Mortgage Holders

Colorado Commercial Property Assessed Clean Energy (C-PACE) is a program that helps building owners access private-sector financing to upgrade their building with energy efficiency, clean energy, and water efficiency improvements. With C-PACE, building owners receive up to 100 percent financing with attractive repayment terms consistent with the useful life of the improvements (up to 25 years). This typically enables them to undertake larger building modernization projects that addresses multiple deficiencies.

In well-designed C-PACE projects, the energy cost savings exceed the PACE payments, creating a cash-flow-positive project. By using C-PACE, building owners can reduce their operating costs, improve the value and competitiveness of their building, meet energy performance goals, and increase their cash flow.

Repayment is facilitated through the County property tax assessment process. A voluntary assessment (similar to a sewer district assessment) is placed on the building owner’s property tax bill. The assessment is repaid over the financing term (up to 25 years) and the annual energy cost savings will, in most cases, exceed the annual assessment payment. As a result such projects are typically cash flow positive in the first year. Because the C-PACE assessment obligation runs with the property, the assessment automatically transfers to the next owner when the property is sold.

Colorado C-PACE project financing is repaid via a voluntary assessment (lien) placed on the property by the County tax assessor and assigned to the financial institution that provides financing for the energy efficiency improvement project.  Since the Colorado C-PACE assessment has priority lien status, similar to a sewer assessment, the existing mortgage holder will be asked to provide its consent to the Colorado C-PACE financing. Such consent is entirely voluntary on the part of the mortgage holder.

There are multiple steps that will involve the mortgage holder:

1. Once a building owner determines that a building modernization project may enhance their building’s asset value (collateral) and cash flow (improved mortgage repayment ability), the program administrator and/or the owner will seek a preliminary meeting with the mortgage holder to review the opportunity.

2. At this first meeting, the owner and the C-PACE program administrator will describe the program’s requirements and answer any questions. In particular they will discuss the third-party technical review process to validate the projected energy savings and related key financial metrics associated with the project.

3. Assuming the mortgage holder does not object, the Colorado C-PACE program administrator will collaborate with the owner and the owner’s C-PACE registered contractor to develop and optimize the project to ensure it meets program requirements. See C-PACE Program Guide for more information.

4. The project development and optimization process includes the creation of a Colorado C-PACE Project Finance Report. This report is the culmination of a comprehensive process that includes input and reviews by the owner, contractor and the program administrator. The end product is a carefully designed, optimized project that meets all the requirements of the program.

5. At a second meeting with the mortgage holder this Project Finance Report will be reviewed in detail and a formal request for consent will be made by the owner.

The majority of Colorado C-PACE projects generate positive cash flow based on the energy savings. For this reason Colorado C-PACE projects typically have a positive impact to a mortgage holder’s key questions – what is the project’s impact to:

• Borrower’s repayment ability
• Collateral value?

To support mortgage holder project evaluations, the Colorado C-PACE program administration team provides an independent third-party review of the technical and financial projections. Such review is consistent with industry best-practice methodology as defined in the Green Building Certification Institute’s Investor Confidence Project protocol. Moreover, the Colorado C-PACE team leverages its proven project optimization tools and extensive project-experience databases to facilitate quality assurance across the project development life cycle.

Given the cash flow generating characteristics of Colorado C-PACE projects, over fifty mortgage lenders in Colorado have consented to Colorado C-PACE projects.  See a list of C-PACE Consenting Mortgage Holders in Colorado.

Under the Colorado C-PACE Statute (C.R.S. 32-20-101 et seq.), the C-PACE special assessment is subject to the same penalties and the same procedures (up to and including a tax lien sale) in the case of delinquency as is provided for through ad valorem (i.e. property) taxes. The C-PACE assessment has priority over all private liens on the property, is of equal priority to other special assessments, and is junior in priority to general property taxes.

The statewide Colorado C-PACE program was launched by Colorado’s New Energy Improvement District (NEID), which was created by the Colorado Legislature in 2014. In 2015 NEID, through a competitive bidding process, selected Sustainable Real Estate Solutions, Inc. (SRS) to be the Colorado C-PACE program administrator.

While many buildings need upgrading, until C-PACE, building owners had no good way to pay for it. C-PACE solves the financial issues associated with a building modernization project by providing 100 percent financing that is long-term, non-recourse, and affordable. Since the financing is based on the building’s financial health, the owner is not required to sign a personal guarantee. Once a project is complete, the building owner has a more valuable, more competitive building, lower utility bills, a more sustainable property, and, often, a higher net operating income if the project was designed to be cash-flow-positive.

No. Colorado C-PACE uses private capital to fund projects.  Visit the Capital Providers page for a current list of capital providers participating in the Colorado C-PACE program. The costs to administer the program is paid by program participants through a program administration fee that is included in the total cost of each project.

Building owners are encouraged to consult their accountants on this matter.

There has been no specific ruling by the Financial Accounting Standards Board on this issue.

Upon closing of Colorado C-PACE financing, the program administrator instructs the county tax assessor to record an assessment (lien) on the county land records.

Yes. Owners who choose not to participate remain unaffected.

Qualifying for C-PACE financing is based on the property, and not the owner. The C-PACE program administrator will look at:

• The property’s estimated market value (assessed or appraised)
• The amount of the owner’s equity in the property
• The owner’s recent mortgage and property tax payment history
• The dollar value of the proposed energy and/or water-saving improvements.

C-PACE projects typically range from $200,000 to more than $1 million. Constraints on the amount are driven by the financial health of the building and include:

• Building financials
• Loan-to-value percentage (<80% LTV is preferred)
• Other considerations of the mortgage holder.

Visit the Participating Counties page of this website for a current list of counties that participate in the Colorado C-PACE program. The program administrator can accept Pre-Qualification Submission Forms ONLY from owners with properties located in a county that has opted into the Colorado C-PACE program. If you have questions about getting any county to join Colorado C-PACE, email info@copace.com.

To ensure the best possible terms, including interest rate and other fees, the building owner can review term sheets from multiple private capital providers, facilitated by the program administrator, to select the best fit.

The total amount available to finance a new construction project in Colorado under C-PACE remains up to 20 percent of the total eligible construction costs. The term of the financing can be extended for up to 25 years.

For existing building retrofits, the maximum term will still be limited by the weighted average effective useful life of the equipment and can range typically from 10, 15, or up to 25-year terms. Only single measure projects with EULs of 25 years or greater would be able to take advantage of the longer 25-year term, items like roof replacement, solar PV, and elevator modernization projects.

Property owners are encouraged to pursue available federal investment tax credits (ITC), utility rebates, and all other available incentives. All or a portion of total incentives may be subtracted from the amount financed under the C-PACE program.

Each C-PACE participating private capital provider sets its own terms, including pre-payment, in its financing agreement with the building owner. It is common for C-PACE capital providers to include a pre-payment fee schedule.