Why a niche category of CRE lending is suddenly seeing record deals

Wepro | Moment | Getty ImagesA version of this article first appeared in the CNBC Property Play newsletter with Diana Olick. Property Play covers new and evolving opportunities for the real estate investor, from individuals to venture capitalists, private equity funds, family offices, institutional investors and large public companies. Sign up to receive future editions, straight to your inbox.A specific kind of loan that helps owners of commercial buildings pay for big upgrades to save energy or water, add renewable power, or improve resilience is seeing huge growth in a lending environment that has been arguably tough.This month, Nuveen closed a $465 million C-PACE deal for The Geneva, a landmark office-to-residential conversion in Washington, D.C. The transaction represents the largest C-PACE financing in history. C-PACE, which stands for commercial property assessed clean energy, is a type of financing that differs from a traditional bank loan. It operates at the state level, requiring local leaders to pass enabling legislation. The amount of the loan is added to the property's tax bill and repaid over a long period (often up to 20 or 30 years). This can make energy-saving projects more affordable, because the payments are spread out, typically at fixed rates, and the upgrades can lower operating costs and increase property value.Between 2009 and the end of 2024, cumulative C-PACE investment reached nearly $10 billion, according to PACENation, a nonprofit that says it advocates for C-PACE financing. Growth, however, has really accelerated over the past five years — with C-PACE lending posting double-digit gains — as more states pass policies enacting the program and more owners and lenders adopt the tool for financing projects. Currently 40 states have C-PACE policies with 32 active programs, up from six active programs in 2015.Nuveen closed $2.1 billion in C-PACE loans across 53 deals in 2025 alone and has originated over $5 billion in total. In September Nuveen closed on its now-second-largest C-PACE transaction to date at $290 million for the Pendry Hotel & Residences in Tampa, Florida. The closing also marked the first C-PACE financed transaction in the city of Tampa.Nuveen said upgrades financed by its C-PACE lending have saved over 300,000 metric tons of carbon dioxide. But it's not all about the environment, and lenders are quick to admit that, especially as political winds shift away from decarbonization."The underlying need of making properties more resilient, more efficient to operate, really doesn't go away," said Alexandra Cooley, CEO and CIO of Nuveen Green Capital, an affiliate of Nuveen. "Actually, the vast majority of the projects that we see — the last I checked it was 97% — are some combination of either energy efficiency, which is cutting costs of operating the property, or climate resiliency. So a very small percentage is actually renewable energy." It is the mechanism, really, that is increasingly attractive to lenders in a higher-for-longer interest rate environment, in which economic policy uncertainty has hit traditional CRE bank lending hard. For institutional clients that want long-term, fixed-rate exposure, it's appealing because C-PACE loans are secured by a senior tax assessment on a piece of real property. "Our borrower is really the property itself, not necessarily the owner of that property at any given moment. So, it's safer, and it enables our investors, who are long-term investors, to have that duration," Cooley explained.Another major player in the space, Peachtree, closed its largest C-PACE deal, a $176.5 million loan for the Rio Hotel & Casino in Las Vegas, Nevada, for renovations that were actually completed in 2024. The loan was structured to finance these renovations retroactively, so the owners could reduce their senior loan obligations, another benefit of the C-PACE product. "They can be utilized as a rescue capital mechanism, where you just recently opened a new development project, a new development hotel property, a multifamily property, any type of commercial real estate property, and you could technically do a retroactive C-PACE loan to help recapitalize that project and help pay down the bank or the lender that financed the project," explained Greg Friedman, CEO of Peachtree Group. Friedman said he sees C-PACE as an economic development tool at a time when "capital markets for commercial real estate have been broken." "Banks make up 50% of the commercial real estate lending market. Banks tend to be the lender of choice for new construction, new development projects, and they're just not lending at the same level," he said. C-PACE is very profitable for Peachtree as a business, Friedman said, because the company can aggregate and securitize the loans. "We have a lot of insurance companies that will invest into these securitizations," he added.While C-PACE lenders are less focused on the "green" aspects of the loan, they are still drawn in by the "resilience." C-PACE loans can be made in order to fund energy efficient upgrades, which saves money overall and makes the building more valuable, but they can also be done for upgrades to the building's resilience. That includes against flood, fire and even earthquakes. That is also appealing to investors as climate disasters become ever more extreme.Cooley said she sees three things driving expansion in the space: More states adopting C-PACE programs, market education and awareness, and investor interest. "As institutional investors have come in, the cost of capital and the structure of C-PACE has become a lot more compelling for the commercial real estate industry," she said.