The evolution of C-PACE from 35% LTV into a 55–65% LTC structured credit solution.
As liquidity tightens across the CRE credit spectrum, the market is quietly witnessing the emergence of a new hybrid: Stretch PACE, a structure combining the long-duration, fixed-rate security of senior C-PACE with a subordinate tranche engineered to extend leverage beyond traditional parameters.
Most C-PACE executions today cap at roughly 35% Loan-to-Value (LTV) or 40% Loan-to-Cost (LTC) and operate as non-accelerable tax liens, senior to the mortgage. In a conventional capital stack, this leaves a 60–65% last dollar, with the balance made up of equity, preferred equity, or mezzanine capital. In high-value institutional developments, particularly in energy-efficient mixed-use, hospitality, and adaptive reuse projects, that 35–40% slice can leave meaningful capital stranded.
Stretch PACE addresses that gap by introducing a two-part structure:
In select jurisdictions such as Florida, statutory flexibility allows for this bifurcation, creating a whole-loan C-PACE construct that can stretch total proceeds to approximately 55–65%+ LTC. The result is a cost-efficient, long-term fixed-rate alternative to stretch senior or mezzanine structures without the complexity of intercreditor agreements or subordination disputes.
Private credit has filled the void left by banks and CMBS lenders, but duration mismatch and cost of funds have limited appetite for long-tenor construction risk. C-PACE provides the missing duration piece. With Stretch PACE, it now begins to replace portions of a lower-leverage senior tranche rather than complement them.
Key advantages include:
For institutional allocators, Stretch PACE represents a significant step in the institutionalization of C-PACE as a structured product, increasingly capable of being:
The macro backdrop reinforces the relevance of Stretch PACE:
Within this environment, fixed-rate, off-balance-sheet structures like C-PACE have become critical liquidity valves for developers and investors seeking stability in a volatile rate landscape.
As the market matures, PACE is tracing a path similar to early CMBS. Much like CMBS in the late 1990s, it is evolving from a niche policy instrument into an institutional fixed-income asset class with standardized ratings and scalable securitization potential.
Stretch PACE will not replace the senior loan, but in states like Florida, it will reshape how capital is layered.
The innovation lies in its ability to create:
In a market starved for duration, structure, and yield stability, Stretch PACE represents the next logical step in institutionalizing sustainable credit.
Clearwater is a New York-based national direct lender specializing in C-PACE Financing for Commercial Real Estate, spanning all asset types and geographies across the U.S. We offer low-cost, fixed-rate, long-term loans ideal for new construction or recapitalizations of recently completed projects. Our team of seasoned real estate investment professionals, with extensive expertise in structured finance, crafts tailored solutions that align with the Sponsor’s needs, including hedging away negative arbitrage and flexible prepayment options.
For more information, please visit us at www.c-pace.com or email us at info@c-pace.com.
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Clearwater is an institutionally capitalized direct C-PACE Lender focused on deploying fast, flexible capital for bold, sustainable projects spanning all asset types and geographies across the U.S.
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