Many REITs operating in the United States have installed solar energy systems to meet sustainability goals and lower their energy costs.
What is a REIT?
A real estate investment trust, or REIT, is a company that owns or finances income-generating real estate assets. REITs receive special tax status in the United States, provided that they meet certain conditions. REITs collectively own around 580,000 properties across the country.
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Types of REITS
While REITs can own various types of properties, most specialize in a certain type of property investment. Industry groups identify 14 distinct categories of REITs, including office REITs, industrial REITs, data center REITs, and residential REITs.
REITs and solar energy
According to a 2022 Morgan Stanley research study, REIT-owned properties contain 38 billion square feet of rooftop and parking space that could be used to generate solar electricity. The same study estimates that, if fully developed, these solar power systems could generate 352 terawatt hours of electricity on an annual basis. This represents more than a quarter of the energy consumed annually by commercial buildings in the U.S., and about 10% of all electricity consumed across the country.
Several of the largest REITs have already recognized the value of this opportunity. Prologis, an industrial REIT with a large portfolio of warehouses and logistics centers, has become one of the industry’s leaders in solar-energy generation. In December 2023, the company announced that it was already halfway to its goal of producing at least 1GW in solar energy from its properties on an annual basis. Other REITS with sustainable energy goals have followed suit by developing renewable energy projects on their properties and buildings.
REITs have become a leading source of small-scale renewable energy projects, includling C&I solar. According to the industry association Nareit, 78% of REITs reported on-site renewable energy generation in 2023—up from just 18% in 2018.
REITs and clean energy tax credits
One of the defining features of a REIT is that it has no federal corporate income tax. For this reason, REITs historically could not make much use of federal clean energy tax credits, such as the investment tax credit (ITC), which is awarded to taxpayers who invest in qualifying solar energy assets.
However, the Inflation Reduction Act of 2022 made the ITC and other clean energy tax credits transferable. This means that companies can sell their tax credits to investors. Transferability has unlocked billions of dollars in tax-credit financing for solar energy projects, including projects developed by REITs.
Learn more
Evergrow helps REITs access tax-credit financing.
To learn more, click the Get Started button above to get in touch with a member of our team.
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