C-PACE Capital Providers—Here’s What You Need to Know About the New Garden State C-PACE Program

If you are a C-PACE Capital Provider—or would be interested in becoming one—the new Garden State C-PACE Program wants to hear from you.

A Capital Provider seeking to participate in the Program (considered a “Qualified Capital Provider”) must apply to be designated by the New Jersey Economic Development Authority (NJEDA). According to the Guidelines (Section 302), a Qualified Capital Provider must be:

1. 1. An accredited investor or qualified institutional buyer as defined respectively in Regulation D, Rule 501 (17 C.F.R. 230.501 through 230.508) or Rule 144A (17 C.F.R. 230.144A) of the federal “Securities Act of 1933” (15 U.S.C. s.77a et seq.), as amended; or
   2. The trustee or custodian of a trust or custody arrangement which provides that each beneficial owner of interests shall be an accredited investor or qualified institutional buyer;
   3. A special purpose securitization vehicle for the sale and transfer of securities, which is restricted to those persons described in subsections A.1 or A.2 of this definition; or
   4. A commercial lending institution chartered by a state or the federal government, including, without limitation, a savings and loan association, a credit union, or a commercial bank.

To be designated as a Qualified Capital Provider, a Capital Provider must meet the following eligibility requirements:

1. 1. 1. Demonstrate that it meets the definition of a Capital Provider
      2. Have a valid Tax Clearance Certificate;
      3. Not be in default with any agreement with the Authority;
      4. Be in substantial good standing with the New Jersey Department of Labor and Workforce Development, the New Jersey Department of Environmental Protection, and the Department of the Treasury as set forth in Section 3.02.
      5. Demonstrate one of the following: a. Be an approved capital provider to participate in three (3) or more C-PACE programs, or b. Has closed financing to three (3) or more C-PACE financing transactions in another C-PACE program(s);
      6. If the applicant’s designation as a Qualified Capital Provider was previously revoked, explanation satisfactory to the Authority of the corrective measure implemented that will prevent or ensure that the compliance failure does not happen again; and
      7. Satisfy the Authority’s review pursuant to the Authority’s debarment and disqualification rules at N.J.A.C. 19:30–2.

A list of Qualified Capital Providers will be maintained on the Authority’s Garden State C-PACE website (www.njeda.com/cpace).

It’s also important to note that “The Authority’s designation of a Capital Provider as a Qualified Capital Provider does not constitute a finding by the Authority that a Qualified Capital Provider is appropriate for any particular C-PACE Project or an endorsement of any Qualified Capital Provider.”

The application process is laid out in the Guidelines, and the application forms are available at njeda.gov/c-pace/.

Why you should consider becoming a Qualified C-PACE Capital Provider:

In brief, the Authority is initially looking to the established national C-PACE financing providers, most of whom are members of the C-PACE Alliance. However, it is also open to the participation of local and regional commercial banks, credit unions, loan associations, and community development financing institutions (CDFIs). There are several reasons to become a qualified C-PACE capital provider:

• • C-PACE lending is a long-term, stable, and low-risk investment that can be held or re-sold

  • C-PACE lending can be substituted for higher-risk and higher-cost capital

  • It favors both the lender and the borrower, by providing low market-rate capital tied to the property, not to the borrower

  • It represents a long-term investment in a tangible real estate asset, helping to reduce energy costs, GHG emissions, and increase resiliency

  • C-PACE Assessments can be bundled, syndicated, and re-sold into the capital markets for a significant fee

If you are interested in becoming a C-PACE lender, we can assist you with this.

There’s another important role banks play:

If you’re a senior lender on the property, you need to consent to the C-PACE Assessment. Why should you do this? While C-PACE payments, as taxes, technically come ahead of your mortgage, in reality they enhance your asset and your security. The C-PACE Assessment alone cannot trigger a default, and it cannot be accelerated. The property is simply being improved, with the costs being added to the property tax, which means that in the event of a sale, it transfers to the new owner. What’s not to like? Unless there is an issue with the project, you should welcome the C-PACE enhancements. And consider becoming a C-PACE lender, if this is something your clients are looking for.