Petros PACE Closes Record $89M C-PACE Financing

Petros PACE Finance’s $89 million for the 111 Wall Street building is the first-ever C-PACE deal completed as part of New York City’s recently launched program.

In addition to being the city’s first deal, it is also the largest single C-PACE transaction ever closed in the US since the financing structure debuted more than 10 years ago.

C-PACE is a long-term financing product secured by a property tax assessment. It provides developers with an affordable alternative to mezzanine debt and equity. The funding can be used for energy efficiency, renewable energy and water conservation improvements to commercial properties as retrofits or during new construction in 37 states and Washington D.C.

Generally, these 20- to 30-year fixed-rate C-PACE loans offer interest rates in the 5% to 6% range, usually lower than private equity rescue capital. Additionally, they don’t require personal guarantees, according to the Chair of Akerman’s Real Estate Finance practice, Randy Eckers. 

The PACE funding is part of a $500 million acquisition and reposition financing closed by 111 Wall Street’s joint venture partners, Wafra Capital Partners and Nightingale Properties. 

The planned PACE-eligible renovations should significantly reduce 111 Wall Street’s carbon footprint and help it achieve LEED Silver certification. Those renovations at the 1.2 million-square-foot, 25-story high-rise office building include a full upgrade to the building’s façade, a complete infrastructure overhaul with new HVAC air conditioning and mechanical-electrical-plumping (MEP) systems. In addition, there will be fully redundant power systems.  Construction and lease-up should be completed in 2023.

“This transaction is a transformational event for the C-PACE industry because it officially launches potentially the largest C-PACE market in the country, New York City, and highlights the breadth and scope of how C-PACE can be used by institutional sponsors to fund their carbon reduction requirements,” said Mansoor Ghori, CEO of Austin-based Petros PACE Finance in a prepared statement. “We anticipate a ripple effect across the country as available capital increases and the benefits of the program become more widely known..”

Under New York City’s Climate Mobilization Act of 2019, large properties will need to cut carbon emissions by 40% by 2030 and 80% by 2050. 

“With these improvements, 111 Wall Street will be well-positioned to meet New York City’s requirements and attract today’s tenants that seek to lease buildings with forward-thinking green designs and environmental sustainability,” said Michael Gontar, Chief Investment Officer of Wafra Capital Partners in a prepared statement.

The completion of C-PACE financing at 111 Wall Street should attract more attention for the program. Earlier this year, Eckers said he thought the program’s arrival in New York City would help boost its profile.

“I think just people are just becoming a little bit more aware of it,” Eckers told GlobeSt.com. “They should be much more aware of it, but New York City is coming online. Once New York City comes online, I imagine that the awareness of the program will increase across the country. At least, I hope it will.”