Practice Test Geeks(CPACE) Commercial Property Assessed Clean Energy Practice Test
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Financing Models Flashcards

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  1. Which of the following best describes a 'open market' C-PACE model?

    Answer: Multiple private capital providers compete to fund projects within a single program

    An open market model allows multiple approved capital providers to offer financing within the same PACE program, promoting competition and better borrower terms.

  2. How does C-PACE financing affect a property's balance sheet compared to a traditional mortgage?

    Answer: It may be treated as off-balance-sheet in some accounting frameworks since it is a tax assessment, not conventional debt

    Depending on accounting treatment, PACE assessments may be characterized differently from conventional mortgage debt, potentially offering balance sheet advantages.

  3. A property owner wants to finance a $2M HVAC upgrade via C-PACE. The property is appraised at $5M with a $3M first mortgage. Why might this application be declined?

    Answer: The combined LTV of 100% ($3M + $2M / $5M) exceeds typical program maximums

    Adding a $2M PACE assessment to a $3M mortgage on a $5M property creates 100% LTV, well above the 70–75% threshold most programs require.

  4. What is the primary purpose of a 'debt service coverage ratio' (DSCR) test in C-PACE underwriting?

    Answer: To confirm that projected energy savings and property income are sufficient to service the PACE assessment payments

    DSCR analysis in C-PACE confirms that net operating income and projected energy savings support the additional assessment obligation without straining property cash flow.

  5. In a government-sponsored C-PACE revolving loan fund, repaid principal is used to:

    Answer: Fund new PACE projects for other property owners in the program

    Revolving loan funds recycle repaid principal into new loans, allowing a single pool of public capital to finance multiple successive PACE projects over time.

  6. Which of the following is a key advantage of C-PACE financing over a conventional commercial real estate loan for energy upgrades?

    Answer: Repayment obligations transfer with the property upon sale, reducing seller risk

    Because the PACE assessment is tied to the property rather than the borrower, it can transfer to a new owner at sale, which is a distinctive structural advantage.

  7. A PACE program administrator requires an 'energy audit' as part of the application. What is the primary underwriting purpose of this requirement?

    Answer: To verify that projected energy savings are realistic and will support the investment thesis

    Energy audits provide the documented savings projections that underwriters use to confirm the economic viability and payback feasibility of the proposed PACE project.