Which Lenders have agreed to a PACE Assessment?

Consenting Lenders

(A Consenting Lender is an existing lender, usually a first mortgage holder, who must agree to the PACE assessment (the new loan).

One of the questions we receive is "Which lenders have agreed to a PACE assessment?" The list below is excerpted from the PACENow Lender Support Update.

The underlying question is "Why would a lender agree to subordinate their interests to a new PACE loan?" Many PACE lenders note that a PACE loan is an assessment - while it is - all tax liens are superior to any debt on the property. So why would an existing first mortgage holder agree to a PACE Assessment. 

The answer is simple: The property receives the benefit of 100% of the improvements while only the annual assessment payment(s) due are ahead of the existing lender's position.

When an owner improves a property two things can happen:
1. Operating Costs Decrease
2. Revenues Increases

Either one improves the property cash flow and value and can lower the cap rate. Lowering the cap rate can have a large effect on the property value.  Improving the quality of the property may also over time improve the credit quality of the tenants with a follow on improvement in the quality of the cash flow.

Improved cash flow, property value, an improved tenant profile and a lower cap rate all go into making an existing lender want to support a property owner's efforts to improve their collateral value.

This is evidenced by a growing list of existing mortgage lenders who have consented to a PACE loan assessment.

For more information please review the PACENow Lender Support Update.

For Houston properties, how do I tell if my property falls within the Houston PACE District?

One question that is frequently asked is:

"How do I tell if a property is located in a geographic area that supports PACE, that is the Houston PACE district?"

After you have read the below instructions, you may click on the Interactive Map link at the bottom of this section which will open the City of Houston map in a new browser window.

City of Houston Interactive Map Instructions

1. From the Layer icon on the top left, select both Legend
2. Type in your address
4. A property location description will then be displayed. To be eligible for PACE, the property needs to be either in the Houston City Limits or in the Houston ETJ. If it is in a City Council District, it is in the City of Houston. If it says Houston ETJ, it is in the Extraterritorial Jurisdiction of Houston. Both locations qualify.

Of course, ultimately you will need to further confirm this information with legal counsel.

http://mycity.houstontx.gov/houstonmapviewer/

How often can payments be made to a PACE lender?

The local authority will send out the tax bill that will contain a PACE amount due. The payment, unlike most other PACE jurisdictions, will go directly to the PACE lender or the Texas PACE Authority, if the property owner prefers. 
The tax assessor collector is only involved in case of default, and in sending out a notice of the PACE assessment with the tax bill. They do not collect any assessments themselves. 
Texas is the only state in the country that does not have the periodic PACE assessment payments collected with the tax bill. So the frequency of payments may be agreed upon between the Property Owner and the PACE Lender. However, at this time most lenders are expected to match the frequency of the payments with the tax bill. 

What does not qualify for PACE?

PACE is not available for Single Family Homes, Duplexes, Fourplexes, Condominiums, Government Owned Properties, Raw Land or New Construction.

Projects located outside of an approved geographic jurisdiction also do not qualify for PACE financing.

What types of improvements qualify for PACE projects?

In Houston the lowest hanging fruit is HVAC, insulation, lighting (indoor and outdoor), cool roofs (reflective white roof), energy management systems, elevator modifications, car charging stations, bike racks, windows, glazing. HVAC components include chillers, cooling towers, air handlers, thermostats, boilers, variable drive fans (VDF's).

Water conservation improvements are also included, such as low flow toilets and showers, irrigation, rain water collection and native landscaping. 

Renewable energy including solar, wind and geothermal projects are also included.

PACE specifically includes soft costs such as architectural, engineering, audits, advisory and financing fees.

Generally, if the improvement touches and electron or a water molecule, it can be included if its annual cost, financed over its useful life, is projected to be less than the money saved through lower utility bills.

What types of properties qualify for a PACE Loan?

Office buildings, industrial, manufacturing, retail, hotel, churches and other Not-For-Profit properties, certain multifamily properties and privately owned schools and hospitals are the types of properties that generally qualify for a PACE loan.

Why would my existing lender agree to subordinate to a PACE Loan?

The answer is simple: The property receives the benefit of 100% of the improvements while only the annual assessment payments due are ahead of the existing lender's position.

Improved cash flow, property value, an improved tenant profile and a lower cap rate all go into making an existing lender want to support a property owner's efforts to improve their collateral value.

Please see a list of Consenting Lenders for more information.