PACE removes the two biggest barriers: upfront cost and cash flow impact. With 100% financing available and terms that stretch 20 to 30 years, the annual assessment payment is often less than the annual energy savings generated by the improvements. This creates a net-positive cash flow scenario from day one for many projects. If you are considering improvements to a commercial property or a hotel or hospitality asset, C-PACE is worth evaluating as part of your capital strategy.
Financing is secured by your property and repaid as part of your property tax bill. The assessment stays with the property, not the borrower.
No personal guarantee required. The financing is secured by the property itself, protecting your personal assets and other holdings.
Unlike traditional commercial loans, C-PACE doesn't require tax returns, financial statements, or income verification. Qualification is based on the property and improvements.
If you sell the property, the C-PACE assessment transfers to the new owner along with the property. This means the improvements you make can increase property value without creating a balloon payment at sale. Buyers often view C-PACE favorably because the energy savings typically exceed the assessment payment, and the improvements are already in place and performing.
C-PACE financing can be used for a wide range of energy efficiency, renewable energy, water conservation, and resiliency improvements that reduce operating costs and increase property value.
C-PACE eligibility is determined by the type of improvement, not the type of borrower. Any permanently affixed improvement that reduces energy consumption, generates renewable energy, conserves water, or improves the resiliency of the building may qualify. The improvement must have a useful life that exceeds the financing term or, at minimum, the assessment period. A third-party energy audit is required to verify that the proposed improvements will deliver measurable savings.
Energy efficiency improvements represent the broadest category and include HVAC system replacements or upgrades, building envelope improvements (roof, insulation, windows, air sealing), LED lighting retrofits, energy management and building automation systems, and high-efficiency boilers or chillers. These improvements typically deliver 15% to 40% reductions in energy consumption depending on the baseline condition of the building.
Renewable energy systems include rooftop and ground-mounted solar photovoltaic arrays, solar thermal systems, small wind turbines, geothermal heat pumps, combined heat and power (CHP) systems, and battery energy storage. Solar installations are the most common renewable energy project financed through C-PACE, particularly for commercial and industrial properties with large roof areas or available land.
Water conservation measures include low-flow plumbing fixtures, smart irrigation systems, rainwater harvesting and storage, greywater recycling systems, and cooling tower water treatment. These are particularly relevant for hotel properties, multifamily buildings, and properties with significant landscaping.
Seismic and resiliency upgrades are available in select states, particularly California, Oregon, and Washington. These include structural retrofits for earthquake resistance, storm-hardening measures, flood mitigation systems, and emergency backup power. Resiliency improvements are an expanding category as more states update their C-PACE statutes to address climate risk.
Solar panels, wind turbines, geothermal systems, and other renewable energy installations.
High-efficiency heating, ventilation, and air conditioning systems that reduce energy consumption.
LED lighting upgrades, smart lighting controls, and automated energy management systems.
Roofing, insulation, windows, and doors that improve energy efficiency and reduce heat loss.
Electric vehicle charging stations for commercial properties, parking structures, and fleet operations.
Low-flow fixtures, rainwater harvesting, irrigation systems, and water recycling equipment.
Structural improvements for earthquake resistance (available in select states with seismic activity).
Building automation, energy monitoring, and smart controls that optimize energy usage.
C-PACE offers fixed-rate, long-term financing with terms that are more favorable than mezzanine debt and more flexible than conventional commercial loans.
C-PACE rates and terms vary by capital provider, state program, property type, and project specifics. The ranges below represent current market conditions as of early 2025. Rates have remained relatively stable compared to conventional commercial lending because C-PACE capital providers underwrite primarily to the property and the energy savings rather than to the borrower's creditworthiness or market interest rate cycles.
The fixed-rate structure is a significant advantage. Unlike floating-rate bridge loans or variable-rate commercial mortgages, a C-PACE assessment payment remains the same for the entire 20 to 30 year term. This predictability makes it easier to model long-term cash flows and project returns. Combined with non-recourse terms and no income documentation requirements, C-PACE provides a level of certainty and simplicity that other capital sources cannot match.
Most capital providers require a $500K minimum. Projects above $50M are financed regularly. Typical deal size is $1M to $15M.
Rates are fixed for the full term. Actual rate depends on property type, location, project size, and capital provider. Lower rates for larger, stronger projects.
Terms are matched to the useful life of the improvements. HVAC and building envelope projects typically qualify for 20-25 year terms. Solar installations can reach 25-30 years.
No personal guarantee required. The financing is secured by the property assessment only. Your personal assets and other properties are not at risk.
No tax returns, financial statements, or bank statements required. Qualification is based on the property, the improvements, and the projected energy savings.
When combined with senior mortgage debt, C-PACE can bring total leverage to 90-100% of improved property value in many programs, reducing or eliminating the equity requirement.
C-PACE sits behind your first mortgage and does not require lender consent in most states. This allows you to finance improvements without refinancing your existing loan, using equity, or bringing in outside investors.
At 6-9% fixed, C-PACE is roughly half the cost of mezzanine financing (10-18%) and a fraction of the cost of preferred equity (12-20%). Over a 20-year term on a $2M project, this difference can save hundreds of thousands of dollars.
C-PACE sits behind senior debt and can fill the gap between your senior loan and the project cost, replacing equity or mezzanine at a lower cost of capital.
Understanding where C-PACE fits in the capital stack is critical for property owners, developers, and their lenders. C-PACE occupies a unique position: it is repaid through the property tax system, which technically gives it senior lien priority alongside property taxes. However, from a practical underwriting standpoint, C-PACE functions as subordinate financing that sits between senior mortgage debt and owner equity.
Here is how it works. A property owner has a first mortgage at 65% loan-to-value (LTV). The owner wants to make $2 million in energy improvements but does not want to refinance the existing mortgage or use cash reserves. C-PACE can finance up to 100% of the eligible improvement costs. The C-PACE assessment is added to the property tax bill and repaid over 20 to 30 years at a fixed rate, typically between 6% and 9%. The combined LTV (mortgage plus C-PACE) can reach 90% to 100% of the improved property value in many programs.
The lien priority question is the most commonly misunderstood aspect of C-PACE. Because the assessment is collected through the property tax system, it has the same collection priority as property taxes in the event of default. This means that in a foreclosure scenario, unpaid C-PACE assessments are paid before the first mortgage, similar to unpaid property taxes. However, most C-PACE programs limit the assessment amount relative to property value and require a savings-to-investment ratio greater than 1.0, which reduces the risk to senior lenders. In most states, C-PACE does not require consent from the existing mortgage holder, though some states have implemented consent requirements.
For developers and property owners, C-PACE effectively replaces a portion of the capital stack that would otherwise require mezzanine debt (10% to 18% interest), preferred equity (12% to 20% returns), or common equity. At 6% to 9% fixed rates over 20 to 30 years, C-PACE is significantly cheaper than all of these alternatives. This makes it a powerful tool for improving project returns and reducing the amount of equity required to complete a commercial real estate improvement or renovation project.
| Capital Stack Position | Typical LTV | Typical Rate | Recourse |
|---|---|---|---|
Senior Debt (1st Lien) Bank or conventional lender | 60-75% | 5-8% | Recourse |
C-PACE (Tax Assessment Lien) Property tax assessment | Up to 100% combined | 6-9% | Non-Recourse |
Mezzanine / Preferred Equity Subordinated debt | 75-90% | 10-18% | Varies |
Common Equity Owner/sponsor capital | 10-40% | Variable return | N/A |
| Feature | C-PACE | Conventional Loan | Mezzanine Debt |
|---|---|---|---|
| Interest Rate | 6-9% fixed | 5-8% | 10-18% |
| Term Length | 20-30 years | 5-10 years | 2-5 years |
| Personal Guarantee | None | Usually required | Often required |
| Income Documentation | Not required | Full underwriting | Full underwriting |
| Transferable at Sale | Yes, automatically | No, due on sale | No |
| LTV Coverage | Up to 100% of improvements | 60-75% of value | 75-90% of value |
| Prepayment Penalty | Varies by lender | Common (yield maintenance) | Common |
| Approval Timeline | 4-8 weeks | 6-12 weeks | 4-8 weeks |
C-PACE can fill the gap between senior debt and project costs, reducing or eliminating the need for owner equity or outside investors. This preserves capital for other opportunities.
C-PACE rates are typically 6-9%, significantly lower than mezzanine financing (10-18%), saving thousands in annual interest costs over the life of the investment.
In most states, C-PACE doesn't require consent from your senior lender, making it easier to add to your capital stack without renegotiating existing loan terms.
C-PACE is available to commercial property owners across a wide range of asset classes. Any privately owned, non-residential property in an eligible jurisdiction can typically qualify.
C-PACE financing is available for virtually any commercial, industrial, or multifamily property type. The property must be privately owned (not government-owned), located in a jurisdiction with an active C-PACE program, and current on property taxes and mortgage payments. Properties with existing tax liens, pending foreclosure actions, or recent bankruptcy filings are typically ineligible.
Commercial office buildings are among the most common C-PACE candidates. Aging office stock often has significant opportunities for HVAC upgrades, lighting retrofits, and building envelope improvements that can reduce energy costs by 20% to 35%. These improvements also help owners meet tenant sustainability requirements, which are increasingly common among corporate tenants.
Hotels and hospitality properties are particularly well-suited for C-PACE because they are energy-intensive operations with high utility costs. A typical hotel spends $2,196 per available room annually on energy. C-PACE-funded improvements to HVAC, lighting, water systems, and building envelope can reduce this by 25% to 40%, directly improving net operating income. If you own or operate a hotel property, learn more about hotel financing options that can be combined with C-PACE.
Industrial and warehouse properties benefit from large roof areas ideal for solar installations, high-bay LED lighting upgrades, and HVAC improvements. Distribution centers and manufacturing facilities with significant energy consumption often see the fastest payback periods on C-PACE-funded improvements.
Multifamily properties with five or more units are eligible in most C-PACE jurisdictions. Common improvements include central HVAC system replacement, solar installations, common-area lighting, water conservation fixtures, and building envelope upgrades. Multifamily C-PACE is particularly attractive because energy savings can be passed through to tenants or retained by the owner depending on the lease structure.
Retail centers, medical offices, self-storage facilities, and mixed-use developments are all eligible. The key requirement is that the property must be commercially zoned and privately owned. Single-family residential properties (one to four units) do not qualify for C-PACE, though some states have separate residential PACE (R-PACE) programs.
HVAC upgrades, solar installations, LED lighting, and water conservation systems that reduce operating costs and increase NOI.
Energy-efficient building systems, smart controls, and renewable energy that attract tenants and command premium rents.
Solar arrays, energy-efficient lighting, HVAC systems, and equipment that reduce utility costs for manufacturing and warehouse operations.
Building-wide energy improvements, solar installations, EV charging, and water conservation for apartment complexes and mixed-use developments.
Energy-efficient systems, solar canopies, LED lighting, and EV charging that reduce costs and attract environmentally conscious tenants.
Comprehensive energy upgrades during conversion projects — historic buildings, warehouse-to-office, industrial-to-residential conversions.
C-PACE legislation has been enacted in over 38 states and Washington D.C., but active programs with established capital providers vary. Availability depends on state law and local government participation.
C-PACE is authorized at the state level through enabling legislation, but individual counties, cities, or special districts must opt into the program for properties within their jurisdiction to be eligible. This means that even in a state with C-PACE legislation, your specific property may or may not be in an active program area. PeerSense verifies program availability for every property before beginning the application process.
The most active C-PACE markets are in states with mature programs, established program administrators, and multiple active capital providers competing for deals. States like Connecticut, California, Florida, Colorado, and Texas have funded hundreds of millions of dollars in C-PACE projects. Other states have legislation on the books but limited deal flow due to newer programs, fewer capital providers, or more restrictive program requirements.
Some states require mortgage holder consent before a C-PACE assessment can be placed on a property, which can add complexity and timeline to the process. States that do not require consent generally see higher deal volume because the process is simpler. Your PeerSense advisor can walk you through the specific requirements for your state and jurisdiction.
States highlighted in bold have the highest deal volume and most established capital provider networks.
C-PACE availability changes as new jurisdictions opt in and programs expand. Even if your state is listed above, your specific county or municipality may not yet participate. PeerSense maintains a current database of active program areas and can confirm eligibility within one business day.
Check Your Property's EligibilityAnswers to the most common questions property owners ask about Commercial Property Assessed Clean Energy financing.
Have a question not answered here? PeerSense advisors work directly with C-PACE capital providers and can answer specific questions about your property and project.
Ask a C-PACE AdvisorIf you own commercial property and want to fund energy efficiency, renewable energy, or water conservation improvements, C-PACE may be the right solution. PeerSense connects you with C-PACE lenders and helps you structure the financing. One conversation. Direct introduction. No runaround.
Or call (317) 452-6990 to discuss your project directly.
Explore conventional financing for acquisition, refinance, and renovation of commercial properties. C-PACE can stack with these loans to cover energy improvement costs.
Hotels are among the best candidates for C-PACE due to their high energy consumption. Explore hotel-specific financing options that pair with C-PACE for energy upgrades.