Eyzenberg JV launches first-ever senior construction, C-PACE loan program

Eyzenberg Greencap is teaming up with Reeds Bay Investment Group to provide the commercial real estate industry’s first joint senior construction and C-PACE loan program.

The partnership will originate loans of $1 million to $20 million for US borrowers that are developing properties in the District of Columbia and 24 states with active C-PACE programs, David Eyzenberg, founder, told Real Estate Capital USA.

The program will mainly target new developments, heavy value-added acquisitions, or recapitalizations done in conjunction with a property redevelopment. Generally speaking, the partnership will seek loans in the multifamily sector or have a strong multifamily component. The program will use leverage of up to 90 percent loan-to-cost. The loans will have terms that range from six months to 30 years.

Eyzenberg Greencap, a joint venture between Eyzenberg & Co and Nuveen’s Greenworks program, believes there is interest from borrowers who want a one-stop solution for construction and C-PACE financing.

C-PACE is a lending program in 36 states designed to encourage property owners to make their buildings more green. Unlike traditional loans, C-PACE financings are paid back at the same time as a borrower’s property taxes, and the loan is attached to the building even after it is sold. The financings are often used for energy efficient retrofits and renovations. Borrowers hope the improvements financed will lower maintenance costs and make their building more attractive in the long run, Eyzenberg said.

The program is not for all borrowers but can be extremely beneficial for some. “C-PACE can fill the gap between senior debt and equity at lower pricing than alternative capital structures like mezzanine debt or preferred and common equity,” Eyzenberg said.

C-PACE can be especially useful for property owners since special assessments taxes are treated as an operating expense, giving the option for them to be passed on to tenants and/or guests, Eyzenberg said.

“For low-yield development markets like New York, DC, or Miami it’s harder to make C-PACE work in a capital stack since leverage is usually cashflow constrained. However, it does make sense if it’s used to blend down the aggregate cost of capital from a more expensive debt fund,” he added.

Lenders are still gaining comfort with C-PACE financing, with Eyzenberg noting that banks and debt funds are the most active at this point. The agencies and commercial mortgage-backed securities conduits are still getting up to speed.