When solar panels began appearing on commercial building rooftops with more frequency early this century, anyone who observed the installations rightly deducted that they were providing power to the underlying property. Today, those panels are increasingly supplying clean energy to surrounding neighborhoods.
The practice, known as community solar, is not only monetizing underutilized space, but it is also helping commercial property owners meet sustainability goals while fostering community connections. Self-storage, industrial, shopping center and other REITs with sizable roof footprints are particularly well-positioned to take advantage of the growing trend.
Under a typical arrangement, solar project developers lease roof space and take care of the rest—the financing, ownership, and maintenance of the photovoltaic installations, as well as plugging into the grid and signing up customers to buy the electricity. This so-called “in-front-of-the-meter” model represents a significant shift away from providing power for on-site use “behind the meter.”
In one of the most recent deals, National Storage Affiliates Trust (NYSE: NSA) in August announced that Solar Landscape would develop at least 100 megawatts of solar capacity across 8.5 million square feet of rooftop space to power homes in a number of states. The companies evaluated the potential of a venture for two years in conjunction with Solar Landscape leasing six initial NSA rooftops in Illinois and New Jersey.
“This is a great ancillary revenue opportunity for us, and one in which we don’t have to make any capital investment and requires minimal time and effort,” says Will Cowan, executive vice president and chief strategy officer for NSA, a REIT based in Greenwood Village, Colorado that owns 68.8 million square feet in 42 states and Puerto Rico. “Ten years ago, I would have said it wouldn’t have been this easy.”
Rooftop Renter
For Solar Landscape, the agreement with NSA continues a bonanza of deals with commercial real estate owners, including REITs such as Prologis, Inc. (NYSE: PLD), Extra Space Storage Inc. (NYSE: EXR), CubeSmart (NYSE: CUBE), and Brixmor Property Group Inc. (NYSE: BRX). Based in Asbury Park, New Jersey, the 12-year-old company initially began as a solar installation subcontractor and evolved into a turnkey developer and long-term asset owner of community solar systems, says Shaun Keegan, Solar Landscape’s co-founder and CEO.
To date, the company leases more than 150 million square feet of commercial roofs nationwide to generate some 1.5 gigawatts of power to more than 262,000 households. “For most landlords, we’re just another tenant that happens to take space on the rooftop,” adds Keegan, who pegs the company’s rooftop capital expenditures at around $3.75 billion. “That’s the evolution of solar power, and business has picked up like crazy.”
