Key Takeaways:
Ares Management is channeling up to $300 million into the niche market for green property upgrades, a significant bet on a specialized corner of the private credit world.
Ares Management is backing Clearwater PACE with a credit facility of up to $300 million, aiming to capture growing demand for energy-efficiency financing in commercial real estate as property owners seek alternative funding sources. The move taps into the expanding market for private credit solutions as traditional lenders pull back.
"This partnership provides crucial, long-term capital for property owners to modernize their buildings, reduce emissions, and lower their operating costs," a spokesperson for Clearwater PACE said. "The scale of the Ares commitment allows us to meet the growing demand for C-PACE financing nationwide."
The investment comes from Ares's alternative credit group, which managed roughly $48 billion at the end of last year. Clearwater PACE, a unit of the Conversant Capital-backed AXCS Capital, will use the vehicle to fund individual projects with checks in the $40 million to $50 million range. The firm's goal is to deploy the entire $300 million facility by the end of this year.
This strategy allows Ares to deploy capital into long-duration, senior-secured instruments tied directly to real estate tax assessments, a structure that can reduce risk and lower capital costs. The deal signals strong institutional confidence in the C-PACE market, which finances upgrades like efficient HVAC systems, LED lighting, and water conservation projects on commercial, mixed-use, and multifamily properties.
The Ares-Clearwater deal arrives as more property owners are turning to nonbank lenders. Interest rates remaining higher for longer are expected to drive more borrowers toward private credit firms, which can offer financing that may not meet traditional banking standards. Last year, Moody’s Ratings highlighted the growing role of private credit in U.S. commercial property lending while also warning about the associated risks in the increasingly crowded market.
C-PACE programs, active in 40 states and the District of Columbia, allow property owners to pay for energy-related upgrades through a special assessment on their property tax bill. This creates a secure, long-term investment for capital providers. For Ares, whose own property-lending group collected $572 million in loan repayments last year, the partnership with Clearwater provides a specialized channel to access these assets.
Clearwater operates across most of the U.S. but maintains a particular focus on the active C-PACE markets in California and Florida. The new capital from Ares is immediately available for deployment for new construction, value-add renovations, and post-construction recapitalizations.
This article is for informational purposes only and does not constitute investment advice.
