Challenge
Slatt Capital was initially brought in to help lower the cost of capital by replacing a high-interest preferred equity piece behind an existing construction loan. However, the assignment quickly expanded to replacing the entire capital stack. At the time, the property had just completed construction and was only about 30% leased, making traditional financing more difficult.
Solution
Slatt Capital structured a new financing package using a combination of C-PACE (long-term financing for commercial property energy upgrades, repaid through the property tax bill) and a senior bank loan, based on three key factors:
Developer Profile: The client is an experienced developer with multiple large projects underway. Using C-PACE (which is non-recourse) reduced the developer’s contingent liabilities and improved his global cashflow, which are two important underwriting metrics banks.
Property Performance: By the time of closing, the property was generating enough income to cover the senior loan payments. This allowed the lender to waive the interest reserve, typically required for lease-up properties.
Cost of Capital: The blended interest rate was in the low 7% range. C-PACE provided a fixed-rate portion, while the bank loan offered a floating rate. This mix gave the client both stability and flexibility in managing interest rate changes.
Result
Senior Bank Loan: $12.5 million
C-PACE Financing: $9 million
The client received a fully restructured capital stack with a competitive cost of capital, no interest reserve requirement, and improved financial flexibility.
