Connecticut Green Bank has sent out an RFP on arranging its second bond backed by commercial PACE loans for at least $50 million, said Bert Hunter, chief investment officer of the bank.
Property Assessed Clean Energy loans are used to make a property more energy or water-use efficient.
Connecticut Green Bank's first asset-backed was a private, 20-year deal for $30 million that closed in May of 2014 and was unrated.
Speaking on the sidelines of Information Management Network’s confererence of Sunshine Backed Bonds, Hunter said the upcoming deal would be a public, rated transaction sold to a variety of investors.
Last year’s transaction had a senior tranche for 80% of the total that was bought by Clean Fund. Connecticut Green Bank retained the other 20%.
The originator provides green financing in other formats as well but Hunter said PACE was the most securitizable. “Pace makes sure that you get secured cash flows because they’re a lien on the property,” he said.
The PACE loans originated by the bank are for commercial/industrial properties as well as multifamily properties of five units or more.
Unlike those in the residential sector, commercial PACE loans are not facing challenges from the government, Hunter said.
The Federal Housing Finance Agency (FHFA) issued a notice of proposed rulemaking in 2012 that would prevent housing giants Fannie Mae and Freddie Mac from purchasing loans that are subject to PACE liens. The regulator objects to the fact that PACE liens are senior to those of Fannie and Freddie.