Texas C-PACE Just Got a Major Upgrade: Higher LTV, More Flexibility, and Stronger Standards

Texas C-PACE Program Expands LTV Cap & Flexibility

Big news for property owners, developers, and lenders: Texas C-PACE has been enhanced to provide greater financing flexibility while maintaining the integrity of its energy and water-saving benefits. Keeping PACE in Texas, the stakeholder group that sets best practices for the state’s C-PACE program has officially approved key updates to the PACE in a Box program, making financing more accessible while strengthening underwriting standards.

What’s Changing?

• Higher Loan-to-Value (LTV) Cap – The maximum LTV for C-PACE financing has increased from 25% to 35%, providing property owners with more capital. All projects must comply with standard banking regulations regarding appraisals.

• Expanded Repayment Flexibility – Capitalized interest and interest-only periods have been extended up to five (5) years, allowing property owners to better align repayment schedules with lease-up and stabilization.

• Updated Savings to Investment Ratio (SIR) Calculation – Interest costs are now excluded from the cost side of the SIR calculation.

• New Principal Payment Timeline – Principal payments must begin no later than five (5) years after closing:

  • Up to three (3) years for construction.

  • Up to two (2) additional years for stabilization if needed.

  • For refinances, stabilization periods may extend up to three (3) years if necessary.

Why This Matters

These improvements position Texas as one of the most competitive and well-structured C-PACE markets in the country. The higher LTV cap allows for greater financing leverage, reducing reliance on expensive mezzanine debt or equity. Meanwhile, the extended interest-only and capitalized interest options give developers the flexibility to manage cash flow during lease-up and stabilization.

At the same time, the updated SIR calculation and reinforced underwriting standards help preserve the integrity of the program, ensuring long-term sustainability and continued benefits for both the private sector and local communities.

For Local Governments

These updates were designed to function together and should be adopted as a package. They have been incorporated into the model PACE in a Box program, which provides a uniform set of best practices for C-PACE administration across Texas.

Local governments that need to update their statutory PACE Reports to implement these changes are encouraged to adopt the full package to maintain compliance with PACE in a Box standards. This approach ensures consistency, transparency, and continued program success.

Next Steps

With these changes now officially in effect, property owners, developers, and lenders should explore how these enhancements can optimize their capital structures and energy-efficient projects.

If you're working on a project in Texas or considering C-PACE financing in another market, now is the time to evaluate these updates. Reach out to discuss how these changes can benefit your next deal —> [email protected]

Sources: Texas PACE Authority; LoneStar PACE

About
Clearwater PACE is a New York-based, national direct lender specializing in C-PACE Financing for Commercial Real Estate spanning all asset types and geographies across the U.S. We offer low-cost, fixed-rate, long-term loans ideal for new construction or recapitalizations for recently completed projects. Our team of seasoned real estate investment professionals, with extensive expertise in structured finance, crafts tailored solutions that align with Sponsor’s needs, including hedging away negative arbitrage and flexible prepayment options.

Cheers,
Jonathan Seabolt
Co-Founder, Clearwater PACE
[email protected]

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