Greenworks Lending LLC is sponsor a $173.2 million in asset-backed securities, backed by repayments to commercial property assessed clean energy assets (PACE). The deal, PACEWELL 5, LLC, will be Greenworks Lending’s first 144a issuance of PACE assets.
Expected to close on December 16, the transaction’s collateral pool consist of $116.1 million of commercial PACE and up to $49.7 million PACE assets to be acquired post-closing.
PACEWELL also includes a prefunding account equal to about 30% of the projected portfolio balance and meets the criteria set out in the transaction terms, according to DBRS Morningstar.
PACE bonds are repaid through local tax assessments on properties that borrow from banks to finance renovations to reduce carbon emissions.
Greenworks, based in Darien, Connecticut, was the first ever to complete a securitization of PACE assets when it completed a $75 million deal in 2017, working with Guggenheim Securities.
TIAA was the main investor in the notes issued in 2017, and Nuveen, TIAA’s global investment manager, acquired Greenworks in April 2021.
Three classes of notes comprise the deal’s capital structure. The most senior note, class A, will issue $160.4 million in notes, and DBRS is expected to assign ‘AAA’ ratings to them. The rating agency also plans to assign ‘AA’ and ‘BBB’ ratings to the subsequent classes.
On any semi-annual payment date, the notes will pay on a pro rata basis if a loss trigger event is in effect. If a loss trigger event exists, the trust will repay the notes on a sequential basis.
The PACEWELL 5 bonds benefit from several layers of credit enhancement, including initial credit enhancement in the form of subordination, a liquidity reserve account and an interest supplement account, DBRS said.
The liquidity reserve account is funded at 1% of the aggregate PACE portfolio balance. This mechanism is subject to a $1.1 million floor at closing and can be used to cover fees and expenses, plus interest shortfalls for classes A, B and C notes after remittance amounts are exhausted. The reserve account is replenished on the 10th day of each April and October, designated as semi-annual repayment dates.
The portfolio consists of 42 loans, which have financed an average of $2.7 million. On a weighted average basis, the loan rate is 5.5%, and the loan-to-value ratio is 19.8%.
The collateral pool is diversified, with multifamily properties accounting for 36% of the pool; followed by lodging, 20.3%; various non-CMBS assets, 18%; then industrial properties, 9.1%; and esoteric commercial property assets, 7.8%.
