Real estate investment trusts, or REITs in short, have been steadily gaining popularity recently. REITs have continued to prove its steadfastness amidst rocky market prospects, and they're becoming more and more attractive to many investors that may not have looked at the asset twice. REIT assets will also be becoming more varied. There are a number of different types of REITs you can get your hands on today, and something of the latest REIT models is in the renewable energy industry. Does a renewable energy REIT actually exist? Read on to discover.
What is a renewable energy REIT?
To understand what a renewable power REIT is, it's important to know how an REIT works to begin with. According to this article, \”an REIT is a company that owns and typically operates income-producing real estate or related assets.\” There are various kinds of REITs out there, and some of the more popular ones include mortgage REITs, equity REITs, hybrid REITs, gaming REITs, retail REITs, residential REITs, and so on.
A renewable energy REIT is a company that invests in energy-related businesses. It's a fairly new niche that has not gotten a lot of traction yet. In fact, the very first company that's become a certified alternative energy REIT only formed last year in 2021. There's an incredible amount of potential within the investment, however, given the nature of climate awareness today. It is just a matter of time before renewable energy REITs become soaring investments necessary for every portfolio. So does a renewable energy REIT actually exist? The answer is yes, and in fact there are two we can look at.
RadiantREIT claims to be the first true renewable energy REIT ever created. In essence, RadiantREIT is a mortgage REIT that caters to the solar power market. The company seeks to finance solar energy the way real estate works. RadiantREIT works together with both solar developers and solar asset portfolio owners, offering long-term and fixed rate debt.
Solar energy is one of the largest growing markets in alternative energy. The projected investment for solar installations was remarkably full of 2021, and it stands to show how more investors are looking into this kind of asset. Before RadiantREIT, talks of solar energy REIT were treated as part of the umbrella of equity REITs. RadiantREIT acts more like solar mortgage REIT, which generates revenue from loan interest payments from the real estate involved in any solar-related projects. RadiantREIT began in 2021 and headquartered in New York. However, the company is still a personal entity, and there are no indications of it going public in the near future.
Hannon Armstrong (HASI)
Hannon Armstrong Sustainable Infrastructure Capital (NYSE: HASI) was approved by the IRS for REIT status in 2012 at a time when nobody was really talking about sustainable energy REITs. According to this article, Hannon Armstrong is a \”renewable power and efficiency investor that stands out through its status as a real estate investment trust (REIT) and its strategy of investing in assets that have a lower risk profile.\” The company also declares to be the very first clean energy REIT to go public, which happened in 2021. Hannon Armstrong's investment approach is environmentally sustainable, and they provide capital to various sustainable-related companies.
Hannon Armstrong has developed in the industry awhile. Originally known as Eden Hannon Goodwin & Company, Hannon Armstrong was founded almost 30 years ago. Its first transaction within the renewable energy field was refinancing a solar plant in California later. In the same year, Hannon Armstrong also financed an energy-efficient asset for that US Department of Energy. The firm operated primarily as a private entity for 32 years before it became publicly traded and listed on the New York Stock Exchange in 2021. After 2021, Hannon Armstrong had sold $100 million price of bonds with a yield of 2.9%.
Hannon Armstrong can be attributed to being one of the first companies to utilize the CarbonCount metric tool, which is often used to evaluate US-based sustainable energy investments. The CarbonCount metric determines how effective a project is when it comes to reducing CO2 emissions per amount of investment. Hannon Armstrong first utilized it in partnership with Alliance to Save Energy in 2021. The investment firm was also the first American company to join the Climate Disclosures Standards Board's Task Force on Climate-related Financial Disclosures. By 2021, Hannon Armstrong was investing $1 billion annually towards energy and sustainability-related projects through the US.
Future of renewable energy REIT
With alternative energy markets evolving and demands for sustainability growing, the way forward for this type of REITs could radically change in the near future. Although HASI has commanded the area for so long, it's becoming clearer that REITs may be the future for financing alternative energy companies. Whether investment firms follow the mortgage REIT model used by RadiantREIT or that utilized by HASI is irrelevant at this point. The US is still leading the global market with regards to renewable energy investments and assets. In addition, renewable energy has so many sub industries; firms can diversity portfolios as needed and create their own sustainable models if necessary.
Renewable energy REITs are assets that investors ought to be on the lookout for. Although Hannon Armstrong might be the only public firm available for investing today, it's highly likely this will change soon. The future is bright for alternative energy, especially now that oil is facing lots of headwinds. Renewable energy REIT HASI might be operating from a behind-the-scenes standpoint today, and it's probably the best time to jump in on the asset. If you’re not prepared to jump in on HASI just yet, a minimum of be on the lookout for private sustainable energy firms that might follow HASI’s footsteps. Once everybody else gets a whiff of this opportunity, the numbers will never be the same.