Senior housing developers have spent the last several years navigating a difficult and rapidly evolving development environment, having to confront rising costs and longer construction timelines, leading to a more cautious lending environment. Even as demand fundamentals strengthen for senior housing, today’s development pipeline remains constrained by construction volatility and tighter capital markets. Amidst this uncertainty, investors have turned to C-PACE, which overcomes the barriers and obstacles that have thwarted traditional financing tools for facility upgrades and development.
Why C-PACE Is Gaining Relevance in Senior Housing Finance
Commercial Property Assessed Clean Energy (C-PACE) financing is repaid through the property tax mechanism as a special assessment tied to eligible measures of the construction. C-PACE can support project completion while funding a wide variety of upgrades that improve building performance, operating efficiency, and resiliency including standby emergency generators. It is an especially strong fit for assisted living and memory care facilities as most investors plan long-term holds of the property and benefit from a reduction in operating expenses from the efficiency measures that exceeds the annual cost of C-PACE repayment.
C-PACE is increasingly well-suited for senior housing, and remains a natural fit for a variety of project types, including:
New Construction
- Completes capital gaps with low-cost non-recourse capital, reducing more expensive senior loan and equity
- Reduces upfront development costs with all financing costs and interest reserves included in the financing
- Can enter project anytime during construction and generally up to 3 years after completion
Renovations
- The financing structure: up to 30-year terms with fixed rates, aligns with assets with long-term operations and predictable cash flows
- Efficiency and resiliency improvements strengthen long-term operations and reduce risk to natural disasters
- Fully funds measures required for code compliance reducing need for CAPEX
Case Study: Minnesota Assisted Living Development Closes Construction Funding Gap Using C-PACE
A developer constructing a 72-unit assisted living community in Hastings, Minnesota encountered significant construction delays driven by multiple external factors. One key issue was a changing regulatory environment for modular construction, which the developer had committed to early in the project’s development.
Those delays contributed to cost overruns and created a funding gap that threatened the project’s path to completion. To address the shortfall, the developer turned to CounterpointeSRE, which structured a C-PACE financing solution that paid off an earlier PACE assessment and upsized the capital stack, providing $7.56 million to take the project through completion.
This C-PACE financing solution was administered by the Saint Paul Port Authority, which is the state administrator for the MinnPACE program. “We are encouraged to see new construction projects leveraging increased loan capacity – up to 30% of property value – and integrating PACE financing more fully into the overall capital stack.” Said Holly Huston, VP of Finance at the Saint Paul Port Authority.
A Facility Designed for Long-Term Performance and Resilience
The modular-built facility is expected to provide a high-quality, sustainable environment aligned with long-term resident needs and cost stability. Improvements include:
- Energy-efficient HVAC and electrical systems, and building envelope
- Water conservation equipment
- On-site stormwater management, improving resiliency and reducing drainage-related risk
For owners and operators, these investments can reduce long-term expenses while enhancing resident comfort, continuity of care, and asset durability.
As senior housing demand rises, development and modernization will need to continue, even amid market uncertainty. The Minnesota assisted living facility financed by CounterpointeSRE demonstrates how C-PACE can support completion by reducing risk and uncertainty, while strengthening long-term building performance.
Going forward, C-PACE is well-positioned to play a growing role in senior housing capital stacks, particularly for projects prioritizing operational efficiency, resilience, and durable long-term outcomes.
For more information and transaction details, please visit https://counterpointesre.com/c-pace-for-senior-housing/.