EV Charging Vendor Looks to Sale-Leaseback Financing
But the arrangement is unusual and isn’t clear whether this will become a trend or remain a one-off.
Sale-leasebacks have been common in commercial real estate for a long time. But not when the property in question is a charging station for an electric vehicle (EV).
That changed with the announcement that EVgo, a vendor of an EV fast-charging network which claims more than 950 locations across 35 states and 65 metropolitan areas, had undertaken four sale-leaseback transactions through SLB Capital Advisors in Los Angeles, CA, Santa Monica, CA, San Diego, CA and Brooklyn, NY.
SLB said that it found an institutional investor to fund “four cornerstone properties” for EVgo, which are expected to feature fast charging stalls. The claimed combined property value of the transactions was $27 million.
“Upon sale of certain properties to an institutional investor, EVgo simultaneously leased back the properties under a long-term lease with multiple renewal options,” a release said.
“Charging stations often occupy desirable, urban locations, and once established, can generate the stable cashflows that support institutional ownership of the underlying assets,” said SLB partner Malik Franklin in prepared remarks.
“The sale leasebck model is a highly effective capital structure that allows EVgo to maintain a nimble position in the market, enabling us to focus on what matters most: installing more fast chargers for our customers,” said EVgo chief executive officer Badar Khan in prepared remarks.
Neither EVgo nor SLB responded to GlobeSt.com’s outreach.
What works in this case depends on EVgo’s business structure of owning standalone charging locations with their own real estate. Other EV company strategies might not fit in with the concept.
EVPassport chief executive officer Hooman Shahidi said, “I think it’s a terrible use of capital,” at least for his company’s approach, which involves a turnkey platform that installs chargers in commercial real estate locations. The CRE owner pays a monthly fee. Then, revenue from the charging services to consumers is split, with the CRE owner getting a majority revenue share.
“Why would you limit yourself to X dollars per month when you had unlimited upside?” Shahidi tells GlobeSt.com. “Doing triple net leases just don’t make sense. Let’s assume you own a retail strip mall. If you [worked] with us, you’d pay a monthly subscription.” And then get the charging revenue that could more than offset the subscription cost.
But then, the dynamic is different from a charging vendor having to own real estate property itself to then install the chargers. In theory, the sale-leaseback model would free capital that the company could use to further expansion.
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