Altus Power, Inc., which builds and operates solar power roof and parking lot installations for commercial real estate properties, is merging with a CBRE Group special purpose acquisition company (SPAC), The Wall Street Journal reports. The deal will value Altus at $1.58 billion and provide it with expansion capital and access to CBRE’s clients. The company’s clients include a lot of the top companies and real estate owners in the United States, Asia and Europe.
CBRE is one of the biggest commercial brokerages and real estate services firms in the world. Its facilities management businesses have expanded from 2.7 billion square feet in 2015 to 7 billion square feet today. A number of CRBE’s office buildings, malls, factories and other properties have large parking lots, rooftops and other areas that can hold solar installations.
“We are experiencing intense pressure from our clients to help them be more environmentally well positioned,” Robert Sulentic, CBRE’s chief executive said.
The Altus Power business model
Altus, which launched in 2009, makes deals with CRE owners where the company builds and operates solar power facilities on their land in exchanges for inexpensive power. Altus currently has more than 200 facilities that can produce more than 265 megawatts of power, The Wall Street Journal reports. That accounts for approximately two-thirds to three-quarters of the power that CRE properties on the site consume, according to Altus co-CEO Lars Norell. The company expects to produce 1,685 megawatts by 2024.
“We’ve ended up being effectively a distributed power company that owns hundreds of solar-generation plants located on rooftops from Vermont to Hawaii and the output from those solar plants we sell to the customers,” Norell told The Wall Street Journal.
The deal comes at an ideal time as CRE properties use a lot of power and more property owners and tenants are shifting their focus on solar. Non-residential property installations’ power generation capacity is expected to expand 200% between 2020 and 2030, according to a Wood Mackenzie and Solar Energy Industries Association report.
Blackstone Group’s energy business has been one of the Altus’ biggest investors, according to The Wall Street Journal. The firm led a $350 million debt financing and committed $300 million in preferred equity, according to Rob Horn, co-head of energy investing at Blackstone Credit. Blackstone will own 17% of the Altus as the result of its merger with CBRE’s SPAC, CBRE Acquisition Holdings. The SPAC launched in late 2020 after it raised $400 million. The firm chose Altus as a merger partner after reviewing 80 different companies.
The attractiveness of solar power
Desires for more eco-friendly CRE buildings is not the only reason solar power has become more attractive. Falling installation prices dropping have also been a factor. According to Norell, a 100,000 to 150,000 square foot would have cost between $4 million and $5 million ($4 to $5 per watt) in 2009. Today, the same installation could cost $1.5 million.
Additionally, climate change concerns have pushed large corporations to adopt policies that can help reduce carbon emissions, The Wall Street Journal reports. A lot of companies will look to use mor solar power at their properties.
“One of the lowest-hanging fruits for them to look at is their own real estate,” Norell said.
Joe Dyton can be reached at firstname.lastname@example.org.