A Connecticut lender has closed on the first-ever securitization of commercial property assessed clean energy (or PACE) loans.

Darien-based Greenworks Lending disclosed Monday that it completed a $75 million, privately placed C-PACE securitization arranged by Guggenheim Securities. The lead investor was TIAA Investments.

The deal, which was rated AA by Morningstar Credit Ratings, is backed by financing for a variety of property types, including office buildings, manufacturing facilities and hospitals. The improvements include a mix of energy-efficiency and renewal energy upgrades, including solar-panel installations.

"This is a milestone moment for the commercial PACE industry,” Greenworks' co-founder and chief executive, Jessica Bailey, said in a statement. The company intends to be a “frequent” ABS issuer, a release noted.

State-based PACE programs, both residential and commercial, provide upfront financing for energy efficiency, retrofit or upgrade projects (such as solar panel installations) that are repaid through tax assessments levied by local or regional government authorities.

Approximately $4 billion in residential and commercial PACE originations have taken place since 2009, but the bulk of that finances retrofits on homes, an estimated $3.67 billion of which has been pooled into collateral for rated securities by three providers, Renovate America, Renew Financial and Ygrene Energy Fund.

But commercial PACE securitizations have been slow to materialize. Morningstar attributes this to the smaller volume of lending ($492 million since 2009, according to nonprofit trade group PACENation) as well as the fact that commercial PACE loans are less homogeneous, making it trickier to assess the riskiness of a pool of assets that can range from multifamily housing to manufacturing facilities.

C-PACE loans also take longer to originate, thanks to more stringent underwriting standards. And, unlike residential PACE, they require consent from the lender of an existing mortgage on the property. That's important, because PACE assessments create a kind of "super lien" that has payment priority over a first mortgage. If a property were to go into foreclosure, any delinquent assessments would get repaid first.

(Commercial mortgage bond offerings increasingly include loans that allow for additional PACE financing for borrowers.)

Greenworks was launched in 2015 and has financed improvements that have saved business owners $150 million in energy costs through a zero-down C-PACE financing program that allows companies to pay for the upgrades over a lengthy repayment period of 20 years, fully paid with the cost savings from energy-efficiency upgrades.

The company stated its transaction was made possible from an expansion of its lending capacity through a warehouse line with ING, allowing it to reach across projects in seven states to build enough diversity in the pool.

According to PACENation, the more than 1,000 commercial projects nationwide that have been PACE-funded since 2008 are primarily in California (191) and Greenworks’ home state of Connecticut (101). Last year, however, new C-PACE programs were launched in Colorado, Rhode Island, New Hampshire, Ohio, Maryland, Florida and Wisconsin.

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