C-PACE is cheap, long-dated capital — and it collects like a delinquent property tax, which is the one claim that can reach the land itself. That makes it the most dangerous neighbor a ground lease can have. It can still work. Here is exactly what we require when a sponsor wants both.
A tax-priority instrument on the property makes every other layer work harder. When the PACE piece grows, our ground cap widens and total fixed-charge coverage — rent plus assessments against stabilized NOI — must still clear a healthy multiple. We would rather show a sponsor both quotes than pretend the assessment is free. And one thing we never do: close over a PACE subordination that exists as a phone call. Executed paper, or the PACE retires at closing.
A defaulted mortgage forecloses on its own collateral. A defaulted PACE assessment collects like unpaid property taxes, with priority that can touch the fee itself. That is why the fee-insulation paper is non-negotiable.
No. The ground lease is unsubordinated in every structure we do. The question is only whether the PACE's paper makes it a safe neighbor.
Yes, when the sizes are honest: the assessment capped, the leasehold lender's debt yield still strong after rent and assessments, and coverage that survives a bad year.
Send the assessment terms and your budget. We will tell you quickly whether the paper can work and what the ground lease is worth alongside it.
Email us the property