Commercial Property Assessed Clean Energy Assets Increasingly Popular Among Funds

Author:Mr Gilbert Liu and Laurence Pettit
Profession:Kramer Levin Naftalis & Frankel LLP
 
FREE EXCERPT

An innovative type of securitized asset is increasingly popular among fund managers, specifically bonds backed by commercial Property Assessed Clean Energy (C-PACE) special tax assessments. Although demand for C-PACE financing was slow to get off the ground, interest from property owners has been growing and has led to an increasingly full pipeline of C-PACE products, prompting us to take a closer look.

One company in California completed its debut securitization, worth $103.6 million, in July. The senior class of those bonds received a triple-A rating from DBRS, the first time a C-PACE securitization received a rating at that level. Meanwhile, the originator of the securitized C-PACE assets expects to float another $500 million of bonds in 2019. Similarly, other companies have sold bonds worth tens of millions and are now expecting to place much more.

One key feature that could make C-PACE financing an attractive option for some originators and property owners is that it is expected to be countercyclical. Here's why: If economic conditions weaken, more property owners looking to sell their holdings might make various upgrades in the hopes of attracting buyers. Among the potential options open to sellers is...

To continue reading

FREE SIGN UP