C-PACE provider Petros PACE Finance and MidCap Financial—a specialty finance firm that provides senior debt solutions to businesses—have completed their first joint unitranche transaction.
Petros, serving as the C-PACE lender, partnered with MidCap as the senior lender to provide a total of $39 million in unitranche financing for the new construction of an AC Hotel by Marriott in Knoxville, Tenn., developed by Vector Hospitality. The financing includes $15 million in C-PACE funding from Petros and $24 million in senior debt from MidCap. Connor Murch of Petros and Bob Moran of MidCap structured the transaction to act as a single construction loan solution.
"Offering unitranche financing is a significant step forward in Petros' evolution as a valued partner to our developer customers and a clear demonstration of our commitment to product innovation as a best-in-class lender," Kevin McMeen, president and CEO of Petros, said in a statement. "This collaboration with MidCap, a respected senior lender, reflects the kind of strategic solutions we deliver to optimize borrower experiences and outcomes. We are excited about this transaction and expect it to be the first of many unitranche deals to come."
"At MidCap Financial, we pride ourselves on tailoring flexible financing solutions quickly and efficiently," said Richard Graham, managing director and head of commercial real estate at MidCap. "The unitranche structure helped streamline underwriting and made for a smooth, collaborative process. Petros presented a well-structured opportunity, and we look forward to partnering on future transactions that deliver innovative, efficient, and cost-effective capital solutions to developers and investors nationwide."
Petros and MidCap's unitranche structure combines C-PACE and first mortgage financing to provide a single source solution to investors and developers. The unitranche approach delivers a simplified solution to the customer as both the C-PACE and first mortgage provider size, structure, price and vet the deal in a coordinated manner that simplifies and accelerates the deal process for all parties involved in the transaction.
"This was the most seamless transaction I have ever experienced," said Aman Patel, President of Vector Hospitality. "Petros and MidCap earned our confidence and trust at every stage of the process. Thanks to their partnership, we are on track to deliver an award-winning hotel."
The AC Hotel project will be a 161-key property constructed in downtown Knoxville, Tenn., close to the University of Tennessee, corporate headquarters, regional healthcare facilities, and other nearby institutions. The C-PACE financing will cover the cost of an energy-efficient HVAC system, enhanced building envelope, LED lighting, water-conserving plumbing, and other sustainable upgrades. Construction began in March and is anticipated to be completed by November 2026.