We’ve been talking quite a bit over the past few months here at GRELJ about many of the darker legal issues associated with green building and real estate. With daylight savings time and, hopefully, spring just around the corner, I thought it might be timely to spotlight CleanTech REIT, a new Manhattan-based real estate investment trust that will exclusively invest in real property that can be used for the generation – or transmission – of energy produced from wind, solar, geothermal, and hydroelectronic sources. (REITs, as you may know, are companies that own and/or operate income-producing real estate and distribute at least 90 percent of their taxable income to shareholders annually as dividends.)
According to a Barclays analyst, CleanTech is the first and only REIT with this type of exclusive investment strategy. The firm was established – at least in part – in response to a “land grab” that its founders (former Clifford Chance attorneys) are observing among European developers, who have been coming into the U.S. and trying to exploit the ongoing instability in the oil markets (note yesterday’s triple digit dip on Wall Street fueled by the oil markets and ongoing conflict in northern Africa) by purchasing real estate with the potential to produce and/or transmit green energy. Although CleanTech is not limiting itself to any particular geographic region or technologies – a strategy which its founders believe should reduce overall risk for investors – its business model effectively depends on the properties’ value appreciating on account of continued flux in the energy markets.
One of the issues that CleanTech – or any other investor in green technologies – will face in the medium term is whether the short-term incentives for renewable energy installations that were extended for varying durations in the stimulus package and TARP will sustain the long-term viability of the underlying technologies. For example, in 2009, only 8 percent of total U.S. energy consumption came from renewable energy sources; whether incentives can bridge the gap until pricing and efficiency can help the technologies stand on their own remains to be seen. The success of firms like CleanTech will obviously be a good litmus test for the industry’s long-term ability to account for a much larger share of America’s needs.