Norton Rose Fulbright represented Petros PACE Finance, LLC, a leading commercial property assessed clean energy (C-PACE) lender, as the lender in the first New York City C-PACE financing, which closed in early June. The C-PACE loan of US$89 million on an existing building in the Wall Street area will be used to make the building more energy efficient.
While New York State (other than New York City) has been operating a C-PACE program through Energy Improvement Corporation's Energize C-PACE program for more than a year, the closing in New York City was the first C-PACE financing under the city's new C-PACE program. The New York City Energy Efficiency Corporation (NYCEEC) is the program administrator for the New York City C-PACE program.
Under Local Law 97 (2019), approximately 22,000 buildings in New York City are required to reduce their carbon footprint beginning in January 2024; otherwise, substantial penalties start to accrue. As a result, commercial developers and property owners have a strong incentive to use C-PACE to finance energy efficiency improvements to these buildings. Thus, a much higher rate of C-PACE utilization is expected in New York City than in the rest of the state, which is not subject to these penalties.
One key difference between New York City's new C-PACE program and the program in the rest of the state is that the foreclosure of the C-PACE assessment outside New York City is done through a judicial foreclosure. In New York City, the C-PACE lender has the option of using judicial foreclosure or transferring the C-PACE assessment to New York City's tax lien securitization program, where the servicer for that program will sell the C-PACE assessment along with any property tax liens on the property. This flexibility should give lenders more confidence that foreclosed assessments can be efficiently collected.