Aquarian Holdings’ $1B Investment in PACE Equity Underscores C-PACE Market Growth

PACE Equity CEO Beau Engman has had a front-row seat to view the sharp growth of the Commercial Property Assessed Clean Energy (C-PACE) industry over the past 10 years, and now his firm is poised for its own surge.

Global investment firm Aquarian Holdings acquired a majority stake in the Milwaukee-based PACE Equity last month and will provide it with up to $1 billion to help scale its C-PACE executions nationally. The capital infusion arms the pioneering C-PACE lender with large-scale potential to expand its CRE financing footprint at a time of far bigger capital market opportunities in the sector than when Engman initially tackled transactions in the sector a decade ago. 

“You had all of us working like crazy behind the scenes to fund projects with different buyers, and that was a tough time,” said Engman, reflecting on the early days of the C-PACE industry. “Now you have much more predictability and scalability around a whole well-established securitization market.”

Engman said part of the incentive to bring in a strategic partner like Aquarian Holdings to the table was aimed at boosting its balance sheet managing capabilities while also mitigating risks with a lower cost of capital. He said the decision to find a partner, which was made in 2022, is also designed to significantly increase the size of its deals, which currently average around $6 million.

Rudy Sahay, founder and managing partner of Aquarian, who was formerly an executive at Guggenheim Partners, said in a statement about the transaction that  “the long-term stability of C-PACE projects are a highly attractive opportunity.”

Aquarian’s investment in PACE Equity comes at a time of momentum for C-PACE with more than 40 states having enabled legislation, and New York City now positioned for more deals following the release of updated guidelines by NYC Accelerator in August. Engman noted that there is also increased acceptance among the banking community to tackle C-PACE deals with many senior lenders teaming up on loans in recent years in a higher interest rate environment to add another layer of the capital stack to deals.

PACE Equity has been an active player in multifamily, office, industrial and senior housing projects, with more than $700 million of deals. It has sought to distinguish itself in the C-PACE market through a low-carbon financing offering that offers lower costs of capital to CRE owners who build or renovate buildings with more sustainability designs.

Further growth for C-PACE financing opportunities should develop in the near term, according to Egman, from increased lobbying efforts in individual states with bipartisan support.

“It’s supported by Democrats and Republicans for different reasons,” Engman said. “It’s a great economic development tool and it’s also great for the environment, so it’s good for a whole variety of state networks”

Andrew Coen can be reached at acoen@commercialobserver.com