Retroactive Financing, part of the Commercial Property Assessed Clean Energy (C-PACE) loan package, is emerging as a viable tool for owners and investors seeking to recover capital for construction cost overruns, curtail senior debt principal and improve overall cash flow. Offered by MD Energy Advisors, a Baltimore-based commercial, utility, and financing energy solutions company, the financing tool has particular applications for the self-storage, hospitality and senior housing asset classes that remain under construction or have recently been completed within the past 36 months.
By financing the energy and water related improvements of a ground up construction or value add project, Retroactive Financing is designed to provide improved financial stability for a real estate project that has not yet to receive its certificate of occupancy, not reached acceptable occupancy levels or is facing substantial construction cost overruns, and is quickly depleting its available cash reserves. Proceeds of the financing vehicle is typically applied for senior debt principal curtailment, cost overruns and for reserve capital designated for interest and operating costs.
“The unplanned increase of interest rates, construction material prices, supply chain issues that are contributing to delays and subsequent higher expenses and an unfavorable economic environment leading to slower than expected absorption timetables are collectively taking a toll on available capital in many instances,” stated Jason Schwartzberg, president & co-founder of MD Energy Advisors. “With equity and in some instances bank debt hard to come by Retroactive Financing is a viable option to substantially improve the overall economic situation and provide a runway to success to the ownership group.”
The loan features terms lower than the floating construction rate, terms up to 30 years and can be used to fund up to 20% of a project’s cost. Retroactive Financing can be utilized for projects in 29 states including Maryland, Pennsylvania, Delaware and Virginia, as well as the District of Columbia. The loan can be structured as interest-only and can be transferred with the property after the sale to a new ownership group.
“Retroactive Financing is especially useful to fill financing gaps created from unexpected lender pullback, as it provides immediate liquidity for both operational and pre-delivery costs,” Schwartzberg added.
