When commercial property owners want to increase asset value, they usually face a choice about how to get the best return from making further capital investments into their property. Solar lease agreements change this equation.
Under a solar lease agreement, the property owner enters into a lease with a solar partner who pays rent for unused roof space, and installs and manages a solar program at no cost to property ownership. Typically, the energy generated is provided to on-site tenants at a discount below the local utility. This results in higher rental income and lower energy costs for the property, with no capital investment required.
By transforming unused roof space into reliable monthly income, owners can unlock new value. This model generates predictable revenue that directly enhances property value through increased Net Operating Income.
King Energy, an industry leader in this approach, has generated over $100 million in value for commercial property owners nationwide since 2021. With goals to create $1 billion in property value, they are long-term partners in making solar accessible and financially beneficial to owners and tenants alike.
The mathematics behind this value creation follows a straightforward principle: long-term solar rent increases a property’s NOI. When divided by the capitalization rate, it creates measurable growth in overall property value.
Since a solar lease agreement requires no capital investment from property owners, every dollar of rent represents pure return. A typical commercial property might generate $20,000 to $ 100,000 annually in solar rent—immediate income with zero upfront cost.
Understanding the Value of Roof Rent
King Energy’s model transforms unused roof space into reliable revenue, boosting the rent roll tied directly to commercial property value. Property owners receive predictable monthly rent payments for their vacant space while avoiding the complexity and cost typically associated with solar ownership.
The project structure is simple: King Energy signs a long-term lease and installs a solar system on-site at no cost. They manage and maintain the system and provide the property’s tenants, from corporate anchors to small businesses, with discounted energy. Owners receive a monthly check and tenants get lower utility bills.
To date, King Energy has already increased property rent rolls by over $15 million, directly contributing to over nine figures in property value increases. Whether in LMI communities or areas with solar requirements, these tangible benefits make solar make financial sense for owners across the board.
Because of their 20 to 25-year timeline, the stability and predictability of rooftop leases make them particularly valuable as a revenue stream. There’s no risk of vacancy or market fluctuations, offering property owners and investors focused on stable, long-term returns.
Cap Rates and NOI: The Math Behind the Value
Understanding the mathematics behind how no-cost solar affects a property’s balance sheet is an essential piece of calculating its worth. At its core, the roof rent model directly affects net operating income and creates cascading financial benefits for owners.
The foundation of commercial property valuation, NOI, is its total income minus operating expenses. Solar rooftop rent flows directly to NOI, requiring no additional operational costs or management burden from property owners. This pure contribution to income makes solar particularly valuable for enhancing property performance.
King Energy’s long-term roof rent provides a steady, predictable boost to NOI through monthly payments. The income starts immediately after system activation and continues reliably throughout the property’s lease agreement. Property owners can count on this revenue stream when calculating total property returns.
Understanding Cap Rates
This increase in NOI creates a decrease in capitalization rate percentage or a property’s income generation compared to its market value. Lower cap rates indicate higher property valuations, making stable income streams particularly valuable in strong real estate markets.
A simple example for a small property illustrates the impact of solar: A rooftop generating $10,000 annually in rent contributes that full amount to NOI. At a 7% cap rate, this creates $142,857 in added property value, demonstrating how even modest rent payments can significantly impact overall valuation.
At a larger scale, $100,000 in annual solar rent at a 6% cap rate generates $1.67 million in added property value. The largest rooftop leases, some generating $1 million annually at a 6% cap rate, can add $16.67 million to property value.
With $15 million in total rent payments and an average national cap rate of 6.54, King Energy’s $100 million in property value increases, and their future trajectory, becomes clear. To hit their goals of $1 billion, they’ll need to increase their rent payments nationwide to around $65.4 million.
How NOI and Cap Rates Impact Property Owners
Stable NOI growth strengthens a property’s position in the market and with lenders by increasing property valuations. This growth translates directly into increased borrowing power, creating new opportunities for improvements or acquisitions.
Enhanced property value provides owners with greater financial flexibility and improved terms when refinancing. The increase in NOI from solar rent demonstrates clear financial improvement to lenders and potential buyers.
With over $139 million in investment, King Energy impacts entire portfolios, improving overall performance metrics. Whether a REIT or individual property owner, they can leverage the increased value to strengthen their market position and pursue additional growth opportunities.
Benefits Beyond the Financials
While the mathematical impact on property value is clear, solar rent creates additional advantages beyond pure financial returns. These benefits strengthen a property’s market position in several key ways:
Enhancing Tenant Appeal
Solar-powered properties increasingly attract and retain environmentally-conscious tenants seeking sustainable space. Corporate tenants often mandate renewable energy in their leases, making solar a valuable marketing advantage in competitive markets. This tenant demand translates into stronger occupancy rates, longer leases, and potential premium rents.
Improving Sustainability
ESG goals and sustainability rankings play an increasingly important role in commercial real estate. Solar installations provide measurable environmental impact that property owners can showcase to stakeholders and investors.
With their enterprise-grade software, solar systems generate documentable metrics for sustainability reporting and green building certifications. The integrated OneBill system reports on difficult-to-quantify Scope 2 and 3 emissions, plus integrates with existing sustainability reporting software.
Simplifying Operations
King Energy manages all operational aspects of the solar installation, creating value without adding complexity. Property owners receive the benefits of solar with no management burden or maintenance responsibilities. This operational simplicity makes solar an attractive option for property owners that want to maintain focus on core business operations.
Reach and Scale: Working Toward $1B+ in Property Value
These comprehensive benefits have driven King Energy’s rapid growth across commercial markets. Their progress toward $1 billion in property value follows the clear mathematics: at current market cap rates, every $65.4 million in annual rent generates $1 billion in property value. The company’s expansion across new markets and property types builds toward this goal.
With over $100 million in added value and more than 175 solar programs operating nationwide, King Energy continues to increase its market presence. The company’s footprint spans 11 states and over 50 property owners, offering unique advantages while operating at a national scale. In California, high utility rates amplify the value of solar savings. Northeast markets benefit from strong sustainability incentives.
In addition to serving REITs and portfolios, King Energy’s distributed approach also creates value in low- to moderate-income communities. They’ve invested or deployed over $68M into LMI Communities, bringing the benefits of solar to the areas that need them most. Property owners benefit from increased valuations, while tenants gain locally sourced clean energy that lowers their utility bills.
Powering Commercial Property Growth
Commercial solar represents a transformative opportunity for property owners seeking value growth without capital risk. The proven relationship between solar rent, NOI, and cap rates creates measurable financial returns while advancing sustainability goals.
King Energy’s track record of $100 million in value creation demonstrates that solar makes financial sense. As their investments and signed leases increase, their financial impact at commercial sites will increase into the billions.
For commercial property owners seeking proven ways to increase asset value without capital risk, solar rent offers a clear path forward. The model’s documented success, from financial returns to tenant satisfaction, demonstrates why leading property owners view solar, and a long-term solar partner, as a strategic necessity rather than an optional amenity.
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