Real estate investment trusts are widely deployed and proven in the real estate industry. When used for the solar market, solar mortgage REITs can lower the cost of capital for projects, increasing the net operating income of a project to ensure positive cash flows over the lifetime of a solar project. Ultimately, solar mortgage REITs provide developers with the option to maintain ownership of a project.
The Real Estate Investment Trust (REIT) model has often been discussed within the solar industry, but the conversation has typically focused on equity REITs, in which revenue is generated from the rents of property owned by the REIT.
The solar mortgage REIT, in which revenue is generated from interest payments on loans backed by the real estate portion of the solar project, helps solar developers fully realize the benefit of the Real Estate Investment Trust (REIT) model. The solar mortgage REIT also has the benefit of maintaining the solar tax credit while allowing for debt repayment schedules that are aligned with the life of the asset.
This model is also attractive for the investor community, particularly for ESG funds looking to increase their impact while maintaining a diverse, liquid portfolio that includes long-term, predictable income streams from solar energy assets.