Article Originally Featured in HotelBusiness.com
As the commercial real estate lending environment continues evolving in response to economic pressures and shifting borrower needs, CPACE (Commercial Property Assessed Clean Energy) financing is becoming more prominent, with projections of it surpassing $10 billion in cumulative investments this year. According to Peachtree Group, a leading hospitality and commercial real estate financier, CPACE originations for the firm are expected to increase by 15–25% this year, marking another strong year for this creative financing solution.
This projected growth is fueled by legislative momentum, borrower demand for capital flexibility and gaps in traditional lending. CPACE programs, long supported by energy efficiency and sustainability goals, are seeing broader market adoption.
As more states implement or expand CPACE legislation, borrowers will have increasing access to a financing option—currently available in 40 states and the District of Columbia—that offers long-term, fixed-rate, fully assumable debt, a rare combination in today’s higher-rate environment.
Banks' tightening of construction lending has created a gap in the capital stack, and CPACE is emerging as a critical tool to bridge that gap with flexible, borrower-friendly terms. Hotel developers, in particular, are leveraging CPACE to offset rising construction costs and inflationary pressures. Whether for ground-up development or major renovations, the program provides a cost-effective alternative that aligns with the longer lifecycle of hospitality assets. Importantly, firms like Peachtree Group are now bundling CPACE with senior loans to provide a seamless financing solution that simplifies deal structures and accelerates timelines.
An emerging trend gaining traction among hotel owners is the use of retroactive CPACE financing.
While CPACE is typically arranged before construction begins, retroactive CPACE allows eligible property owners to secure this funding after a project is completed—sometimes even years later. The allowable "look-back" period varies by state but generally ranges from two to three years. This form of financing is proving especially valuable for owners by providing lower-cost liquidity and enhancing cash flow on projects that were initially funded through traditional means.
A recent example is the Hilton Garden Inn in Davis, Calif., which underwent a renovation in 2019. Peachtree Group originated the retroactive CPACE financing, and the proceeds were used to pay down the senior loan and fund the buildout of a fitness studio attached to the hotel.
As awareness of retroactive CPACE grows, more borrowers are expected to revisit previously completed projects to unlock capital, improve balance sheets or reinvest in future developments.
In a macroeconomic environment still marked by persistent high interest rates and cautious bank lending, CPACE's fixed-rate, non-recourse nature stands out. As more stakeholders, including municipalities, developers, and capital providers, embrace CPACE's flexibility and stability, its role in reshaping commercial real estate finance will only deepen. For hotel developers and owners looking to navigate today's complex capital markets, CPACE isn't just an option, it's a strategic advantage.
Peachtree Group is a direct balance sheet lender focused on funding first mortgage bridge loans, mezzanine loans, preferred equity investments, and commercial property assessed clean energy (CPACE) financing. Jared Schlosser is responsible for Peachtree's hotel originations platform and its CPACE program.
Article Originally Published in HotelBusiness.com
Hotel owners are facing one of the most demanding operating environments in decades. Interest rates remain high, property valuations are resetting and the costs of running a hotel—particularly energy—continue to rise. Meanwhile, guests have elevated expectations, lenders are more selective and the pressure to maintain profitability in an uncertain market has never been more significant.
In this climate, hotel owners can no longer afford to delay strategic upgrades that make their properties more efficient, resilient and competitive. Sustainable innovation is no longer nice to have; it’s quickly becoming essential for long-term success. Fortunately, hotel owners now have a powerful tool to help them implement these upgrades without draining their reserves or disrupting cash flow: CPACE financing.
Energy is among the most volatile and burdensome line items in a hotel’s operating budget. The rising cost of utilities—from climate control to lighting to laundry—cuts directly into margins. According to recent projections, U.S. natural gas prices alone are expected to increase by nearly 50% in the coming year. These rising costs can add up fast for hotels, especially older properties.
However, energy costs are also one of the most addressable threats. Owners who invest in energy-efficient systems, solar panels, HVAC upgrades or water conservation measures can significantly reduce operating expenses. More importantly, they gain more control over those expenses, becoming less reliant on grid pricing and utility volatility.
This is where CPACE (Commercial Property Assessed Clean Energy) financing comes into play. CPACE enables hotel owners to access long-term fixed-rate financing for eligible improvements like energy efficiency, renewable energy and resiliency upgrades. Unlike traditional loans, CPACE is repaid through a special property tax assessment over a period that can extend up to 30 years. That means no upfront capital outlay, non-recourse financing and the potential to pass along costs to future owners if the asset is sold.
By using CPACE, hotel owners can make the upgrades they need today without disrupting operations or tying up cash reserves.
These improvements do more than reduce costs. Properties that are upgraded with efficiency and resiliency in mind tend to command stronger interest from guests, brand partners and investors. As consumers become more conscious of sustainability and more sensitive to comfort and reliability, hotels that can market lower carbon footprints, modernized systems and energy independence stand out in a crowded market.
There’s also growing evidence that sustainability enhances asset value. Properties that have made these upgrades are often better positioned for refinancing or disposition. Buyers are looking closely at operating expenses and capital needs. A hotel with a new roof, efficient systems and solar capabilities is far more attractive than one that faces deferred maintenance and high utility bills.
Sustainable innovation also offers protection against increasingly frequent and severe weather events. Hurricanes, heatwaves, floods and freezes can cause major disruption. Hotels that integrate battery storage, microgrids and storm-resistant features can maintain operations, reduce damage and serve as safe havens in times of crisis. That kind of resilience doesn’t just protect the bottom line—it enhances a hotel’s reputation and guest loyalty.
Hotel owners don’t have to tackle everything at once. The key is starting with the most impactful and cost-effective improvements. CPACE makes that possible. It’s an accessible scalable financing solution that aligns with the long-term nature of hotel ownership and investment.
In a tightening market where margins are under pressure and capital is harder to come by, CPACE offers hotel owners a path forward. It provides a way to modernize properties, cut expenses, increase competitiveness and build resilience—all without adding traditional debt to the balance sheet.
Today’s environment demands more from hotel owners. With sustainable innovation and the strategic use of CPACE financing, those demands can become an opportunity—not just to survive but to grow stronger and more competitive in the years ahead.
Peachtree Group
Peachtree Group is a direct balance sheet lender focused on funding first mortgage bridge loans, mezzanine loans, preferred equity investments, and commercial property assessed clean energy (CPACE) financing. Jared Schlosser is responsible for Peachtree's hotel originations platform and its CPACE program.
$51.5MM CPACE (30-year term) loan in a 224-unit townhome development in the Vinedo Community of Paso Robles, CA. The Reserve is part of the 279-acre master-planned Vinedo community, which, at full build-out, will contain ~1,425 total homes. The CPACE loan will fund the building envelope, HVAC, lighting, solar PV, plumbing, seismic improvements, and qualifying soft costs as the eligible costs are incurred during the construction process. The sponsor, Adam Tancredi comes from a 70-year-old family legacy of homebuilding and has over 17 years in the real estate development industry with an emphasis on both residential and commercial developments.
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ATLANTA (Dec. 9, 2024) – Peachtree Group (“Peachtree”) has reached a significant milestone in Commercial Property Assessed Clean Energy (CPACE) financing, surpassing the $1.0 billion mark—a distinction shared by only a select few companies in the industry. In 2024 alone, Peachtree completed 22 CPACE transactions across the U.S., surpassing its previous record for CPACE originations.
"In 2019, we launched CPACE, and today we've surpassed our first billion—a testament to the exceptional team and the strength of Peachtree’s vision,” said Jared Schlosser, Peachtree’s Executive Vice President of Hotel Lending and Head of CPACE. “Our strong foundation has not only fueled Peachtree’s success in CPACE financing but also solidified its position as a leader in the broader commercial real estate lending market.”
In the most recent loan origination rankings by the Mortgage Bankers Association, Peachtree was ranked as the seventh-largest commercial real estate investor-driven lender in the U.S.
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The firm’s $1.0 billion in CPACE financing is rooted in hospitality, which remains its largest segment comprising approximately 45% of its total. However, Peachtree has successfully expanded into other sectors, particularly residential communities (including multifamily, student housing and senior living), which now represent 22% of the portfolio or $220 million. Additionally, the firm has executed numerous CPACE transactions across industrial, mixed-use and office sectors, showcasing its versatility.
“In this challenging lending market, CPACE financing has emerged as a crucial source of liquidity for all commercial real estate sectors. This financing option is becoming increasingly essential as owners grapple with looming debt maturities and limited refinancing opportunities,” Schlosser said.
Commercial real estate remains in a turbulent period with trillions of dollars in debt maturing and refinancing becoming increasingly difficult due to tighter lending standards from traditional lenders. These challenges are reshaping the industry and forcing property owners to seek alternative financing solutions.
“CPACE has been a game-changer, offering long-term fixed-rate financing that lowers the cost of capital while enabling property owners to pursue energy-efficient upgrades with reduced financial strain,” Schlosser said. “Peachtree is proud to lead the way in expanding access to this innovative solution, helping owners across all commercial real estate sectors.”
In just over a decade, CPACE has reached a cumulative $7.2 billion in U.S. commercial real estate financings, according to PACE Nation, confirming the growing market adoption and acceptance of this financing tool.
About Peachtree Group
Peachtree Group is a vertically integrated investment management firm specializing in identifying and capitalizing on opportunities in dislocated markets, anchored by commercial real estate. Today, the company manages billions in capital across acquisitions, development and lending, augmented by services designed to protect, support and grow its investments.For more information, visit www.peachtreegroup.com.
