PACE Snapshot

This inaugural edition of the property assessed clean energy (PACE) Snapshot is a new DBRS Morningstar semiannual research series dedicated to providing insights on general industry developments as well as collateral performance trends underlying our publicly rated residential PACE (R-PACE) securitizations. In addition, we also cover the latest trends in the commercial PACE (C-PACE) sector.

-- Residential and commercial PACE assessment volume has remained steady, with about $900 million originated through May, compared with $2.13 billion in all of 2022, according to PACENation. The majority of PACE financings has been dedicated to the commercial side, with approximately $620 million in total C-PACE financings so far this year.

-- On the heels of solid volume in 2022, where issuance topped $1.56 billion, PACE securitization totals this year have yet to break the $500 million mark through May. In the deals that have gotten done, we have seen a significant decrease in excess spread as interest rates on the asset side have yet to catch up with the jump in interest rates demanded by bond investors.

-- Delinquencies across DBRS Morningstar-rated R-PACE securitizations have remained low, generally ranging from 1% to 3%. Likewise, there have been low delinquencies across our rated C-PACE securitizations, with zero losses to date.

“With climate change concerns becoming more of a focus, along with awareness about PACE as a financing mechanism increasing, we have seen additional jurisdictions hopping on the PACE bandwagon,“ said Stephanie Mah, Senior Vice President, Structured Finance Research, DBRS Morningstar. “For example, Atlanta, Colorado, New Jersey, New Mexico, and Tennessee recently either introduced or expanded existing C-PACE-enabling legislation,” noted Mah.