Commercial property-assessed clean energy financing, known as C-PACE, lets owners of commercial and multifamily property pay for qualifying improvements through a special assessment on the property instead of a conventional loan. It has moved from a niche tool to a mainstream piece of the capital stack: one industry tally put U.S. C-PACE financing at about $3.6 billion in 2025, up 63 percent from 2024, with conversions and multifamily development among the larger uses.
The Texas framework
In Texas, PACE is authorized by Chapter 399 of the Local Government Code, the Property Assessed Clean Energy Act. A city or county opts in by creating a PACE program; many have done so using a common set of standardized documents, and the Texas PACE Authority administers programs for a large share of the state’s local governments.
What qualifies
- Properties: commercial, industrial and manufacturing, multifamily (generally five or more units), hospitality, agricultural and nonprofit property.
- Improvements: energy efficiency, water conservation, resiliency and distributed generation, such as HVAC systems, lighting, roofing, insulation, solar, and water management.
- New construction: qualifying measures in new buildings can be financed, which is part of why C-PACE now appears in development capital stacks.
How it works
The owner chooses the project and a capital provider, applies to the local program, and signs an agreement under which the local government levies an assessment on the property. The capital provider funds the work and is repaid from the assessment, which is collected much like a property tax and is tied to the property rather than the owner. Terms can be long, commonly up to twenty years or more, and are typically set so that the useful life of the improvements is at least as long as the financing.
The mortgage lender has to agree
Because the assessment is a lien that ranks ahead of a mortgage, Texas programs require the consent of existing mortgage lenders before an assessment is placed on a property. For an owner refinancing or building, it is best to raise C-PACE with every lender in the stack at the start, not after the term sheets are signed.
“Raise C-PACE with every lender in the stack at the start, not after the term sheets are signed.”
Where it fits
Used well, C-PACE replaces some of the most expensive capital in a project, often part of the mezzanine or preferred equity layer, with long-term, fixed-rate financing for the building’s systems. It works best when the improvements are real and documented, the senior lender is comfortable with the priority of the assessment, and the project’s cash flow comfortably covers the combined payments.
Questions to settle early
- Has the city or county where the property sits adopted a PACE program?
- Which measures qualify, and what engineering or savings report is required?
- Will the senior lender consent, and on what conditions?
- How do the assessment payments affect debt service coverage and the exit?
- What happens to the assessment if the property is sold?
Sources
MBA NewsLink: C-PACE financing jumps 63% year-over-year to $3.6 billion (March 24, 2026)Texas PACE Authority: public sector overviewFor general information only. This is not an offer or commitment to lend, insure or invest, and not legal, tax, accounting or investment advice. Terms, availability and eligibility vary and are subject to credit approval and applicable law. Fortuneo Redux Reinsurance, Ltd. and Fortuneo Manens Life & Annuity Company are planned entities and are not licensed.