CleanFund, a nationwide commercial property assessed clean energy financing company, provided $4.2 million in C-PACE funding for a 94-room hotel, which began construction in September in Tracy, Calif, east of San Francisco.
The four-story, 67,000-square-foot new Hilton Home2 Suites by Hilton is a $22 million development of Lathrop, Calif.-based RAAD Hospitality Group. Expected to be completed by late 2019, the Home2 Suites will accommodate business, leisure and family travelers, and will offer a swimming pool and a patio, Wi-Fi, in-room kitchens, conference facilities and other amenities.
Live Oak Bank recognized C-PACE as an ideal solution to fill the $4.2 million construction financing gap and lower the weighted average cost of capital for its client, RAAD.
“We were pleased with the way our senior lender, Live Oak Bank, and CleanFund worked together to provide the most accretive financing solution for our new hotel project. We’ve been operating for over 20 years and are excited to have C-PACE as a new financing tool in the capital stack, enabling us to stretch our equity dollars towards acquisition and development of other hotels,” Andy Kotecha, president of RAAD Hospitality, said in a statement.
“This project represents Live Oak’s first C-PACE deal, and we were thrilled to bring in CleanFund because of their deep experience with banks, their great track record in handling C-PACE start-to-finish, and their focus on improving the bottom line for our clients through this innovative solution,” Jamie Bourgeois, GM—hotel lending at Live Oak Bank, Wilmington, N.C.
“CleanFund’s 30-year financing for the lighting, electrical, HVAC, glazing systems, plumbing fixtures, insulation and other energy-related systems complements the overall capital stack for a more successful project,” Joe Euphrat, managing director at CleanFund, said in a statement. “We’re pleased to be able to provide competitive financing, making this Home2 Suites a highly energy-efficient and environmentally-friendly property.”
C-PACE financing was introduced in California in 2008 as a form of voluntary parcel tax assessment financing to fund qualifying improvements that reduce energy and water usage, and that provide seismic and other resiliency benefits to the built environment. C-PACE financing for commercial real estate, which has been adopted in 35 states and the District of Columbia, allows property owners to repay qualified investments for building upgrades and new construction as a line item on the property’s ordinary property tax bills.