CPACE financing (Commercial Property Assessed Clean Energy) sometimes referred to as PACE loans, is gaining traction as a viable option for hotel developers looking to optimize their capital stack. We spoke with Jared Schlosser, EVP of Hotel Lending and Head of CPACE at Peachtree Group to demystify CPACE financing and address common misconceptions.
Q: What specific advantages does C-PACE financing offer to hotel developers?
Jared Schlosser: C-PACE provides an attractive cost of capital today. Most of the deals we're handling are in the high seven percent range with fixed rates, which is cheaper than most other interest rates on the market. Whether you’re looking at senior loans, mezzanine debt, or preferred equity, C-PACE can often be a more affordable option. When you use C-PACE to replace a higher-cost source of capital, it can help make a deal work financially where it otherwise might not.
Q: What are some of the common misconceptions that hotel developers have about CPACE financing?
JS: The biggest misconception is that no one consents to it. I often hear from developers who are interested in CPACE but believe that senior lenders won’t consent to it. I get five or six calls a day from people saying, "This CPACE thing sounds interesting, but nobody consents to it." That’s simply not true. We’ve closed 90 of these deals, so obviously, so somebody's consented to it!
We’ve worked with major banks, insurance companies, and debt funds to secure consents. We’re not asking anyone to do something we haven’t successfully done ourselves. For the right deal and with the right underwriting, senior lenders are more open to PACE financing today than they were five years ago.
Q: Why should people come to Peachtree Group for their CPACE Financing?
JS: We have a strong track record of getting difficult deals done across the country, particularly in the hotel sector. Our team has deep expertise in hotel financing, which can be crucial when navigating the underwriting and consent process. Because senior lenders and other players in the capital stack trust our advice and trust what we're pitching to them.
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, lending to all commercial real estate asset classes with a specialty in hotel financing. The Peachtree Group team has executed more than 297 transactions, originating more than $4.5 billion for projects seeking capital to complete acquisitions, recapitalizations, refinancing and renovations
Looking for more on CPACE Financing? Check out Jared's appearance on the On the Edge Podcast.
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Atlanta Business Chronicle - Last month, Atlanta-based real estate investment firm Peachtree Group closed its largest-ever credit deal — a $176.5 million clean energy loan for a massive renovation aimed at restoring the glory of a Las Vegas hotel and casino.
In July, the firm demonstrated the breadth of its business with a $42 million loan to finance Banyan Street Capital’s purchase of Atlanta Financial Center, a Buckhead office property being considered for partial redevelopment.
The transaction is the latest in a series helping drive Peachtree toward another record year, even as commercial real estate faces ongoing volatility in debt markets — conditions that reward private lenders able to move quickly.
“Peachtree Group’s success comes from our team’s willingness to be creative, gritty and decisive in a volatile market,” Greg Friedman, managing principal and CEO of Peachtree Group, told Atlanta Business Chronicle. “We aren’t afraid to lean in and make quick calls when others hesitate.”
He adds that such an approach doesn’t mean recklessness.
“Our discipline in the process gives us the conviction to act with confidence,” he said. “That balance has been the linchpin to our success, turning disruption into opportunity and allowing us to keep building an investment platform that delivers value through every cycle.”
Founded in 2007, Peachtree employs more than 3,000 people nationwide and is a regular on the Inc. 5000. It is widely recognized as a top player in hospitality and commercial real estate.
...“We are well on our way to another record year of originations,” Friedman wrote.
ATLANTA (August 18, 2024) – Peachtree Group (“Peachtree”) has originated the largest credit transaction in its history, closing a $176.5 million retroactive Commercial Property Assessed Clean Energy (“CPACE”) loan for Dreamscape Companies’ recently renovated 2,520-room Rio Hotel & Casino(“Rio”) in Las Vegas, Nev. The deal, finalized in less than 60 days, ranks among the largest CPACE financings ever completed in the United States.
The Rio, now under the Destinations by Hyatt brand, is a casino resort featuring two hotel towers, Ipanema and Masquerade, connected by a casino, restaurants and retail establishments. Renovations completed in 2024 included a full transformation of the Ipanema Tower guest suites, a reimagined casino floor and significant upgrades to multiple food and beverage venues. The comprehensive property improvement plan also delivered exterior enhancements, modernization of the central heating and cooling plant, electrical infrastructure upgrades and renovations to the convention center.
“This deal highlights an inflection point for CPACE, with some of the nation’s largest financial institutions consenting to its use because they see the clear benefit to the capital stack,” said Jared Schlosser, head of originations and CPACE for Peachtree. “By closing quickly on a marquee hospitality asset, we were able to strengthen the position of both the owner and its lenders.”
The CPACE loan retroactively funded the renovations enabling the owners to pay down their senior loan. Retroactive CPACE funding offers a distinct advantage by allowing 100% of the proceeds to be reimbursed for completed project costs.
“This transaction is not only a historic milestone for Peachtree Group, but also a testament to the ecosystem we have built over the past 18 years,” said Greg Friedman, managing principal and CEO of Peachtree. “Through our vertically integrated platform, deep expertise and disciplined approach, we have developed the infrastructure to be a leader in the private credit space. Our ability to deliver speed, creativity and certainty of execution positions us to provide capital solutions that create value for our investors and partners across market cycles.”
The CPACE market has surpassed $10 billion in cumulative U.S. originations in just over a decade, according to the C-PACE Alliance, with strong growth expected as more institutional owners and lenders recognize its value. “We see tremendous opportunity ahead for retroactive CPACE and its use in funding new commercial real estate development,” Schlosser said. “It’s an attractive alternative to more expensive forms of capital.”
Peachtree is one of the most active CPACE lenders in the country, with more than $1.5 billion in originations. The firm’s credit platform spans CPACE, bridge, mezzanine and construction lending, providing creative capital solutions across market cycles.
The hotel lending landscape continues to shift, shaped by rising rates, tighter equity, and the need for more creative capital structures.In this Hotel Business Magazine roundtable recap, Peachtree Group’s Michael Harper, President, Hotel Lending, and Jared Schlosser, Head of Credit Originations & Commercial CPACE, share insights on:
• Navigating the gap between buyer/seller expectations
• The growing role of private credit
• Structuring deals with CPACE, mezzanine, and hybrid financing
• Underwriting and execution in today’s higher-risk environment
