A landowner, owning more than 2,500 acres of property generating $10 million per year through agricultural and water production use, was seeking to understand how to maximize and – unlock – the value of this holding, while also leaving a legacy he had been thinking about for some time.

The client is a forward thinker with a passion for technology. He wanted to leverage that passion to not only realize the full value of his land, but to make it his business to give back by generating clean, sustainable energy. In fact, prior to engaging with Addicus, he was in discussions with two major solar development companies to evaluate the feasibility of leasing a substantial portion of his acreage for solar power generation.

The challenge he was encountering was two-fold:

• An option on the land would tie it up for three to five years, restricting his ability to do much else with the asset. Under this scenario, he could continue to farm the property and maximize water rights, but most other opportunities would not be executable until the option is either exercised or it expires.
• On the other hand, if all 2,500 acres of land were successfully developed for solar, the client and his family believed their neighbors in the county would consider the installation a considerable blight on the pastoral community. The ill will this was sure to generate – in a town where the family had deeps roots and had lived for decades – was not the legacy for which the client and his family wanted to be known.

When Less is More. A Whole Lot More.

The Addicus difference began when the client engaged us to assess if his best answer was an opportunity he was missing – something besides choosing the lesser of his current unfavorable options.

After a thorough investigative process – including diligence, feasibility (including bringing in independent solar engineers and consultants), valuation, and arranging a land trust and donation – we recommended a fresh strategy:

Less is more.

The team at Addicus advised the client to decline the option to develop the entire 2,500 acres, and instead focus on two smaller parcels. What’s more, the client had some large, planned income events likely occurring in the near future for which he would need substantial tax offsets. Given this larger scenario, we advised the client to continue his traditionally successful water rights development, develop a solar farm on a smaller parcel of the property (roughly 160 acres), and consider donating his other property to preserve it in perpetuity and generate attractive tax benefits.

This land, for me, was about being able to grow something, build something that would do good for a long, long time.

- client, addicus consulting group

The financial result was greater than the client imagined possible during his initial explorations, and included:

• A $30MM income tax deduction
• An active solar farm in development that projects to deliver substantial value for the client and his family vis a vis tax benefits and economic returns.
• Control of the property and its water rights, along with the continued ability to farm
• Civic harmony through building of the solar business in the lowest visibility area of the property and on substantially less acreage than originally planned

The business learnings, in this case, were that sometimes the biggest opportunities are not clear at first. This is why we spend considerable time and energy to understand a client’s assets – as well as their vision, objectives, and concerns – so that we can architect inventive solutions that drive maximized value.

The opportunities for tax and financial planning are dependent on each client’s unique circumstance and past trends and performance are not guarantees of future market activity, deal terms, outcomes, or performance; accordingly, Addicus makes no representation, warranty or guaranty regarding any particular offer, deal term or transaction, or the outcome of or any returns related to any of the foregoing.

The analysis and discussion set forth in these materials are general and intended for informational and educational purposes only. They are not, and are not intended to be, investment or planning advice. In any case, Addicus is not making any representation regarding the suitability of any business, investment or financial decision for your particular circumstance, and any such decision should be made independently by you in consultation with your other tax, financial and other legal advisors. Further, any advice we may provide is qualified in its entirety by our limited knowledge of the relevant facts and circumstances of your situation, and only represents a reasonable interpretation of currently available information, including without limitation the language of the relevant provisions of the Internal Revenue Code of 1986, as amended, and regulations and administrative guidance issued by the Department of the Treasury. Any advice we may ultimately provide is subject to change based on further administrative interpretations or the availability of additional information.