Inverted leases are one of the most popular forms of tax equity financing for solar projects in the United States. Our inverted lease model, which has been used by major finance companies to calculate the returns to solar projects, is based on hundreds of hours of development.
This version models a “simple” inverted lease, which involves a tax equity investor (or a subsidiary) leasing solar systems from the developer. The tax equity investor (Tax Equity) then makes periodic master lease rental payments to the developer. Please read our paper Tax Equity 101: Structures for more details. We model both the returns to Tax Equity and to the developer.
Our model gives you full control of the inputs both globally (investment-level) and locally (portfolio-level). More specifically:
- Input 1: allows you to input master lease, debt, incentive, operating, and other expense assumptions. This worksheet also shows the key model outputs.
- Input 2: allows you to input the assumptions about each individual project, such as system size, system productivity, cost, and fair market value. The model accommodates up to 12 individual tranches for a portfolio of projects with different timelines. This worksheet also shows the key model outputs.
In addition to the input worksheets, we have included calculation worksheets for the following:
- Tranche: calculates the operation of each tranche in the portfolio, including receipts, expenses, and depreciation.
- Portfolio: consolidates the results of all tranches onto one worksheet.
- Section 467: calculates the allocated rent for income tax purposes.
- WH Debt: models the loan balance, interest, and fees associated with short-term debt.
- Cash Flow and IRR: calculates the IRR for both Tax Equity and the sponsor based on their respective cash flows.
These calculations result in IRR outputs for Tax Equity, Developer, and debt investors. We show IRRs pre- and after-tax.
The model is built in Microsoft Excel and comes completely unlocked. You may modify it as you wish to meet the needs of the projects you are evaluating. Because of the size of this model, Woodlawn Associates offers a one-hour walkthrough with purchase of the model and would be happy to help with any modifications you may have.
We also offer custom modeling services, so if working through the details is more than you have time for, please contact us.
(Note: Due to the almost infinite number of possible variations in projects, we cannot guarantee the model is suitable for your project as-is. If you have questions, feel free to contact us before purchasing.)