The commercial real estate sector, particularly hotels, is grappling with an escalating storm of challenges: maturing debt, tightening credit conditions and soaring interest rates. By the close of 2025, U.S. hotel-securitized loans totaling $14 billion are set to mature, thrusting hotel owners into a daunting refinancing landscape. Many properties are already struggling to generate enough income to meet rising debt obligations.

Liquidity through CPACE

In this challenging environment, CPACE (Commercial Property Assessed Clean Energy) financing emerges as a lifeline, offering vital liquidity to navigate these turbulent waters and avoid further financial distress.

This innovative financing mechanism provides access to lower-cost capital at a time when traditional funding sources are increasingly constrained and liquidity demand is at an all-time high.

By leveraging CPACE, property owners can enhance their financial resilience and invest in energy-efficient upgrades, ensuring their properties remain competitive and sustainable.

Financial structure offers flexibility

Unlike traditional financing, CPACE is repaid through a property tax assessment, providing long-term, fixed-rate financing without requiring upfront capital. This structure allows hotel owners to undertake substantial property improvements that reduce operating costs and enhance property values.

The benefits of CPACE extend beyond immediate financial relief; by lowering energy costs, CPACE-financed upgrades can significantly improve a property’s bottom line over time.

CPACE financing is rapidly gaining traction in the U.S., with cumulative financing surpassing $7.0 billion. Its growing popularity underscores its effectiveness in addressing financial challenges while promoting energy efficiency and sustainability.

Using CPACE retroactively

A standout feature of CPACE financing that is relatively less known is its ability to be applied retroactively.

Retroactive CPACE operates similarly to standard pre-project funding, with the key advantage that 100% of the loan proceeds can reimburse property owners for costs already incurred. This is particularly beneficial for hotel owners who have recently completed upgrades or energy-efficient projects and are looking to improve cash flow or refinance existing loans on better terms.

Case study: $40M closed in 28 days

A notable example of CPACE’s practical application is Peachtree Group’s origination of a $40 million retroactive CPACE loan for the recently opened 147-room AC Hotel San Diego Downtown Gaslamp Quarter. This financing, amortized over 30 years, provided substantial financial relief by enabling a significant paydown of the senior loan. The swift closing, completed in under 30 days, allowed the hotel immediate financial relief, established a solid cash flow foundation during its early years of operations and ensured better, long-term stability.

A strategic advantage in an uncertain market

As hotel owners and developers face unprecedented challenges, adopting CPACE financing is not just a prudent financial decision but a strategic imperative. By leveraging CPACE, property owners can ensure their properties remain financially viable and environmentally sustainable in the years to come.

In an uncertain and volatile market, CPACE financing stands out as a beacon of hope for hotel and commercial real estate owners. Now is the time to explore this innovative financing option to secure stability, mitigate risks and support sustainable development. By embracing CPACE, hotel owners can strengthen their financial position and contribute to a more sustainable future for the hospitality industry.

Learn more at Lodging Conference

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. Hear more from Jared during the “Connect with Active Lenders” panel at the upcoming Lodging Conference October 7-10 in Phoenix, AZ.

Provided by Jared Schlosser, Peachtree Group’s EVP, Hotel Lending & Head of CPACE

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