Nuveen and Nuveen Green Capital are looking to tap into commercial property-assessed clean energy financing momentum with a novel closed-end fund geared toward insurance company investors.
The New York-based investment management arm of TIAA rolled out the Nuveen CPACE Lending Fund August 9 with $525 million of capital commitments from six major insurance firms.
Alexandra Cooley, chief investment officer of Nuveen Green Capital, told Real Estate Capital USA the fund brings access to the C-PACE market to a deeper pool of allocators. Across the roughly three dozen states with active C-PACE programs, the financing allows owners and developers access to capital for energy-related upgrades on existing assets and funding support for new construction projects.
For C-PACE to make sense on a large scale for insurance company investors, Cooley said the team needed a structure that met their specific regulatory and return requirements. Most of the investment in Nuveen’s C-PACE lending fund is able to be put on, as an example, Schedule D, which carries a lower regulatory capital charge than most investment funds.
“Insurers can achieve a relative market rate of return compared to the regulatory cost of capital,” Cooley said. “They are also supporting green and socially beneficial projects on commercial buildings and that is becoming increasingly important to insurance CIOs.”
C-PACE investments notably are investment-grade up to 100 cents on the dollar because of the position they take above a senior mortgage in the capital stack. Cooley noted the investments are also long duration and currently most investors have a small exposure toward C-PACE financing.
Nuveen’s deployment and investment strategy for the fund will be the same as its current approach to C-PACE financings. Cooley said in the current portfolio that no state’s C-PACE program receives more than 20 percent of the overall exposure of the roughly dozen states with active programs.
Construction financing has been a key use case for C-PACE loans in the current market. Cooley said the firm has been able to use the financing for new construction projects, bridge loans and stabilization financing. About half of Nuveen’s C-PACE loan portfolio currently has a significant construction component with about 30 percent for bridge loans and about 20 percent for stabilized properties.
Cooley said the pullback from construction and bridge lending – especially by US regional banks and from investors trying to reduce exposure to commercial real estate – is giving Nuveen a better window of opportunity to get exposure to high-quality assets.
Cooley noted Nuveen does not focus on any single commercial real estate to maintain broad exposure across asset classes and averages a loan-to-value ratio of about 20 percent with its C-PACE loans. She said the firm tends to lend alongside mortgage lenders, which typically account for two to three times the exposure of Nuveen’s C-PACE component.
In its 2023 global institutional investor survey, the firm noted that 82 percent of insurers said they planned to consider impact investments in the next year. Roughly eight in 10 insurers the manager surveyed said they were investing in or planned to invest in energy innovations in the next two years.
Joe Pursley, head of insurance, Americas, at Nuveen, said in the firm’s August 9 announcement that the C-PACE lending fund mirrors insurance company appetite. “Insurers are interested in differentiated sources of capital efficient income, and increasingly motivated to address climate change,” he noted.
Interest in and use of C-PACE financing has gained momentum in recent years despite commercial real estate market volatility. The financing niche recorded $4.2 billion in volume in 2022, according to data from non-profit PACE financing advocate PACENation.
If you do not receive this within five minutes, please try to sign in again. If the problem persists, please email: 
