NewburyportNews.com, Newburyport, MA

January 12, 2013

Solar farm land sold for $1M

Real estate investment trust buys True North Energy site

By Angeljean Chiaramida
STAFF WRITER

---- — SALISBURY — A publicly traded real estate investment trust has purchased the Rabbit Road land housing the True North solar farm for about $1 million.

PW Salisbury Solar, LLC, a nonoperating subsidiary of Power REIT, purchased the 54-acre site from True North, developed by Jim Vaughn of West Newbury, on Dec. 27, according to the deed posted on the Essex County Registry of Deeds’ website.

Along with the land, Power REIT bought the buildings and improvements on it, according to the deed.

Power REIT paid $915,000 for the land and assumed another $122,000 for sewer financing, bringing the total price to $1.037 million, according to Ton Konrad, editor at AltEnergyStocks.com and “Green Stocks” blogger at Forbes.com. Locally, the property is assessed at $715,000, according to town records.

The property was put up for sale this fall, not long after the solar farm began producing electricity. The land was advertised through LandVest requiring a sealed bid by Oct. 12 for a minimum of $1.75 million. The terms stipulated that the solar electric-generating facility was not part of the sale, but would become a tenant on the land.

According to Konrad, True North has a 21-year lease on the property at a rate of $80,800 a year, with a 1 percent escalation rate. The terms of the deal have Power REIT paying the real estate taxes on the property, but not on the solar farm, Konrad said.

Konrad has been following the progress of Power REIT, a small, publicly traded company, which in recent years altered its business plan to focus on acquiring real estate in renewable energy resources, such as solar and wind power. Konrad said Power REIT is the first real estate investment trust to invest in a solar energy site. Prior to its new focus, Power REIT invested primarily in railroad-related real estate, Konrad said.

A real estate investment trust, or REIT, is a business entity that doesn’t pay corporate income tax because it meets specific criteria. Konrad said the trusts must invest in real estate and pass on nearly all their income to their shareholders, who in turn pay tax.

In its Jan. 7 announcement on the Salisbury purchase, Power REIT Vice President Arun Mittal said the solar farm pays the company rent, which is its return on the investment.

Prior to constructing the solar farm, Vaughn struck 20-year power purchase agreements with the town of Salisbury, city of Newburyport and Triton Regional School District in Byfield in return for giving each energy credits that save them money on their electric bills. The returns on those agreements will provide a revenue source to Power REIT, as well as the solar farm.

According to Salisbury Town Manager Neil Harrington, the town began enjoying the savings from its energy credits soon after Vaughn’s facility went online in August. Harrington was unaware of the sale, but has said the language in Salisbury’s agreement with Vaughn would survive through any future owners through the life of the contract.

The sale of the land to Power REIT is another chapter in Vaughn’s journey since 2006, when he began acquiring the acreage beside Vaughn Manufacturing, the Old Elm Street water heater company he once owned and ran, but since has sold.

Back then, the economy was booming and Vaughn had hoped to develop an industrial/commercial park with 20 or more lots. But when the economy collapsed, Vaughn had a $5 million investment in 54 acres, no tenants and no prospects.

“I wish I had a nickel for every client who said they’d build there,” Vaughn said in a 2010 interview. “I bet I spoke with 100 people. What I learned from that experience is that talk is cheap in real estate.”

Motivated by the need to pay off loans and develop the land, Vaughn realized the property had solar potential: It’s flat has an unobstructed southern exposure and there is a National Gird transmission line at its front door. He sold Vaughn Manufacturing, the company his grandfather founded, and incorporated True North Energy with the goal of making “renewable energy from the sun,” he said.

It took a lot to turn an approved plan for a business park into a solar farm, such as getting Salisbury Town Meeting to adopt a solar zoning bylaw, obtaining government-driven alternative energy incentives fostered by the Patrick administration and negotiating the power purchase agreements that made the project financially viable — even before it generated one watt of energy.