- July 1, 2015: Vol. 27, Number 7

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PACE financing: A primer for real estate investment management professionals

by Robert Johnson Jr.

Property assessed clean energy, or PACE, is a new financing mechanism that works like a special assessment district bond, but one that benefits only a specific property. Using PACE, cities and counties promote on-site renewable-energy projects, energy-efficiency upgrades and, in some places, water-efficiency upgrades. PACE is rapidly expanding across the United States. PACE financing is a promising, arguably off–balance sheet financing option that deserves a place in the capital stack for building retrofits and for new construction.

PACE bonds can be issued by authorized government agencies (and, in some cases, private finance entities) and can finance up to approximately 15–20 percent of a property’s value for renewable-energy, energy-efficiency or water-efficiency upgrades. The financing creates a special assessment lien on the property that is repaid in semi-annual property tax installments over the term.

A common requirement with PACE financing is a project g

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