How do I sell my income stream please?
Discussion
I own the land on which a solar farm has been built. I granted a 25 year lease to the solar operators in 2015.
The current rent is £65k linked to RPI for the next 20 years. The solar operator spend just over £15m developing the site.
I am looking to capitalise the income stream now that yields have strengthened.
Does anyone on here know who the buyers of these income streams are?
What sort of yield might I be looking at for my valuation? I was guessing that someone might want a guaranteed 5% for the next 25yrs.
How would I factor in the increase in rent over the next 20 years?
This is such a niche investment that I really don't know where to look for a buyer.
The current rent is £65k linked to RPI for the next 20 years. The solar operator spend just over £15m developing the site.
I am looking to capitalise the income stream now that yields have strengthened.
Does anyone on here know who the buyers of these income streams are?
What sort of yield might I be looking at for my valuation? I was guessing that someone might want a guaranteed 5% for the next 25yrs.
How would I factor in the increase in rent over the next 20 years?
This is such a niche investment that I really don't know where to look for a buyer.
As it's property how about a property auction? I've seen advertising hoardings, freeholds, ground rents, phone masts etc go through. Most property seems to command strong money at auction, and you can set a reserve so it won't go cheap.
I've used Clive Emson as both a buyer and seller and they have been pretty good.
I've used Clive Emson as both a buyer and seller and they have been pretty good.
I would say 7-11% yield, depending on the credit worthiness of the firm paying the lease. 5% is just return of your money.
Big question will be can you find a buyer that will value it at pre tax, not post tax... (ie to a 40% tax payer, that isn’t 65k a year, it is 39k a year). Auction is probably the best.
Big question will be can you find a buyer that will value it at pre tax, not post tax... (ie to a 40% tax payer, that isn’t 65k a year, it is 39k a year). Auction is probably the best.
You could have a chat to someone like www.nextenergycapital.com
I know they would be interested in the actual installed panels, but I don't know if they would have any interest in the ground rent alone, though I suspect they might know someone who might be.
I know they would be interested in the actual installed panels, but I don't know if they would have any interest in the ground rent alone, though I suspect they might know someone who might be.
belfry said:
I own the land on which a solar farm has been built. I granted a 25 year lease to the solar operators in 2015.
The current rent is £65k linked to RPI for the next 20 years. The solar operator spend just over £15m developing the site.
I am looking to capitalise the income stream now that yields have strengthened.
Does anyone on here know who the buyers of these income streams are?
What sort of yield might I be looking at for my valuation? I was guessing that someone might want a guaranteed 5% for the next 25yrs.
How would I factor in the increase in rent over the next 20 years?
This is such a niche investment that I really don't know where to look for a buyer.
Dropped you a mail via your Profile, feel free to contact me via mine if you've not got it.The current rent is £65k linked to RPI for the next 20 years. The solar operator spend just over £15m developing the site.
I am looking to capitalise the income stream now that yields have strengthened.
Does anyone on here know who the buyers of these income streams are?
What sort of yield might I be looking at for my valuation? I was guessing that someone might want a guaranteed 5% for the next 25yrs.
How would I factor in the increase in rent over the next 20 years?
This is such a niche investment that I really don't know where to look for a buyer.
J
belfry said:
The land is not for sale; it's just the income stream.
That may restrict your pool of buyers somewhat, and you would probably take a bigger discount reflecting the creditworthiness of the counterparty paying the rent.Can you take out a commercial mortgage against the land (giving you cash now) and use the rent to pay it down? Would achieve roughly the same thing with lower transaction costs.
Yield you can achieve will be based on the covenant strength of the solar farm operator, rent review pattern i.e. are they annual uplifts or five yearly compounded, fixed to RPI or subject to cap/collar uplifts etc plus other terms/conditions contained in the lease.
Happy to put you in touch with a few people that deal in this sector if you want.
Happy to put you in touch with a few people that deal in this sector if you want.
slightly tongue in cheek, but why not give Thurrock council a ring - it is a big investor in solar!
There is an interesting investigation going on by @bureaulocal and reported on in the FT
https://twitter.com/bureaulocal/status/12637198252...
https://www.ft.com/content/7a01b39d-a5df-4e3f-b9a6...
There is an interesting investigation going on by @bureaulocal and reported on in the FT
https://twitter.com/bureaulocal/status/12637198252...
https://www.ft.com/content/7a01b39d-a5df-4e3f-b9a6...
Very niche. The land agents (Frank Knight, Berry's etc) might be able to help as they'll know investors who might be interested.
Its a big risk for whoever buys though, as if the solar operator goes bust they have nothing - they don't own the land, and don't own the assets. Expect a substantial discount from what you've calculated the total rent to be, I would have thought.
Its a big risk for whoever buys though, as if the solar operator goes bust they have nothing - they don't own the land, and don't own the assets. Expect a substantial discount from what you've calculated the total rent to be, I would have thought.
JPJPJP said:
You could have a chat to someone like www.nextenergycapital.com
I know they would be interested in the actual installed panels, but I don't know if they would have any interest in the ground rent alone, though I suspect they might know someone who might be.
Would the owners of the panels to whom the OP has leased the land not be potentially quite miffed if he attempts to sell their assets? I know they would be interested in the actual installed panels, but I don't know if they would have any interest in the ground rent alone, though I suspect they might know someone who might be.
Condi said:
Its a big risk for whoever buys though, as if the solar operator goes bust they have nothing - they don't own the land, and don't own the assets. Expect a substantial discount from what you've calculated the total rent to be, I would have thought.
^^^ This. At the end of the day if the business had long term security the solar company would be happy to pay a discounted lump sum to buy out the annual rent themselves. But I bet they won't.I've played with the idea of how much someone might offer OP to buy this income stream but I just can't get comfortable with the concept. On the one hand, with interest rates close to zero, it could be worth a small fortune - let's say £2,500,000. On the other hand, if Mr Solar goes bust in 2023 the purchaser would be absolutely shafted.
OP presumably thought the income opportunity looked good over the contract period at the outset. After all, £65k p.a. is not to be sniffed at. What's changed since the contract was signed?
It is worth the Net Present Value of the income stream at a discount rate.
The Discount Rate is based on the security of income. If he was well advised, he has a “hell and high water” link through to the FIT which secures the income, if not, the security might be some SPV set up by the energy company.
As for inflation, that can be swapped out for a fixed rate if needed.
clived said:
Would the owners of the panels to whom the OP has leased the land not be potentially quite miffed if he attempts to sell their assets?
He’s not looking to sell their assets. He’s looking to sell the right to receive the rent they pay for having their assets on his property.As others have said, this is likely to be problematic.
loafer123 said:
It is worth the Net Present Value of the income stream at a discount rate.
The Discount Rate is based on the security of income. If he was well advised, he has a “hell and high water” link through to the FIT which secures the income, if not, the security might be some SPV set up by the energy company.
As for inflation, that can be swapped out for a fixed rate if needed.
Exactly, SPV plus UK solar industry is not somewhere I’d be putting money (not in this form anyway - sorry OP but think this is a pretty hard sell)The Discount Rate is based on the security of income. If he was well advised, he has a “hell and high water” link through to the FIT which secures the income, if not, the security might be some SPV set up by the energy company.
As for inflation, that can be swapped out for a fixed rate if needed.
85Carrera said:
loafer123 said:
It is worth the Net Present Value of the income stream at a discount rate.
The Discount Rate is based on the security of income. If he was well advised, he has a “hell and high water” link through to the FIT which secures the income, if not, the security might be some SPV set up by the energy company.
As for inflation, that can be swapped out for a fixed rate if needed.
Exactly, SPV plus UK solar industry is not somewhere I’d be putting money (not in this form anyway - sorry OP but think this is a pretty hard sell)The Discount Rate is based on the security of income. If he was well advised, he has a “hell and high water” link through to the FIT which secures the income, if not, the security might be some SPV set up by the energy company.
As for inflation, that can be swapped out for a fixed rate if needed.
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