Capital Stack Options: C-PACE, OZ, & EB-5 for Hotel Financing in Puerto Rico

If you're planning a hotel or resort build in Puerto Rico, understanding your capital stack is critical.

At DEV Builders Group, we guide clients through every layer, from C-PACE audits to pre-construction modeling and incentive alignment. Puerto Rico is emerging as a prime destination for hospitality development thanks to demand growth and layered financing tools.

In 2025, hotel developers and investors are turning to capital stack strategies that incorporate C-PACE, Opportunity Zones (OZ), and EB-5 financing. These structures reduce risk, increase return potential, and align with Puerto Rico’s economic incentives and sustainability goals.

What Is a Hospitality Capital Stack?

A capital stack refers to the layered structure of financing used in hotel development. It typically includes:

• Senior debt (bank loans)
  
  
• Mezzanine debt (subordinated financing)
  
  
• Preferred equity
  
  
• Common equity
  
  
• Specialty layers like C-PACE, OZ equity, or EB-5 capital
  
  

In Puerto Rico, developers can combine these tools with Act 60 tax incentives to optimize ROI, reduce upfront capital needs, and create sustainable, high-yield hospitality assets.

C-PACE Financing for Hospitality Projects

C-PACE (Commercial Property Assessed Clean Energy) allows developers to finance energy-efficient upgrades through a property tax assessment.

It offers fixed-rate, long-term, non-recourse funding that doesn’t interfere with senior debt.

Benefits for Hotel Builds

• Up to 100% financing for energy-efficiency, water conservation, and resiliency
  
  
• Terms up to 30 years
  
  
• No upfront equity needed for green retrofits or upgrades
  
  
• Boosts NOI through utility savings
  
  

Real Example

The Hilton Garden Inn in Denver, CO used $3.1M in C-PACE to fund HVAC, LED, and building envelope upgrades.

The improvements reduced operating costs and supported LEED certification.

In Puerto Rico, C-PACE financing is currently being developed in partnership with energy and infrastructure entities and is expected to become applicable for commercial hospitality projects in major metro areas such as San Juan and Dorado as adoption increases.

Opportunity Zones (OZ) for Hotel Development

Puerto Rico has 98% of its land designated as Opportunity Zones, making it one of the most OZ-advantaged markets in the U.S.

Qualified Opportunity Funds (QOFs) invest in these areas, offering major tax advantages.

OZ Tax Benefits for Hotels

• Capital gains deferral through 2026
  
  
• No tax on new gains after a 10-year hold
  
  
• Step-up in basis on original investment

Ideal Uses

• Ground-up construction in underdeveloped areas
  
  
• Renovation of existing hospitality properties
  
  

Real Example

An OZ hotel in Palm Beach, FL used OZ equity with conventional debt to develop a boutique resort.

Puerto Rico’s eligible OZ areas include municipalities like San Juan, Ponce, Bayamón, and Mayagüez, making these regions strong candidates for OZ-aligned hotel developments.

EB-5 Capital for Puerto Rico Hospitality Projects

EB-5 allows foreign investors to gain U.S. residency by funding job-creating projects.

In hotel projects, EB-5 typically fills a portion of the equity layer.

Benefits

• Long-term, low-cost capital
  
  
• Often structured as mezzanine or preferred equity
  
  
• Reduces need for costly institutional equity

EB-5 Criteria

• Minimum investment: $800,000 (TEA-qualified area)
  
  
• 10+ U.S. jobs must be created per investor
  
  
• Requires USCIS approval through a regional center
  
  

Real Example

EB5 United funded a 5-star resort in California, using EB-5 equity with OZ and senior debt.

Puerto Rico’s high-unemployment municipalities qualify as Targeted Employment Areas (TEAs), enabling EB-5 use for hospitality development in places such as Arecibo, Aguadilla, and parts of Ponce.

Combining C-PACE, OZ, and EB-5: A Strategic Capital Stack

Puerto Rico developers are combining these financing tools to reduce equity requirements and increase capital flexibility.

Example Capital Stack



• Senior loan – 50%
  
  
• EB-5 capital – 20%
  
  
• OZ equity – 20%
  
  
• C-PACE financing – 10%
  
  

This multi-layered structure enhances leverage, reduces cost of capital, and maximizes tax advantages.

Puerto Rico’s Capital-Friendly Advantage

Puerto Rico’s hospitality investment climate includes:

• 4% fixed corporate tax rate
  
  
• 100% property tax exemption (Act 60)
  
  
• OZ tax breaks
  
  
• C-PACE green financing (in development)
  
  

These benefits make Puerto Rico one of the most capital-stack-friendly destinations for hotel development in the U.S.

What Developers Need to Know

To access these tools, you’ll need to:

• Partner with a USCIS-certified regional center (EB-5)
  
• Create a compliant OZ business plan
  
• Work with a C-PACE provider to conduct energy audits
  
• Align construction timelines with Act 60 incentives and permitting requirements
  

DEV Builders Group offers full support through each step. From pre-construction to capital planning, we ensure your project aligns with local incentives and financing layers.

FAQ: Capital Stack Options

for Hospitality in Puerto Rico

Sources

1. Unlocking Value in Hotel Development: Capital Stacks, Opportunity Zones, and Strategic Equity Placement
2. 7 reasons why EB-5 financing is right for your next hotel project
3. Moncayo, Auberge Resort & Residential Community
4. C-PACE, an innovative financing mechanism for hotel construction and retrofit
5. How C-PACE is a Game-Changer for Hotel/Hospitality Green Building Financing
6. How C-PACE Financing Can Be Part of an EB-5 Project’s Capital Stack

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