The Four Seasons Private Residences in San Francisco has set a new benchmark in real estate financing by securing nearly $256 million in Commercial Property Assessed Clean Energy (C-PACE) financing. This move, not only marks the largest PACE financing amount ever recorded but also showcases an innovative approach to real estate development and sustainability.

Understanding PACE Financing

PACE financing is unique as it is not tied to the borrower but to the property itself, repaid over time through a tax lien. This type of loan is typically used for environmental upgrades or construction and remains with the property even if it is sold. The Four Seasons Residences utilized this financing to repay construction loans, demonstrating the versatility and practicality of PACE in large-scale real estate projects.

The Four Seasons Residences Project

The project includes the transformation of the historic ten-story Aronson Building, over 120 years old, into 18 residential units, and the addition of a new 43-story tower housing 128 units. This ambitious undertaking involved significant efficiency and resiliency improvements, such as:

• A stormwater recycling system for non-potable use.
• A 1.5-megawatt standby emergency generator.
• Energy upgrades and seismic strengthening.
• Construction waste management.

These enhancements are expected to yield $8 million in utility savings over the 25-year financing term, with a 27% to 30% reduction in water and energy usage.

Financial Structure and Benefits

The municipal bond issued on the Westbrook Partners condo buildings, which includes the Four Seasons Residences, will be repaid at a fixed rate over 25 years. This structure provides financial stability and predictability for the project. The innovative C-PACE structure allows flexibility during the sales process, ensuring that condo owners, both current and new, are not burdened with immediate repayments. Instead, they will begin paying off the assessments with their 2024 property taxes, with any balances due paid for individual units upon their sale.

Market Impact and Future Prospects

This financing deal represents a significant step forward in the use of innovative financing methods in the real estate sector. As Eric Alini, CEO of Counterpointe, notes, "C-PACE represents an innovative way to finance energy improvements and can be value added to large capital stacks." In a market where liquidity is becoming scarce, tools like C-PACE are crucial for property owners and investors to realize their visions and projects.

The Four Seasons Residences, a LEED Silver building, currently offers units ranging from $2.3 million for a one-bedroom to $49 million for its largest penthouse. Since sales began closing in late 2020, at least 16 units have been sold, according to city records.

If you are looking to buy or sell in the building, text me. The Four Seasons Residences not only offers luxury living but also stands as a testament to innovative and sustainable financing in the heart of San Francisco.