Most people agree renewable energy is a field that holds great promise for entrepreneurs and energy/technology companies. But how can an investor — be it an equity firm, institutional manager or individual — prudently take advantage of the rapid growth in this field without becoming immersed in the risks undertaken by investing in the underlying technology itself?
Here’s a very recent case study in how forward-looking investors have avoided the pitfalls of investing in renewable energy technology directly; but rather leveraged Federal tax credits for renewable energy projects to great advantage with the assistance of The Cherrytree Group:
In late 2016 our president, Warren Kirshenbaum, worked with two investors and a regional developer to develop an individual investor tax credit fund dedicated to commercial solar projects. The fund’s individual investors will receive tax credits, depreciation and cash flow valued at approximately $3 million.
The developer is Golden Goose Renewables, a unit of Golden Goose Capital — a boutique private equity firm that invests in commercial real estate and renewable energy businesses. Since 2013, Golden Goose has accumulated $100 million of student housing assets in Durham, New Hampshire through a combination of acquisition, organic-growth and development strategies. The centerpiece of the Durham portfolio is a 220,000-square-foot mixed–use development named Madbury Commons that is comprised of student housing and retail/offices.
Cherrytree provided the initial capital for the fund so the tax credits could be secured, as well as due diligence, fund structuring, compliance and indemnification support. The Cherrytree-backed funds are branded as “P&R Tax Credit Equity Funds” (the P & R stands for “Preserve and Renew”). P&R Funds can be dedicated to either renewable energy (i.e. solar) or historic rehabilitation projects.
Cherrytree invested $625,000 in the Fund, in order to satisfy IRS Safe Harbor considerations. The transaction contemplated by the fund was to invest in three separate commercial solar arrays that together comprised 1.3MW of power generation. Those individual projects are:
Milton Town Solar: a 1.2MW solar energy installation constructed on a landfill leased from the Town of Milton, NH. The lease has a 20-year term with two five-year extension options. The Town of Milton has also consummated a 20-year power purchase agreement for the power generated from the Milton Town Solar facility.
Littleworth Road Solar: a 334kw DC fixed-tilt ground-mounted photovoltaic solar array set in an open field. The solar array is located on level land in Dover, NH and operates as a net metering facility. The facility has concluded a Group Net Metering Agreement whereby the Madbury Commons Apartments refeenced above will purchase nearly 400,000 kilowatts of power from the Littleworth Road facility: representing the sum total of its annual production.
Second Chance Solar: a ground-mounted solar photovoltaic array sized at 66kw, covering 7,200 sq. ft. and using 180 solar panels in Keene, New Hampshire. The panels have been installed with sufficient space between each for rain water to fall, disperse and infiltrate. Construction included assembling a utility tunnel that covers approximately 900 sq. ft.
On their own merits, these are important projects that operate with sophisticated technology to generate stable renewable energy for New Hampshire residents — while putting into active use former landfills and under-utilized farm land. The developer is a highly competent provider of renewable energy, and we are thankful for their professionalism, dedication, and their unwavering support and cooperation during this complex and time-challenged transaction.
Would these solar arrays have been built without the benefit of tax credits? It’s unlikely. But for us to be able to support the generation of renewable energy by utilizing the tax code is a glowing example of a successful public-private partnership and an efficient use of the marketplace to achieve financial and environmental goals. The tax credit fund’s individual investors will greatly reduce their tax bills, and the developers will provide energy to hundreds of New Hampshire students, residents and businesses purely off the sun’s rays.
It’s another win-win for the Cherrytree Group.