Question 1

Is PACE a loan?

Accepted Answer

No. PACE is an assessment tied to the property.

Question 2

How does PACE benefit the senior lender?

Accepted Answer

PACE financing improves infrastructure and can increase collateral value. Replacing aged equipment typically reduces a building’s operating costs.

Question 3

Why do senior lenders consent to PACE financing?

Accepted Answer

1. PACE Assessments Cannot be Accelerated.  --   While the full assessment amount is recorded on the property records, only the annual payment may be collected, even in a default situation. The past due portion that is senior to a mortgage lender’s claim is typically, only 1-3 percent of the property value. For example, consider a $1 million PACE financing on a property valued at $5 million. The annual assessment for a 20-year term financing would be $87,185. If the property owner did not pay the PACE assessment in year 1, the PACE funder can collect only the delinquent payments. The PACE funder’s claim is limited to $87,185 or 1.75 percent of property value. The remaining payments are due according to the original repayment schedule.
2. PACE Financing Does Not Restrict a Senior Lender’s Foreclosure Rights. --  Unlike other debt, PACE does not require an inter-creditor agreement. Rather, in the event of a default on the senior lender’s debt, the senior lender can foreclose on its mortgage interest in the property in the same manner as if it were the sole financing on the property. PACE does not affect any existing remedies under the loan documents. The PACE capital provider may not prevent, restrict, or otherwise impact the senior lender’s foreclosure.
3. Senior Lenders May Escrow the PACE Assessments. --  Some senior lenders require property owners to escrow the annual PACE assessment obligation monthly in the same manner as property tax and insurance escrow requirements. The PACE escrow mitigates any risk associated with failure to pay the PACE assessment when due. In addition, a lender may request the PACE capital provider to capitalize an interest reserve to carry the payments through a construction period.
4. PACE Funds Are Fully Available as of Date of Closing. --  The PACE financing typically closes simultaneous with the senior lender, and all the PACE funds are deposited into an escrow account. Therefore, senior lenders have the comfort of knowing that all funds are available to be drawn as of the closing date.
5. PACE Financing May Increase the Value of the Senior Lender’s Collateral.  -- Most states require that an engineer establish the monetary savings expected to result from the PACE project. Therefore, a PACE project directly reduces a building’s operating costs, increasing its net operating income and valuation.
6. PACE Financing May Improve Debt Service Coverage.  -- PACE interest rates are typically lower than other forms of financing (e.g. mezzanine debt or preferred equity) and offer longer maturities, resulting in lower payments and a higher debt service coverage ratio.
7. Relationships matter. --  Nearly every PACE project involves a customer who wants to complete a project to upgrade their property. PACE funded projects make good business sense for the building owner, and therefore the building’s mortgage lender, too.

Question 4

How are PACE assessments repaid?

Accepted Answer

PACE Assessments are paid annually.  PACE is billed around the same time as the annual tax bill and collect through a third party collect named Amerinat.

Question 5

What do you need from me as a mortgage lender?

Accepted Answer

PACE requires the mortgage holder to consent to the assessment.

Question 6

What are the costs associated with Show Me PACE?

Accepted Answer

Show Me PACE lenders may charge the market interest rate on PACE loans, plus applicable fees. PACE market and the particular terms of each loan should not be confused with the market rate of traditional commercial mortgage financing.

Show Me PACE has the following fees for PACE projects:
1. One-time application fee of 1.25% for projects under $1,000,000 and a 1% fee for projects over $1,000,000 with a cap of $40,000. This fee will be collected as part of closing.
2. Annual administrative servicing fees is 1% of the annual collected amount not to exceed $1,000.
3. Projects closed after 2022 will be collected by the administrators' third-party servicer, the fee for this service is a flat $400.
4. If the assessment is collected by the Jackson County Collector, each annual assessment payment provided to the Assessor of Jackson County it will assess a 1.6% fee. These fees are subject to adjustment by changes in state statute. Amerinat provides servicing for the assessment at $400 per assessment per year, whether collected directly by AmeriNat or by the municipality.

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