C-PACE as a capital markets solution

NATIONAL REPORT – Over the last five years, Commercial Property Assessed Clean Energy (C-PACE) financing has moved from the margins to the mainstream—especially in the hotel sector.

Once considered a tool for retrofits and small-scale efficiency projects, C-PACE has evolved into a capital markets solution used by developers as a core part of the capital stack for new construction, redevelopments, and refinancings—available across most states, it is applicable to all commercial real estate classes and provides long-term, fixed-rate financing that runs with the property.

This shift comes at a time when hotel developers are navigating higher interest rates, reduced lender appetite, and the capital-intensive requirements of both ground-up projects and property-wide renovations. C-PACE has emerged as a flexible form of private credit that not only fills financing gaps but does so at a cost well below mezzanine debt or preferred equity. The result is a financing source that is increasingly popular among sponsors with large portfolios and ambitious projects.

Use cases for development

Construction loans. Five years ago, using C-PACE for new construction was virtually unheard of. Today, it accounts for roughly 50% of annual C-PACE dollar volume nationwide (source: PaceNation).

For hotels—among the most capital-intensive property types—this shift has been game-changing. Developers can now use C-PACE to replace expensive mezzanine debt or preferred equity, filling out the capital stack at a lower blended rate. In many markets, loan-to-value ratios can reach 35% or above, and with the advent of delayed-draw structures, C-PACE can mirror the mechanics of a traditional construction loan.

Because it can refinance eligible costs already incurred, C-PACE is increasingly used as takeout financing to pay down senior debt or preferred equity. These loans are usually fully funded at close, providing immediate runway and relieving cash flow pressure.

Laura Rapaport

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Many improvements already required to meet code—HVAC, impact glass, plumbing, and resiliency measures—qualify for C-PACE. By financing these components with C-PACE, sponsors can lower overall financing costs and reduce equity while maintaining a structure senior lenders will consent to.

Bridge financing. Hotel projects often need more time to reach stabilization, particularly during renovations or market recovery. Traditional bridge financing can be excessively costly and hard to secure. C-PACE offers an alternative.

Because it can refinance eligible costs already incurred, C-PACE is increasingly used as takeout financing to pay down senior debt or preferred equity. These loans are usually fully funded at close, providing immediate runway and relieving cash flow pressure.

Rescue capital. In today’s capital markets, many owners are recapitalizing to reduce debt service and extend maturity timelines.

By injecting liquidity at the property level, C-PACE can help pay down senior lenders while improving collateral through efficiency and resiliency upgrades. That dual benefit makes lenders more willing to consent. For owners, it provides a lower-cost alternative to equity infusions while creating time for a property to stabilize.

Case study: Newport Beachside Hotel & Resort

A clear example of how C-PACE is reshaping hotel financing is the Newport Beachside Hotel & Resort in Sunny Isles Beach, Florida. The 339-key oceanfront property, once a destination for stars from Sammy Davis Jr. to Tina Turner, is undergoing a complete repositioning and will reopen in late 2025.

North Bridge arranged $42.7 million in C-PACE financing, the first transaction of its kind in Sunny Isles. The financing supported ~$37 million of eligible improvements, including high-efficiency HVAC and low-flow plumbing; new elevators; impact glass and generator replacement; and seawall restoration for resiliency.

The renovation, led by HB Capital Group with design by EoA Group, will also transform the guest experience, including upgrading the oceanfront pier restaurant into a fine dining destination, adding six new food and beverage concepts, reimagining the pool and beach club, and introducing fire pits along the waterfront.

Developer lesson: Many of the hotel’s qualifying improvements—HVAC, plumbing, resiliency measures—are standard requirements for any major renovation. By financing them through C-PACE, the sponsor lowered its cost of capital while setting up the property for long-term success.

The bigger picture

Five years ago, C-PACE for hotel development was rare. Today, new construction represents about half of annual C-PACE volume nationwide, and the hotel sector is at the forefront of this growth. More sophisticated sponsors are using it not just for energy retrofits, but for ambitious ground-up projects, large-scale repositionings, and recapitalizations.

In a capital-constrained market, that combination explains why C-PACE has gone from an afterthought to a fixture in hotel financing—and why developers who ignore it may be leaving capital efficiency on the table.

Contributed by Laura Rapaport, Founder & CEO, North Bridge, New York City

The views and opinions expressed in this content do not necessarily reflect the opinions of Hotel Investment Today by Northstar or Northstar Travel Group and its affiliated companies.