Carlyle will commit up to $1B to help North Bridge provide landlords with clean energy financing, the companies announced Monday.

Under the deal, Carlyle, a Washington, D.C.-based investment firm with $435B of assets under management, would buy a minority stake in New York City-based North Bridge, Bloomberg reported. North Bridge focuses on commercial property assessed clean energy, or C-PACE, loans.

North Bridge will increase its scale using strategic growth and finance expertise from Carlyle, the companies said in a news release.

C-PACE’s popularity has increased as banks retreated from commercial real estate lending in recent years and demand for sustainable property development increased. More states are also legally allowing C-PACE financing, North Bridge founder and CEO Laura Rapaport told Bloomberg.

Cumulative C-PACE investments shot up from $2.3B in 2020 to $7.2B in 2023, according to PACENation data.

“It’s really those three things combined that make it the perfect storm to be a capital markets solution,” Rapaport told Bloomberg.

About 40 states plus Washington, D.C. have laws allowing PACE financing, according to Bloomberg. More states adopting PACE-enabling legislation may be partially responsible for boosting C-PACE loan originations, and additional states are considering legislation that would allow it, Commercial Search reported.

C-PACE financing can be used for new construction projects, renovations, acquisitions and retroactive recapitalization opportunities, according to the release. It is a private, fixed-rate form of financing with flexible terms secured by local property assessments. It also has accretive benefits to commercial real estate capital stacks, making it increasingly sought after, the release states.

“Our partnership with North Bridge, a leader in providing capital market solutions to commercial real estate owners, allows us to further meet the financing demands facing the industry,” Rachel King, a principal focused on opportunistic real estate credit at Carlyle, said in the release.

“Banks have pulled back from commercial real estate lending due to concentration risk in the sector, resulting in a dynamic that we believe should yield attractive relative value opportunities for C-PACE lenders with capital to deploy today.”

The transaction was a joint effort between Carlyle’s credit strategic solutions and private credit teams, according to the release.