Petros PACE Finance gets creative with flexible C-PACE financing

Partner Insights spoke to Kevin McMeen, President and CEO of Petros PACE Finance about how the firm’s real estate expertise and creative mindset shapes deal structures to custom fit their clients’ specific business plans. By using a consultative approach they’ve developed a successful strategy for unlocking a powerful financial tool that performs well in a variety of capital stacks.

Commercial Observer: How does a C-PACE program work and what sets the Petros PACE Finance’s approach apart from more traditional capital providers in structured real estate finance?

C-PACE, or Commercial Property Assessed Clean Energy financing, is a public-private initiative that enables real estate developers and owners to access long-term, fixed-rate financing for sustainable building improvements. What differentiates Petros PACE Finance is not just our access to capital, but our approach to structuring it.

We don’t see ourselves simply as green lenders — we see ourselves as real estate capital specialists. Our team brings a deep understanding of structured real estate finance, which allows us to align C-PACE funding with the unique goals and challenges of each project. Where other [C-PACE] capital providers often offer a one-size-fits-all product, we take a more customized, deal-by-deal approach. That means working closely with our clients, leveraging our relationships with senior lenders, and tailoring our C-PACE structures to complement the rest of the capital stack — not compete with it.

Commercial Observer: In what ways can C-PACE be strategically integrated into a capital stack to support a developer’s unique business plan?

C-PACE is more than just a tool for sustainable upgrades — it’s a powerful strategic instrument within the capital stack. We often help developers use C-PACE to bridge financing gaps or replace higher-cost capital like mezzanine debt or preferred equity.

In one example, a property owner in Philadelphia was looking to convert underperforming retail space in a mixed-use asset into residential units. We offered up a creative structure that combined look-back financing for previous energy-efficient improvements with forward-looking capital for the conversion. This solution not only enabled the borrower to improve cash flow but did so at a significantly lower cost — under 10% — compared to mezz or preferred equity, which often comes in at mid-to-high teens.

By tailoring the structure to their timing and objectives, we provided an efficient and cost-effective alternative, helping improve overall economics and aligning the capital stack with their long-term vision.

Commercial Observer: What role does real estate expertise play in structuring effective C-PACE deals at Petros?

Our success lies in our deep real estate expertise — not just our understanding of C-PACE as a financial product. We see the full picture: capital stack dynamics, cash flow modeling, market cycles, and development risk. This allows us to go beyond templated deals and design solutions that truly support the underlying business plan.

Take, for example, a new hotel and retail development where the borrower was combining traditional financing with EB-5 capital. We identified greater long-term value in the hotel component versus the retail, which carried more lease-up risk. Rather than treating it as a single transaction, we reallocated more of the C-PACE proceeds to the hotel portion. This optimized the pricing and created a more cost-effective structure overall.

This level of precision is only possible when you approach C-PACE not as a plug-in product, but as one piece of a much more complex financial puzzle.

Commercial Observer: Why is a “one size does not fit all” mindset critical when applying C-PACE to complex real estate deals?

It’s really about understanding what the borrower is trying to accomplish as opposed to us selling them a finance package. A lot of C-PACE lenders are focused on green capital and delivering something sustainable which is usually the heart of the deal.  It’s a great dynamic and a proven solution, but it can limit a project’s scope.

We offer a deep understanding of how real estate works from a credit perspective in terms of examining the bones of the lease-up process. We compute how that gets valued and examine exposure while also offering expertise on how capital markets work.

When you start pulling all those things together in the context of the borrower’s business plan, you understand what needs to be tweaked, pushed or pulled to get the most elegant, cost-effective solution for the capital structure.

Commercial Observer: How does Petros’ understanding of both client needs and C-PACE financing mechanisms create value beyond just providing capital?

Petros acts as a strategic partner, not just a capital provider. Our custom approach enables us to craft financing solutions that are not only affordable but also aligned with the borrower’s timing, objectives, and long-term goals.

For example, C-PACE is traditionally a long-term, fixed repayment product — but that doesn’t work for every client. Some sponsors need the flexibility of a prepayment structure that matches their business plan. We’ve designed custom prepayment options that allow for accelerated payback windows, but also include built-in adjustments if plans shift and a longer-term structure is needed.

By designing deals that fit into the borrower’s broader capital strategy — including pricing in line with credit quality and aligning with other senior debt — we unlock more efficient structures. That kind of value creation only happens when you truly understand both the real estate and the financing mechanisms that support it.

Commercial Observer: How does your firm differ from other C-PACE specialists?

Typical C-PACE lenders tend to prioritize “green lending” above all, and considering that it is still becoming a more accepted layer in the capital stack, there’s still confusion surrounding exactly how it works.

As example, we were recently meeting with a group of brokers in Florida, and we could tell by the body language that there was little interest in the program. After we explained how we typically approach deals the vibe began to change.

He said, “I’ve met with a bunch of C-PACE providers, and this is the first meeting where I felt you were speaking my language, as opposed to me having to figure out your language and how that translates into what I’m working on for my clients.”

We strive to be more user-friendly, considerate of what our clients are focused on and what we can do to make the deal happen and their life easier. That’s the big difference.