The Green Line Apothecary in Rhode Island. Credit: Green Line Pharmacy / Courtesy

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Green banks are offering businesses a chance to borrow against previous investments in energy-saving upgrades. 

The Green Line Apothecary in Rhode Island is known for its old-school flair: Both locations in Wakefield and Providence boast authentic soda fountains where customers can sit and chat over root beer floats. 

“We wanted to reestablish the days when the pharmacy was more than just a place to pick up your pills,” said Ken Procaccianti, who runs Green Line with his wife Christina, a pharmacist, and is also a builder. “It used to be a community gathering place.” 

But when it came to readying the space for their Providence location, which opened just last year, the couple took a decidedly forward-thinking approach. The North Main Street site was so rundown it required a gut rehab. Beyond replacing the roof, plumbing and windows, however, the couple also invested in more than $300,000 in energy-saving upgrades, including LED lighting, spray-foam insulation, and high-efficiency HVAC equipment. 

It was only after the project was finished that they learned they could borrow against those energy improvements, providing their growing business with valuable liquidity. And so earlier this fall, the Procacciantis closed on a $327,584 retroactive loan through the Rhode Island Infrastructure Bank’s C-PACE financing program. 

The loan supplied “additional capital that will help us continue to grow, add employees, add services,” Procaccianti said. 

C-PACE, which stands for commercial property assessed clean energy, is more traditionally known for providing up-front financing for building owners to make their buildings more efficient, resilient or healthy. The loans are attractive because they have competitive interest rates and are repaid over a long term, usually 20 to 30 years, through a tax assessment on the property. 

C-PACE can also be used retroactively, but it’s only recently that the backward-looking version of the program has gained visibility. Since the pandemic hit, lenders have begun marketing the loans as a way of helping business owners free up capital. 

“Retroactivity is still a well-kept secret in PACE,” said Jessica Bailey, the chief executive officer and co-founder of Greenworks Lending, one of the country’s largest providers of C-PACE financing and Green Line’s lender. “We didn’t realize how widely it could be used until we really dug into it after COVID hit. We’ve definitely begun doing more proactive outreach for it.” 

The Darien, Connecticut-based lender did about a dozen retroactive loans last year, but that volume has increased 600% this year, Bailey said. While the loans still represent a small share of their overall lending activity, “it’s a big growth area for us,” she said. 

Most of the two dozen or so states that have active C-PACE programs offer a retroactive option, though the look-back periods vary in length, Bailey said. Rhode Island, for example, will retroactively finance efficiency and clean energy installations completed after July 2015, while California allows for a three-year lookback. 

“Some states don’t have it written into their program guidelines, so it’s up to their program administrator there,” she said. “Most administrators are fine with it as long as the borrower did the qualifying work.”

Rachel Davis, senior vice president of sales at Petros PACE financing, another large lender based in Austin, Texas, said they are also seeing more interest in retroactive financing this year. 

“We are seeing it where maybe the building owner had higher-cost mezzanine debt that’s started to come due,” she said. “This is a natural fit if they can replace it with PACE. And we’re also seeing folks use it to modify their senior loan agreements, where they pay down some of the senior mortgage and lower their exposure.” 

A building owner applying for retroactive financing must provide the lender with documentation showing that the energy upgrades are completed and paid for, Bailey said. A third-party engineering firm then reviews the upgrades to ensure they are allowable under that state’s PACE guidelines. 

Once the loan is approved, the term is set based on the remaining useful life of the equipment installed. 

Payments are due with property taxes (usually twice a year) and the amount owed shows up on the borrower’s tax bill as a line item, Bailey said.

The Connecticut Green Bank, which administers that state’s C-PACE program, offers retroactive financing for qualifying projects completed within the previous year, but hasn’t done any since the pandemic hit, said Mackey Dykes, vice president of financing.

They have developed two separate incentive programs to help out business owners. One allows the borrower to defer the first two payments on their C-PACE loan, “so you’re getting money right into your pocket from the energy savings and increasing your cash flow,” Dykes said. 

The other allows for interest-only payments for up to three years. Interest rates currently range from 5.5% to 6.5%, he said.

Green Line was the RI Infrastructure Bank’s first retroactive C-PACE loan. 

“The option existed prior to the pandemic,” said Toby Ast, the bank’s C-PACE business development manager. “We’ve been trying to promote it more recently because it offers building owners an option to access capital at a time when traditional lending might be more constrained due to COVID-19.” 

The Procacciantis, meanwhile, are contemplating another round of C-PACE financing, either upfront or retroactively. Their pharmacy business, which includes medication delivery throughout Rhode Island, is brisk enough that they plan to relocate the Wakefield store to a larger space in need of a similar set of upgrades. 

“It’s another building that needs some help,” Ken Procaccianti said. Noting that the work required for the Providence location was so extensive that at times it was “gut-wrenching,” he added, “we are gluttons for punishment.”

Lisa Prevost

Lisa Prevost is a longtime journalist based in Connecticut. She writes regularly about housing, development and business for the New York Times. Her work has also appeared in the Boston Globe, CNBC.com, Next City and many other publications. She is the author of "Snob Zones: Fear, Prejudice and Real Estate." A native New Englander, Lisa covers Connecticut and Rhode Island.