Chameleon of the Capstack

In 2017, almost nobody knew what C-PACE was, and most deals were well under $1 million. Josh Krsnak needed $7 million of it to put the Minnesota Wild’s practice rink on the roof of an old Macy’s in downtown Saint Paul, and that loan made Hempel Real Estate the first-ever client of PACE Loan Group. In Part 1, Josh Krsnak, CEO of Hempel Real Estate, sits down with PLG CEO Rafi Golberstein to explain why C-PACE now shows up in roughly three out of four of his deals. Real deals, real cap stacks, real decisions.

For more on C-PACE and PACE Loan Group, visit PaceLoanGroup.com and subscribe wherever you listen.

What we get into:

• Treasure Island Center: a $72M Macy’s conversion with the Minnesota Wild’s practice facility on the roof, $7M short
• Why a 10% gap could not carry equity pricing, and how a $7M PACE loan closed it
• Lender consent, CAM pass-through, and sponsorship built on a 2011 loan and a 2013 equity partnership
• PACE on roughly 75% of Hempel projects, financed almost entirely with local and regional banks
• Not always about rate: recourse exposure and bank lending limits
• PACE at ~8% vs. equity costing mid to high teens
• The Avenue, Milwaukee: a mall found on a website called Dead Malls, now 250,000 SF of office, just under 300 apartments, ~100,000 SF of retail, and a 23-restaurant food hall

A Saint Paul adaptive reuse project had historic tax credits, an opportunity zone designation, and three years of searching for financing. When the bank could only hold $12 million of a proposed $28 million loan, C-PACE stepped in with nearly $16 million to complete the capital stack.

In Part 2, Matthew McCormack of PACE Loan Group explains why C-PACE is better understood as flexible senior debt than cheap equity. The conversation covers large capital stacks in Florida, how resiliency measures expand eligible project costs, and where hotel-to-multifamily conversions create opportunities for workforce housing.

Learn more at PaceLoanGroup.com and subscribe to The Chameleon of the Capstack wherever you listen.

Market-rate multifamily is the most financed asset class in America, and every bank, debt fund, and agency lender will do the vanilla deal in a heartbeat. So why does C-PACE keep showing up in the capstack? Because the problem changed. In Part 1 of Episode 4 of The Chameleon of the Capstack, Matthew McCormick, Senior Vice President of Originations at PACE Loan Group and the firm's first-ever employee, sits down with PLG CEO Rafi Golberstein to walk through how the multifamily play flipped: from stacking on top of a bank's LTC ceiling when debt was 3 percent, to pairing with private credit at its last dollar to pull a couple hundred basis points out of the blended rate. It ends in Fishtown, Philadelphia, with a 114-unit deal financed on 15 percent equity.

For more on C-PACE and PACE Loan Group, visit paceloangroup.com and subscribe wherever you listen.

What we get into:

• Employee number one: hired off a LinkedIn message and a one-page WordPress site in 2018, now one of 32 FTEs
• Four months of not knowing what a special assessment was
• PLG's top three asset classes: multifamily, senior living, hospitality
• Why multifamily works for PACE: every deal PLG has done has a story behind it
• Private-client developers, not institutions
• Leverage problem vs. cost-of-capital problem
• PACE 1.0: solving the bank's LTC problem when debt was 3%
• Today: nearly every deal is coverage constrained
• Pairing C-PACE with debt funds at their last dollar to knock a couple hundred basis points off the blended rate
• The sponsor with 20 to 25% equity and a tapped-out friends-and-family raise
• 30 months vs. 30 years: why kicking half the debt to a 30-year maturity calms nervous sponsors
• Why a strong refi market makes debt fund money tolerable
• The next generation of developers: strong experience, no track record, no deposits, and why banks pass
• Non-recourse PACE as a way to manage contingent liabilities while growing
• Fishtown, Philadelphia: 114 units with 15% equity and a JLL-sourced senior lender at 85% of the stack
• The credit gut check: sponsors who answer every question vs. sponsors who answer selectively
• The repeat deal: why loan servicing sells the next one

Chapters

0:00 Cold open: employee number one, 32 FTEs later
 0:36 Intro: The Chameleon of the Capstack
 0:54 Today's guest: Matthew McCormick, SVP of Originations
 1:14 Eight years in: PLG's first hire
 1:41 Four months of not knowing what a special assessment was
 2:25 2017: starting the company and realizing it needs staff
 3:06 Recruited by LinkedIn message and a one-page WordPress site
 3:53 From one employee to 32 FTEs
 4:19 A tree nut allergy and the first big developer meeting
 4:34 PLG's top three asset classes
 5:03 Why multifamily works for PACE: every deal has a story
 5:52 The most financed asset in America, so where does PACE compete?
 6:43 Private-client developers, not institutions
 7:26 Leverage problem vs. cost-of-capital problem
 7:43 PACE 1.0: solving the bank's LTC problem when debt was 3%
 8:39 Today: nearly every deal is coverage constrained
 9:07 Pairing PACE with private credit to cut the blended rate
 10:22 The sponsor with 20 to 25% equity
 11:00 A couple hundred basis points of rate compression
 11:19 30 months vs. 30 years: the maturity argument
 12:01 Why a strong refi market makes debt fund money tolerable
 13:12 The next generation of developers
 14:00 Non-recourse PACE and contingent liabilities
 14:40 Fishtown, Philadelphia: 114 units with 15% equity
 15:28 JLL brings a senior lender to 85% of the stack
 15:48 The credit gut check
 16:56 The repeat deal: loan servicing sells the next one 

Banks will tell you they've loosened their credit box. They've also quietly capped how many dollars they'll write you. In Part 2 of our senior living conversation, PACE Loan Group Managing Director Peter Grabell walks through the deals where C-PACE does the work nobody else in the stack wants to: clearing lender consent, freeing up bank capacity, and refinancing a bank partially out of a deal years after the building's already stabilized.

An aging population is the most reliable demand story in real estate, so why do senior lenders still treat senior living like a problem child? Because someone has to operate it, and that makes banks nervous enough to cap leverage a full 10 points below a vanilla apartment building. In Episode 3 of The Chameleon of the Cap Stack, Peter Grabell, Managing Director and Head of Production at PACE Loan Group, sits down with PLG CEO Rafi Golberstein to make the case that senior living is a leverage problem, not a cost-of-capital problem, and to show how C-PACE quietly fills the gap that banks, credit unions, and equity leave open. Real deals, real cap stacks, real decisions.

The largest indoor water park in North America draws 300,000 visitors a year, runs massive HVAC and water-recycling systems, and sits on the Atlantic City boardwalk. So how does that qualify as energy efficient and become the first C-PACE deal ever closed in the state of New Jersey?

PLG CEO Rafi Golberstein and Head of Loan Structuring Jerry Ellis break down a Q4 hospitality run that ranged from the funky to the five-star. The headliner: a $45M recapitalization on a 125,000 sq ft indoor water park, closed in roughly 50 days against a hard year-end deadline in a state where no one had ever closed a C-PACE loan before.

Why two years of operating history made an "un-financeable" asset class work. How direct HVAC load and water recycling drove the energy-efficiency qualification. Why a retroactive prevailing-wage waiver created a 30-day application sprint. And how getting Atlantic City to opt into the program in real time turned into two more referred Jersey deals within a week.

This is Part 2 of the hospitality breakdown.

Most hotel capital stacks have three layers. This one had six: ground lease proceeds, C-PACE, mezz, preferred equity, common equity, and key money, and it still closed.

PLG CEO Rafi Golberstein and Head of Loan Structuring Jerry Ellis walk through Q4's hospitality run: a Hyatt House in Orlando connected by SkyBridge to a 1.74M-attendee convention center, and an $800-a-night unflagged luxury inn in the Hudson River Valley that became PLG's first-ever New York State closing.

Why C-PACE beat traditional senior debt on a Hyatt where the sponsor was deciding between a bank and a structured stack. How a related-party ground lease at 7% functioned as cheaper-than-senior capital. Why tranched funding across four draws saved the sponsor from negative arb on $30M sitting idle. And how a USDA loan falling out at the last minute on the upstate deal turned into a relationship-driven save.

Plus: why New York is the largest CRE market in the country and one of the slowest for C-PACE and what it took to plant a stake there.

Learn more at paceloangroup.com

Data centers consume massive power, but does that make them ineligible for green financing? This one draws 20+ megawatts daily, making it the single largest power consumer in downtown Kansas City. It still qualified for $100 million in C-PACE.

PLG CEO Rafi Golberstein and SVP Robbie Pinkas break down how direct-to-chip cooling, upgraded chillers, and Kansas City's underground chilled water infrastructure made a seemingly unlikely deal fully eligible. They also explain why PACE beat investment-grade bonds for this particular capital stack, including non-recourse structure, 20-year fixed-rate terms, and the flexibility a greener sponsor needed that traditional data center financing couldn't offer.

Plus: why PLG now accounts for over a third of Missouri's entire C-PACE production, what makes Kansas City a quietly compelling infrastructure market, and why centrally located data centers may hold more long-term value than the massive isolated complexes dominating headlines.

This is Part 2 of the Patmos Data Center breakdown. Listen to Part 1 wherever you found this one.

Learn more at paceloangroup.com

A defunct Kansas City printing press. 25 megawatts of untapped grid power. A young developer with vision but limited liquidity. In this episode, SVP Robbie Pinkas walks through how he turned a gut instinct about data centers and C-PACE into a $100 million assessment—structuring retroactive proceeds to fund the property acquisition while financing the remaining build-out. The deal closed in under 12 months, the facility is now over capacity, and there may be room for a subsequent assessment. Robbie and Rafi unpack the sourcing, the creative deal architecture, and why this conversion model could be replicable for entrepreneurial data center developers hunting underutilized power allocations.