This article is featured in the Fall 2022 issue of Texas LAND magazine. Click here to find out more.
Janice, a longtime Oklahoma rancher, recently asked me, “What can I do with these wind payments?”
She didn’t want to sell her property, but she was garnering payments from six wind turbines that had been erected on her ranch. She was interested in selling the cash flow generated by the wind energy infrastructure and purchasing more land that she could lease for solar energy development.
My response? “You should have sold it yesterday.”
As the renewable energy industry continues to expand, more and more landowners throughout the US are beginning to earn significant revenue from solar, wind, battery storage and electrical vehicle charging stations. Most landowners are oblivious to the financial implications of these opportunities.
They won the lottery, right? This is mailbox money, the same as mineral royalties generated by having an oil and gas well or mining on their property, right? Wrong. These cash flow payments are rarely, if ever, in the form of a royalty payment. The vast majority of solar farm and wind turbine payments are fixed rent payments that extend for 30+ years in most cases.
Working through LandGate, Janice connected with a qualified land professional who explained exactly what her wind payments really are. . .and what they are not. Thanks to the expert guidance, she soon understood why she needed to sell her wind payments and keep her land:
1. Inflation: Her payments are fixed rent payments that typically escalate from one to two percent. The current inflationary environment means her cash was losing anywhere from six to eight percent depending on who you talk to. In a nutshell, her cash stream was losing money.
2. Land Appreciation: Her land was increasing in value. She didn’t want to sell it and she didn’t have to.
3. Income Not Guaranteed: Janice assumed that her 40-year wind lease meant she was guaranteed to get paid for that long. Wrong. In reality, the lease terms for solar and wind are not guaranteed, and the projects can be terminated at any time depending on the project’s economic viability.
4. Sought-After Commodity: Currently cash flow payments from solar, wind, battery storage and electrical vehicle charging are a highly sought-after commodity. Purchasers are currently buying these cash flow streams at rates never seen in any energy industry. At the moment, prices are very, very good for sellers.
5. 1031 Exchange: The proceeds from selling cash flow payments can be used, as Janice did, to buy more property utilizing a 1031 exchange.
One of LandGate’s qualified land partners connected with Janice and listed her cash flow, but not her land. Within weeks Janice had several cash offers that were all structured in a way that allowed her to utilize a 1031 exchange to buy more property.
At the same time, the LandGate professional used LandGate’s proprietary software to identify several listed properties located in very high-value solar potential locations. Janice now owns a full section of land in southern Colorado that sits in one of the region’s highest-value solar areas. She still owns her original property in Oklahoma which will be free and clear of any encumbrances once her original wind lease expires.
Landowners: LandGate provides free data for landowners to help determine the value of your land when it comes to solar farm potential, wind farm potential, minerals, carbon credits, or any other resource. Find your land values at LandGate.com.
Land Real Estate Agents: Get access to the only data intelligence for land resources. Bring this unique knowledge to your clients. Access the $4 trillion a year of energy and environmental deals. LandGate’s marketplace gives access to the largest network of corporate buyers paying top-dollar for land and its resources. Learn more at LandGate.com.