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Country’s First Green Energy REIT Launches in New York City

GRELJ - CleanTech Green REIT

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.

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4 Responses to Country’s First Green Energy REIT Launches in New York City

  1. Katie March 23, 2011 at 5:55 pm #

    What a great idea, I know there are some more traditional REITs that are already investing in green properties, just in a different way. Cole REIT has acquired a few buildings that are LEED Silver and Gold Certified, these types of buildings are not only environmentally friendly they are also smart choices for long term investments. It’s nice to see that multiple REITs are really taking it to a whole new level of green.

  2. Ujjval Vyas, Ph.D., J.D. April 4, 2011 at 1:23 am #

    I have to say that this kind of thing always amuses me. How can you depend on subsidies as the primary mechanism by which you will return revenues to your investors? A very chancy strategy and combined with the rather complex due diligence needed to assure truly high performing buildings, I am even less sanguine about this fund. All of this sounds a bit odd: Russian equity fund, land grab, subsidies, etc. It is all as clear as mud. Of course if this is a kind of hedge fund which is a secretive location for juicy deals, that might be another thing entirely. But if so, it certainly has little to do with sustainability or green and much more to do with the business-as-usual of access capitalism. Hope they aren’t looking to LEED as a proxy for performance.

    Funny how folks in the green industry who as a rule hate fat cats and finance gamers suddenly laud the same kind of thing done in the name of their own cause.

    Very puzzling stuff.

  3. Jake Grayston June 29, 2011 at 9:54 am #

    I agree with Ujjval Vyas, this is a very chancy strategy. Also when due deligence get too complex it usually does not get doe (or not done well enough)

    Nice idea, but….

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