Since the Federal Reserve began its monetary policy tightening cycle in March 2022, the benchmark interest rate increased from a range of 0 percent to 0.25 percent to a range of 5.25 percent to 5.50 percent. This increase in financing costs has sent reverberations throughout the ecosystem of commercial real estate by decreasing the availability of financing from commercial banks and slowing real estate transaction volumes and construction activity. As a result, many real estate developers have been stuck in an unfortunate circumstance where capital market conditions have restricted the viability of new construction and asset repositioning.

In order to finance construction opportunities in real estate, a growing number of investors and developers are beginning to look to property assessed clean energy (PACE) loans in the absence of affordable financing in the market.

What are PACE loans?

PACE loans are nonrecourse, assumable, fixed-rate financin