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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Ed Mathews (00:36):
I do want to ask, and first off, I want to thank
you, because we just found out Iwas telling our guests, we just
found out today that we are atop 15 global podcast in the
multifamily space, which we'reon a list of about 90 really
good podcasts.
So thank you.
If you are new to the show andyou like what you hear today or
you listen to some of the otherepisodes, one of the things you
(00:57):
can definitely do to help usgrow and help us find subjects
and guests who will pique yourinterest as well is to follow us
and always feel free to comment.
I read every single comment andI try to respond to as many as
possible.
So thank you.
And with that I have a guesthere who his domain expertise
(01:17):
and subject matter expert isnear and dear to my heart for a
couple of different reasons.
One we just signed a big dealto do something very similar to
what he does, which we'll getinto.
It's similar but not the same.
And also he's leading the waveof alternative energy and also
turns out that it's helpingmultifamily owners make extra
money.
(01:37):
With that, Owen Barrett fromShine, congratulations on your
success and welcome to the show.
Owen Barrett (01:42):
Thanks for having me.
Ed Mathews (01:43):
Yeah, so, Owen, for those folks that haven't
discovered Shine yet, why don'tyou give us a little bit about
what the company's all about,and then we'll get into it?
Owen Barrett (01:52):
Yeah, so Shine is the only turnkey solar solution
for the multifamily industry.
I think that's really importantfor kind of a number of reasons
.
We developed Shine afteracquiring 650 units ourselves
multifamily units throughout theMidwest and treating that
portfolio as a guinea pig interms of what's the best way to
deploy solar on multifamily, andwhat we noticed was there's a
(02:13):
lot of solar contractors thatdon't understand multifamily and
then there's a few softwarecompanies out there that
understand how to bill tenantsonce solar is installed.
But there was nobody doing bothand it's created this sort of
nightmare scenario where amultifamily operator owner had
to go do the due diligence on acontractor and then work with a
(02:33):
billing company.
And the more parties involved,the more complicated these
projects get and they're alreadycomplicated.
And we spent about two yearsdeveloping a turnkey solution,
brought the installationexpertise with a proprietary
billing platform and launchedShine to really try and
decarbonize the multifamilyspace via onsite solar.
Ed Mathews (02:55):
Excellent, and when you say decarbonize, let's talk
about the impact of that.
So how do you track that?
What are the KPIs that you'reparticularly focused on?
Owen Barrett (03:05):
Yeah, so just within the decarbonization space
.
It's a lot easier todecarbonize a new building than
it is existing.
So you see a lot of peoplefocused on how do I build new
buildings the right way, with alower carbon footprint?
That's how we should bebuilding these things Leads.
I personally don't put a lot ofemphasis on building rating
systems because I think therating themselves are really
(03:27):
expensive and you could get tothe same results without the
rating.
I also think how you operate abuilding is more important than
how it was built, and the ratingsystems tend to focus on how
things are built, not whathappens once it's in operation.
Of all the buildings that existtoday, I think two thirds, or
70%, will exist in 50 years and40% of global emissions are from
(03:49):
the built environment.
If we want to have an impact onemissions, we have to go after
existing buildings, andmultifamily is not known to be
the most innovative industry outthere.
They're slow to move, riskaverse.
I just thought it was a reallyinteresting opportunity to try
and go after this spacespecifically and come up with a
(04:09):
model that's not leading withenvironmental metrics, saying
let's do this for the trees,let's do this for the polar
bears, let's do this for thekids.
It's let's do this because itwill make you more money, it's
better for your tenant and, oh,it's also good for the
environment.
Ed Mathews (04:24):
And so let's talk about the money.
Then One of the things and Imentioned on our previous show
as well we just signed a, sowe've gotten into land
development and one of thethings that we discovered here
in Connecticut was theincentives to work with local
solar companies.
To build infrastructure is,frankly, pretty lucrative right,
and we carved out probably 10,12 acres, I believe, for a solar
(04:46):
farm here in centralConnecticut and we're in the
process of permitting andgetting that entitled and all
that, and the local governmentand the state government have
been really supportive.
It seems like it's going tohappen.
So in our scenario, not goingon a building, it's going on raw
land.
It is basically a ground leasewhere they're putting a five
megawatt battery and a bunch ofsolar panels and connecting it
(05:06):
to the three phase grid and offwe go.
How is what Shine does?
How is that different?
Owen Barrett (05:11):
We have come up with a business model that
focuses on helping owners ofbuildings, generally existing
buildings but we do work withnew development to installing on
site solar on those properties.
To installing onsite solar onthose properties.
When you think about yourtypical apartment building,
think about a 200-unit gardenstyle property.
The common area meters so theelectric meters that are
(05:33):
covering the leasing office, thefitness center, the pool, the
exterior lights that's onlyresponsible for 5% to 10% of
total emissions at the property.
90% to 95% is from tenants.
You have a lot of solarcompanies that are pitching
owners on let's go install solaron your common area meters.
And it doesn't work for anumber of reasons.
Generally, the numbers are tooinsignificant to get anybody's
(05:54):
attention the owner, the assetmanager, whoever it may be.
The second piece from adecarbonization story is what's
even the point of offsetting 5%of the total emissions?
It's a drop in the bucket.
What's even the point ofoffsetting 5% of the total
emissions?
Like it's a drop in the bucket.
So we tried to think from afirst principles approach how
could we actually decarbonizemultifamily?
And in order to do that, youhave to install solar on the
(06:15):
tenant meters.
And in order to do that, inmost states.
You have to install one smallsolar system per apartment unit.
So each apartment unit isgetting its own small solar
system, a small residentialsystem that's interconnected
into the tenants electricity orutility meter, and then there's
software required on the backend to monitor all of these
individual systems, to bill allthese individual tenants.
(06:37):
And it's really been built fromthe ground up to decarbonize
existing buildings and thenagain it works for new
construction too.
But it's purpose-built todecarbonize existing apartment
buildings, not take vacant landand put a solar farm on it,
which is also important.
But that space is way morecompetitive than the space that
we're operating in.
Ed Mathews (06:57):
Each individual unit has an array of solar panels or
at least one, I assume and allthe backend infrastructure as
well as the software to manageit.
So it's not like an Eamon Demonkind of thing where you're
bringing in one trunk and thencalculating what is the usage
right, if I'm understanding youproperly.
Owen Barrett (07:17):
There's three states in the US, to my
knowledge, that have somethingcalled virtual net energy
metering, where and the statesare California, colorado and
Massachusetts, where apartmentowners can install a large array
into the common area meter andvirtually allocate the benefit
to tenants.
Square footage similar to rubs.
It's great, it's really easy.
The challenge is that there's47 states that don't have that.
(07:40):
So how do you install solar inthose 47 states?
And you have to install a smallPV system into each apartment
unit.
So a studio may get four panels, a one bedroom may get five
panels, a two bedroom may getsix.
From the roof it looksidentical.
The roof is covered in solarpanels.
You'll have, instead of one,conduit pipe coming down the
(08:01):
side of the building, you mayhave three or four, and then
from those three or four theykind of branch out to the meter
bank.
So it's a really cleaninstallation.
But for now it's the only wayto go after the tenant load,
which is for us the mostimportant piece to this whole
problem.
Ed Mathews (08:15):
And in terms of justifying the expense, what is
say, a five-year, 10-year lookat a return on investment on a
project like this?
Owen Barrett (08:26):
It changes, heavily dependent on the cost of
electricity.
Cost of electricity is thebiggest variable in sort of the
financial analysis Superexpensive in Connecticut.
Really expensive in California,fairly cheap in the rest of the
country.
To most people's surprise,texas is like next on the list
from a residential perspective,commercial, totally different.
On average it's about $6,000per unit to install.
(08:48):
That's the gross cost.
Solar for now.
This could change with the newadministration but for now has a
base 30% tax credit that istransferable and that is super
important because the tax credithas been around for an
extremely long time.
Federal tax credits generallyhave zero benefit to real estate
(09:08):
owners because they have somuch depreciation that if
they're playing the game rightthey don't have a federal tax
liability.
Historically tax credit hasbeen useless.
Now you can take that taxcredit and you can sell it for
cash.
So $6,000 gross cost has a 30%tax credit.
For ease, let's just say it's33, a third.
So the net cost is $4,000.
(09:30):
And on average our systemscreate $620 per unit in NOI.
So I don't know what the caprates are in Connecticut but you
put 5, 6, 7% cap rate on $620.
It's going to two to three Xthat $4,000 cost that it takes
to install the solar in thefirst place.
Ed Mathews (09:49):
And so how does that ?
I'm very curious about how youarrive at that number.
Is it just perceived value andthe building is more valuable,
or is it that you can chargehigher rents or your
infrastructure costs?
Owen Barrett (10:02):
Obviously, they go down right, yeah so it's taken
us a long time to get to thebest model, what we found and
again a lot of this comes fromour experience as owners.
The vast majority of tenantsand prospective tenants evaluate
apartments on apartmentscomjust looking at rent.
So we felt like it wouldactually hurt a property to try
(10:25):
and increase the rent becauseyou're decreasing utility costs.
Tenants of our installationslease the solar equipment from
the building owner.
So if you're a tenant pre-solar, you may pay the local electric
utility $100 per month.
We come in, we install solar oneverybody's meter.
Everybody's electric bill dropsto $50 per month.
Of that 50, you're going to paythe building owner $45 per
(10:50):
month and so now the tenant, youhave a net savings of $5 per
month.
The building owner is making anadditional $45 per month in
what we call solar income.
It's that mechanism that has toexist to justify the initial
CapEx cost in the first place.
If you can't somehow drive thevalue back to the owner, then
(11:10):
they're never going to spend amillion dollars or whatever it's
going to cost to install solarto begin with.
Ed Mathews (11:14):
Yeah, the return is excellent.
Just in the $540 a year, justan additional revenue right On a
$6,000 expenditure.
It's a no-brainer.
Owen Barrett (11:24):
Yeah, and it's actually a $4,000 expenditure
when you transfer the tax credit.
Yeah, the numbers arepersuasive.
It's usually mid-teens.
Irr it's a double-digit cash oncash return.
We think it makes sense on thebusiness case, sure does.
Ed Mathews (11:38):
So after this show, I'd like to have a conversation
about a very close friend ofmine who has a couple hundred
units that might be interestedin this.
Let's do it, okay.
And so how does what's theprocess to go through to make
sure that the building itself isappropriate to install solar in
the building, because I wouldimagine there are certain
(11:58):
configurations that it justdoesn't make sense.
Owen Barrett (12:01):
Yeah, the best use case is garden style, just
because there's the most roofarea per apartment unit.
Mid-rise works too Not as well,but it does work.
High-rise doesn't really work.
Usually when we get into ahigh-rise scenario, if there's
surface level parking, we'llinstall carport solar to just go
after the common area load.
But garden style is the best.
(12:22):
The age of the roof is reallythe thing that we look at the
most closely.
We don't like to install solaron roofs that are about 12 years
or older.
There can be certain situationswhere roofs hold up than others
, but generally 12 years ornewer is when we will install.
And then what's reallyinteresting from our model is a
lot of times in what's calledCNI solar commercial and
(12:43):
industrial you have to do a sitevisit before you can give hard
numbers or even soft numbers,because oftentimes you have to
upgrade the electrical servicebecause the amount of energy
that your solar system isproducing is too much for the
main service panel to handle.
You have to do an upgrade,costs a lot of money, takes a
lot of time because you have togo through utility, Because all
of our systems are so small.
(13:05):
Each individual system is sosmall.
On aggregate it's fairly big,but the individual systems are
so small.
We have not run into aninstance where we have to
upgrade any electricalinfrastructure.
It's huge, yeah.
So electrically, we have notrun into a building that doesn't
work.
We have seen some with roofsthat are too old and we
generally suggest that theyreplace the roof before they put
(13:27):
solar on, because we don't wantto be that company that puts
panels on and then the roof hasto be replaced.
Ed Mathews (13:32):
Yeah, five years later, right, Exactly.
And so, as you're going through, you got to do a site visit
Like what's the process?
So walk me through.
Ed calls Owen and says hey, man, I'm ready to move forward.
What happens next?
Owen Barrett (13:49):
So first we'll do a remote analysis.
That is usually within 5% interms of how big the system size
is going to be, what it's goingto cost, what it's going to
save.
If that looks good, we'll do asite visit to confirm any
assumptions, just make surewe're not missing anything and
then we'll move to aninstallation agreement.
Once we firm up the numbers, wecan't dictate how long it takes
that insulation agreement to besigned.
Sometimes it's a week,sometimes it's six weeks,
(14:10):
sometimes it's three months,just depending on lawyers.
But once it's signed we'll moveinto engineering.
Permitting.
That usually takes two to fourweeks.
Once the plans are submitted.
That depends on where it'sbeing submitted.
California, new England,generally take two to three
months.
Everywhere else usually takessix-ish weeks and then the
physical installation takesabout four weeks.
(14:31):
Wow, that's it.
If done correctly, it's veryrepeatable.
This model it's a bunch ofsmall residential systems on an
apartment building, so it soundsreally complex and there's a
lot of administrative work thatgoes into it a lot of permits, a
lot of engineering, a lot ofinterconnection agreements.
But the physical installationis probably the easiest part.
Ed Mathews (14:50):
So the other thing I'm curious about is selling it
back to the power company.
Is there additional energy thatgets stored somewhere?
And, if so, how do you store it?
Owen Barrett (15:01):
And also, what do you do with it?
So there's not, thankfully,because that would make our
model a lot more complicated.
In most instances, in gardenstyle properties, our energy is
being used in real time forbaseload, so we're only
offsetting 30 to 50% of totalconsumption at the unit level,
which we see as a good thing,because once you start producing
(15:25):
more than 50% and you startexporting energy, the model gets
a lot more complicated becauseyou have to understand the net
metering rules.
What is the value ofelectricity that the utility is
giving you, if any, when youexport it to the grid?
Thankfully, our systems exportlittle to no energy, which makes
the financial modeling a loteasier.
Ed Mathews (15:46):
Yeah, and to understand on the building owner
side as well, exactly, okay,all right, what question am I
not asking you that I should beasking you?
I've tried to get as geeky as Icould, but my solar knowledge
is only so deep.
Owen Barrett (16:00):
Yeah, a lot of the questions we get all the time
is oh, and if you're telling methat it's a 17% IRR and a 10%
cash on cash return, why iseverybody not doing this?
It's education and that's ourjob.
That's why I'm going on allthese podcasts.
That's why I'm trying to getthe word out.
Until last year, literallythere was no way to monitor
systems and bill tenants forthis unique installation
(16:22):
approach where you'reinterconnecting into every
single apartment unit.
Now it exists.
We're just trying to get theword out.
Multifamily is in a tough spotright now.
Expenses are up, Rent hasstagnated.
People need to get creative inhow they're creating value, and
so we're just trying to get theword out that there's a new way
to generate a lot of income thatalmost every group has not come
across before.
It's like the early days ofbulk internet.
Ed Mathews (16:44):
Yeah, being a recovering Silicon Valley guy
myself, let me ask youtechnology-wise, where do you
think we are relative to thebirth of the internet?
Me and my friends always talkabout it's for AI.
It's literally 1997 in where weare, so we're just in the
beginning.
So, I'm curious where you thinksolar is and this technology in
particular.
Owen Barrett (17:06):
Yeah, so we're not using any novel technology.
We're installing off the shelfstuff, and I think that's
important too, because we don'twant hardware risk.
Institutional investors,especially, are very risk averse
, so if we start telling themthat we're manufacturing our own
products to install, it's goingto be a lot on their heads.
I think the solar market isfairly mature.
Every year we see solar panelsget incrementally more efficient
(17:30):
and historically they've gottenincrementally cheaper.
That could change with tariffs.
I don't think you're going tosee any leaps in technology.
I think you are going to seeincremental progress.
I think a lot of the biggerleaps in technological advances
are going to be on storage andbatteries, because that's much
newer than solar modules.
Ed Mathews (17:48):
Yeah, and obviously that's not something that you're
dealing with today.
Is that something in the futurethat you're contemplating or
yeah.
Owen Barrett (17:56):
So what's really fascinating about our model is,
historically, apartment ownersonly have insight into the
consumption of their common areameters.
They have no idea how muchwhole building energy is being
used.
Because we're doing aninterconnection into every
single apartment unit, we knowexactly how much solar energy is
coming in, how much utilityenergy is coming in, and so we
(18:18):
can build this holistic wholebuilding energy picture.
And then, once incentives startto take off for onsite storage,
we can then use the data thatwe've collected and go back to
owners and say now it makessense for you guys to install
storage.
It didn't seven years ago, butnow it does.
So we're always payingattention to it, but it works in
(18:40):
so few markets that it's nothigh up on our priority list.
Ed Mathews (18:44):
Yeah, it's interesting you say that because
Connecticut, for instance, hadlegislation it was on the Hill
here in Hartford to talk to.
One of the things they werecontemplating was building
owners had to disclose what theenergy consumption cost was for
each unit, and the buildingowner lobby, the landlord lobby,
basically said we have nopractical way to know what that
information is lobby, thelandlord lobby basically said we
(19:06):
have no practical way to knowwhat that information is.
Owen Barrett (19:10):
Some utilities will give you whole building
energy data, but they will nevergive it to you at the unit
level because that's proprietaryor it's the ownership of the
tenant.
This is an interestingworkaround to that it's value
adding, it's income generatingand you get a lot of data.
Ed Mathews (19:22):
All right, hey Owen, I could go ahead and get geeky
with you and talk about theintricacies.
Unfortunately, they only let metalk for 30 minutes, so we got
to start to get into thelightning round here.
One of the things that I'mreally interested in is talking
with property owners andentrepreneurs and leaders like
yourself and, frankly, whatmakes them tick right, and so
(19:42):
I'm curious about your purposeand how do you think about your
purpose in terms of,professionally, what you're
trying to accomplish and,frankly, what gets you out of
bed on Monday morning.
Owen Barrett (19:55):
So as an energy manager I had the Nitchesco for
a while and now for the last Ithink eight years, I've been
working on decarbonizingmultifamily.
So I don't think I could have ajob that doesn't somehow touch
decarbonization space.
Ed Mathews (20:15):
Excellent.
I love that.
So I'm also interested in thementors you've had in your
professional life and personallife.
What's the best advice you evergot and who gave it to you?
Your professional life andpersonal life what's the best
advice?
Owen Barrett (20:25):
you ever got and who gave it to you.
So it wasn't a mentor, but itwas a potential investor that
ended up not investing in anearlier company and he told me I
do not invest in part-timeentrepreneurs.
It was like if you're notcommitted enough to go all in,
you shouldn't expect anybody towrite a check for you.
Ed Mathews (20:43):
All right.
Speaking of walking away,something I've learned in my
corporate world as well is thatI just don't believe in mistakes
.
I don't believe they're bad.
I fundamentally.
I mean, some of them are bad,right, but the lion's share of
them are simply lessons to belearned, and I absolutely
believe that we learn way morefrom our mistakes than we do
from our successes.
So I'm curious, professionally,what's a decision you'd love to
(21:04):
have back and how did younavigate it?
Owen Barrett (21:07):
I quit a very cushy corporate job in 2012 to
start my entrepreneurial journey.
This was right when LEDlighting was taking off.
I thought the technology wouldsell itself, that I could just
quit this job, start a lightingcompany and buy a yacht.
I went 18 months without makinga dime.
I sold off my entire 401k tosurvive.
I was on food stamps.
(21:27):
I was a week away from havingto move back to Connecticut with
my parents.
Most businesses fail notbecause they're bad ideas, but
because the time it takes to getrevenue is like three to five
times longer what anybodyexpects, and people just run out
of runway.
And the other piece of advicethat I wish someone would have
told me was the second.
You start a company, you are incharge of sales.
(21:51):
Figure out how to sell, becauseif you can't, sell, you're
going to fail.
Ed Mathews (21:56):
100%.
Agree with that as well, and Ilearned that hard lesson myself
with a consulting firm.
I had, way back in the day, allright.
So the other thing that I'mreally intrigued by is how
leaders consume information.
So I'm curious what's the bookon your nightstand, literally or
figuratively, and who are youpaying attention to these days?
Owen Barrett (22:15):
Yeah, literally right now.
It's a book called Money forCouples.
I'm married, I have two kids.
I heard this guy I don't knowwho the author is, but I heard
him on a podcast and he justtalked about how typically in
the U S, in every couple there'sa money person and a non-money
person, and regardless of howmuch money you have, it causes
sort of tension in relationshipsbecause one person understands
(22:36):
everything and the other personunderstands nothing or less.
I heard this and I was like, ohman, like this is totally true
for myself and my wife.
I'm the money person and so I'mreading that book to hopefully
eliminate the knowledge gap andget everybody on the same page
and just see where, if anywhere,it leads.
Ed Mathews (22:55):
Excellent.
And then the last thing.
I'm always intrigued by howpeople define success in their
own world, and so I'm curioushow you do that.
Owen Barrett (23:04):
Yeah, with this company, shine, it's pretty easy
.
It's how many units have wedecarbonized?
For me, I'm driven by impact.
Fortunately, impact andfinancial success are closely
correlated in this businessmodel.
I think we're just lucky inthat regard.
Ed Mathews (23:18):
All right cool.
Owen Barrett (23:19):
So when you're not talking about decarbonization
or real estate or solar,specifically, what do you like
to do for my wife and I justmoved to park city, utah, so
that we can spend more time inthe mountains.
I'm a big rock climber, she's abig trail runner, so just
trying to get in the mountainsas much as we can.
Ed Mathews (23:34):
Yeah, I'll bet.
Oh, that's one of the mostbeautiful places on earth.
A couple of very close friendsthat live out there as well.
If folks want to get in touchwith you or learn more about
shine, what's the best way to dothat?
Owen Barrett (23:48):
Our website's get shinecom.
There's a contact form you canfill out.
We just launched a really coolAI tool where building owners
can see how much solar they canfit on their property, how much
NOI will be generated.
The only social media that I'mon is LinkedIn.
Owen Barrett on LinkedIn.
Ed Mathews (24:02):
Okay, Owen Barrett, thank you so much for your time
today.
I got a lot smarter about yourproduct, so I'm excited and I'm
serious about having thatconversation with you about my
own portfolio.
Thanks for joining us andcontinued good fortune.
Owen Barrett (24:14):
Yeah, thanks for having me.
I do want to ask, and first off, I want to thank
you, because we just found out Iwas telling our guests, we just
found out today that we are atop 15 global podcast in the
multifamily space, which we'reon a list of about 90 really
good podcasts.
So thank you.
If you are new to the show andyou like what you hear today or
you listen to some of the otherepisodes, one of the things you
(00:57):
can definitely do to help usgrow and help us find subjects
and guests who will pique yourinterest as well is to follow us
and always feel free to comment.
I read every single comment andI try to respond to as many as
possible.
So thank you.
And with that I have a guesthere who his domain expertise
(01:17):
and subject matter expert isnear and dear to my heart for a
couple of different reasons.
One we just signed a big dealto do something very similar to
what he does, which we'll getinto.
It's similar but not the same.
And also he's leading the waveof alternative energy and also
turns out that it's helpingmultifamily owners make extra
money.
(01:37):
With that, Owen Barrett fromShine, congratulations on your
success and welcome to the show.
Owen Barrett (01:42):
Thanks for having me.
Ed Mathews (01:43):
Yeah, so, Owen, for those folks that haven't
discovered Shine yet, why don'tyou give us a little bit about
what the company's all about,and then we'll get into it?
Owen Barrett (01:52):
Yeah, so Shine is the only turnkey solar solution
for the multifamily industry.
I think that's really importantfor kind of a number of reasons
.
We developed Shine afteracquiring 650 units ourselves
multifamily units throughout theMidwest and treating that
portfolio as a guinea pig interms of what's the best way to
deploy solar on multifamily, andwhat we noticed was there's a
(02:13):
lot of solar contractors thatdon't understand multifamily and
then there's a few softwarecompanies out there that
understand how to bill tenantsonce solar is installed.
But there was nobody doing bothand it's created this sort of
nightmare scenario where amultifamily operator owner had
to go do the due diligence on acontractor and then work with a
(02:33):
billing company.
And the more parties involved,the more complicated these
projects get and they're alreadycomplicated.
And we spent about two yearsdeveloping a turnkey solution,
brought the installationexpertise with a proprietary
billing platform and launchedShine to really try and
decarbonize the multifamilyspace via onsite solar.
Ed Mathews (02:55):
Excellent, and when you say decarbonize, let's talk
about the impact of that.
So how do you track that?
What are the KPIs that you'reparticularly focused on?
Owen Barrett (03:05):
Yeah, so just within the decarbonization space
.
It's a lot easier todecarbonize a new building than
it is existing.
So you see a lot of peoplefocused on how do I build new
buildings the right way, with alower carbon footprint?
That's how we should bebuilding these things Leads.
I personally don't put a lot ofemphasis on building rating
systems because I think therating themselves are really
(03:27):
expensive and you could get tothe same results without the
rating.
I also think how you operate abuilding is more important than
how it was built, and the ratingsystems tend to focus on how
things are built, not whathappens once it's in operation.
Of all the buildings that existtoday, I think two thirds, or
70%, will exist in 50 years and40% of global emissions are from
(03:49):
the built environment.
If we want to have an impact onemissions, we have to go after
existing buildings, andmultifamily is not known to be
the most innovative industry outthere.
They're slow to move, riskaverse.
I just thought it was a reallyinteresting opportunity to try
and go after this spacespecifically and come up with a
(04:09):
model that's not leading withenvironmental metrics, saying
let's do this for the trees,let's do this for the polar
bears, let's do this for thekids.
It's let's do this because itwill make you more money, it's
better for your tenant and, oh,it's also good for the
environment.
Ed Mathews (04:24):
And so let's talk about the money.
Then One of the things and Imentioned on our previous show
as well we just signed a, sowe've gotten into land
development and one of thethings that we discovered here
in Connecticut was theincentives to work with local
solar companies.
To build infrastructure is,frankly, pretty lucrative right,
and we carved out probably 10,12 acres, I believe, for a solar
(04:46):
farm here in centralConnecticut and we're in the
process of permitting andgetting that entitled and all
that, and the local governmentand the state government have
been really supportive.
It seems like it's going tohappen.
So in our scenario, not goingon a building, it's going on raw
land.
It is basically a ground leasewhere they're putting a five
megawatt battery and a bunch ofsolar panels and connecting it
(05:06):
to the three phase grid and offwe go.
How is what Shine does?
How is that different?
Owen Barrett (05:11):
We have come up with a business model that
focuses on helping owners ofbuildings, generally existing
buildings but we do work withnew development to installing on
site solar on those properties.
To installing onsite solar onthose properties.
When you think about yourtypical apartment building,
think about a 200-unit gardenstyle property.
The common area meters so theelectric meters that are
(05:33):
covering the leasing office, thefitness center, the pool, the
exterior lights that's onlyresponsible for 5% to 10% of
total emissions at the property.
90% to 95% is from tenants.
You have a lot of solarcompanies that are pitching
owners on let's go install solaron your common area meters.
And it doesn't work for anumber of reasons.
Generally, the numbers are tooinsignificant to get anybody's
(05:54):
attention the owner, the assetmanager, whoever it may be.
The second piece from adecarbonization story is what's
even the point of offsetting 5%of the total emissions?
It's a drop in the bucket.
What's even the point ofoffsetting 5% of the total
emissions?
Like it's a drop in the bucket.
So we tried to think from afirst principles approach how
could we actually decarbonizemultifamily?
And in order to do that, youhave to install solar on the
(06:15):
tenant meters.
And in order to do that, inmost states.
You have to install one smallsolar system per apartment unit.
So each apartment unit isgetting its own small solar
system, a small residentialsystem that's interconnected
into the tenants electricity orutility meter, and then there's
software required on the backend to monitor all of these
individual systems, to bill allthese individual tenants.
(06:37):
And it's really been built fromthe ground up to decarbonize
existing buildings and thenagain it works for new
construction too.
But it's purpose-built todecarbonize existing apartment
buildings, not take vacant landand put a solar farm on it,
which is also important.
But that space is way morecompetitive than the space that
we're operating in.
Ed Mathews (06:57):
Each individual unit has an array of solar panels or
at least one, I assume and allthe backend infrastructure as
well as the software to manageit.
So it's not like an Eamon Demonkind of thing where you're
bringing in one trunk and thencalculating what is the usage
right, if I'm understanding youproperly.
Owen Barrett (07:17):
There's three states in the US, to my
knowledge, that have somethingcalled virtual net energy
metering, where and the statesare California, colorado and
Massachusetts, where apartmentowners can install a large array
into the common area meter andvirtually allocate the benefit
to tenants.
Square footage similar to rubs.
It's great, it's really easy.
The challenge is that there's47 states that don't have that.
(07:40):
So how do you install solar inthose 47 states?
And you have to install a smallPV system into each apartment
unit.
So a studio may get four panels, a one bedroom may get five
panels, a two bedroom may getsix.
From the roof it looksidentical.
The roof is covered in solarpanels.
You'll have, instead of one,conduit pipe coming down the
(08:01):
side of the building, you mayhave three or four, and then
from those three or four theykind of branch out to the meter
bank.
So it's a really cleaninstallation.
But for now it's the only wayto go after the tenant load,
which is for us the mostimportant piece to this whole
problem.
Ed Mathews (08:15):
And in terms of justifying the expense, what is
say, a five-year, 10-year lookat a return on investment on a
project like this?
Owen Barrett (08:26):
It changes, heavily dependent on the cost of
electricity.
Cost of electricity is thebiggest variable in sort of the
financial analysis Superexpensive in Connecticut.
Really expensive in California,fairly cheap in the rest of the
country.
To most people's surprise,texas is like next on the list
from a residential perspective,commercial, totally different.
On average it's about $6,000per unit to install.
(08:48):
That's the gross cost.
Solar for now.
This could change with the newadministration but for now has a
base 30% tax credit that istransferable and that is super
important because the tax credithas been around for an
extremely long time.
Federal tax credits generallyhave zero benefit to real estate
(09:08):
owners because they have somuch depreciation that if
they're playing the game rightthey don't have a federal tax
liability.
Historically tax credit hasbeen useless.
Now you can take that taxcredit and you can sell it for
cash.
So $6,000 gross cost has a 30%tax credit.
For ease, let's just say it's33, a third.
So the net cost is $4,000.
(09:30):
And on average our systemscreate $620 per unit in NOI.
So I don't know what the caprates are in Connecticut but you
put 5, 6, 7% cap rate on $620.
It's going to two to three Xthat $4,000 cost that it takes
to install the solar in thefirst place.
Ed Mathews (09:49):
And so how does that ?
I'm very curious about how youarrive at that number.
Is it just perceived value andthe building is more valuable,
or is it that you can chargehigher rents or your
infrastructure costs?
Owen Barrett (10:02):
Obviously, they go down right, yeah so it's taken
us a long time to get to thebest model, what we found and
again a lot of this comes fromour experience as owners.
The vast majority of tenantsand prospective tenants evaluate
apartments on apartmentscomjust looking at rent.
So we felt like it wouldactually hurt a property to try
(10:25):
and increase the rent becauseyou're decreasing utility costs.
Tenants of our installationslease the solar equipment from
the building owner.
So if you're a tenant pre-solar, you may pay the local electric
utility $100 per month.
We come in, we install solar oneverybody's meter.
Everybody's electric bill dropsto $50 per month.
Of that 50, you're going to paythe building owner $45 per
(10:50):
month and so now the tenant, youhave a net savings of $5 per
month.
The building owner is making anadditional $45 per month in
what we call solar income.
It's that mechanism that has toexist to justify the initial
CapEx cost in the first place.
If you can't somehow drive thevalue back to the owner, then
(11:10):
they're never going to spend amillion dollars or whatever it's
going to cost to install solarto begin with.
Ed Mathews (11:14):
Yeah, the return is excellent.
Just in the $540 a year, justan additional revenue right On a
$6,000 expenditure.
It's a no-brainer.
Owen Barrett (11:24):
Yeah, and it's actually a $4,000 expenditure
when you transfer the tax credit.
Yeah, the numbers arepersuasive.
It's usually mid-teens.
Irr it's a double-digit cash oncash return.
We think it makes sense on thebusiness case, sure does.
Ed Mathews (11:38):
So after this show, I'd like to have a conversation
about a very close friend ofmine who has a couple hundred
units that might be interestedin this.
Let's do it, okay.
And so how does what's theprocess to go through to make
sure that the building itself isappropriate to install solar in
the building, because I wouldimagine there are certain
(11:58):
configurations that it justdoesn't make sense.
Owen Barrett (12:01):
Yeah, the best use case is garden style, just
because there's the most roofarea per apartment unit.
Mid-rise works too Not as well,but it does work.
High-rise doesn't really work.
Usually when we get into ahigh-rise scenario, if there's
surface level parking, we'llinstall carport solar to just go
after the common area load.
But garden style is the best.
(12:22):
The age of the roof is reallythe thing that we look at the
most closely.
We don't like to install solaron roofs that are about 12 years
or older.
There can be certain situationswhere roofs hold up than others
, but generally 12 years ornewer is when we will install.
And then what's reallyinteresting from our model is a
lot of times in what's calledCNI solar commercial and
(12:43):
industrial you have to do a sitevisit before you can give hard
numbers or even soft numbers,because oftentimes you have to
upgrade the electrical servicebecause the amount of energy
that your solar system isproducing is too much for the
main service panel to handle.
You have to do an upgrade,costs a lot of money, takes a
lot of time because you have togo through utility, Because all
of our systems are so small.
(13:05):
Each individual system is sosmall.
On aggregate it's fairly big,but the individual systems are
so small.
We have not run into aninstance where we have to
upgrade any electricalinfrastructure.
It's huge, yeah.
So electrically, we have notrun into a building that doesn't
work.
We have seen some with roofsthat are too old and we
generally suggest that theyreplace the roof before they put
(13:27):
solar on, because we don't wantto be that company that puts
panels on and then the roof hasto be replaced.
Ed Mathews (13:32):
Yeah, five years later, right, Exactly.
And so, as you're going through, you got to do a site visit
Like what's the process?
So walk me through.
Ed calls Owen and says hey, man, I'm ready to move forward.
What happens next?
Owen Barrett (13:49):
So first we'll do a remote analysis.
That is usually within 5% interms of how big the system size
is going to be, what it's goingto cost, what it's going to
save.
If that looks good, we'll do asite visit to confirm any
assumptions, just make surewe're not missing anything and
then we'll move to aninstallation agreement.
Once we firm up the numbers, wecan't dictate how long it takes
that insulation agreement to besigned.
Sometimes it's a week,sometimes it's six weeks,
(14:10):
sometimes it's three months,just depending on lawyers.
But once it's signed we'll moveinto engineering.
Permitting.
That usually takes two to fourweeks.
Once the plans are submitted.
That depends on where it'sbeing submitted.
California, new England,generally take two to three
months.
Everywhere else usually takessix-ish weeks and then the
physical installation takesabout four weeks.
(14:31):
Wow, that's it.
If done correctly, it's veryrepeatable.
This model it's a bunch ofsmall residential systems on an
apartment building, so it soundsreally complex and there's a
lot of administrative work thatgoes into it a lot of permits, a
lot of engineering, a lot ofinterconnection agreements.
But the physical installationis probably the easiest part.
Ed Mathews (14:50):
So the other thing I'm curious about is selling it
back to the power company.
Is there additional energy thatgets stored somewhere?
And, if so, how do you store it?
Owen Barrett (15:01):
And also, what do you do with it?
So there's not, thankfully,because that would make our
model a lot more complicated.
In most instances, in gardenstyle properties, our energy is
being used in real time forbaseload, so we're only
offsetting 30 to 50% of totalconsumption at the unit level,
which we see as a good thing,because once you start producing
(15:25):
more than 50% and you startexporting energy, the model gets
a lot more complicated becauseyou have to understand the net
metering rules.
What is the value ofelectricity that the utility is
giving you, if any, when youexport it to the grid?
Thankfully, our systems exportlittle to no energy, which makes
the financial modeling a loteasier.
Ed Mathews (15:46):
Yeah, and to understand on the building owner
side as well, exactly, okay,all right, what question am I
not asking you that I should beasking you?
I've tried to get as geeky as Icould, but my solar knowledge
is only so deep.
Owen Barrett (16:00):
Yeah, a lot of the questions we get all the time
is oh, and if you're telling methat it's a 17% IRR and a 10%
cash on cash return, why iseverybody not doing this?
It's education and that's ourjob.
That's why I'm going on allthese podcasts.
That's why I'm trying to getthe word out.
Until last year, literallythere was no way to monitor
systems and bill tenants forthis unique installation
(16:22):
approach where you'reinterconnecting into every
single apartment unit.
Now it exists.
We're just trying to get theword out.
Multifamily is in a tough spotright now.
Expenses are up, Rent hasstagnated.
People need to get creative inhow they're creating value, and
so we're just trying to get theword out that there's a new way
to generate a lot of income thatalmost every group has not come
across before.
It's like the early days ofbulk internet.
Ed Mathews (16:44):
Yeah, being a recovering Silicon Valley guy
myself, let me ask youtechnology-wise, where do you
think we are relative to thebirth of the internet?
Me and my friends always talkabout it's for AI.
It's literally 1997 in where weare, so we're just in the
beginning.
So, I'm curious where you thinksolar is and this technology in
particular.
Owen Barrett (17:06):
Yeah, so we're not using any novel technology.
We're installing off the shelfstuff, and I think that's
important too, because we don'twant hardware risk.
Institutional investors,especially, are very risk averse
, so if we start telling themthat we're manufacturing our own
products to install, it's goingto be a lot on their heads.
I think the solar market isfairly mature.
Every year we see solar panelsget incrementally more efficient
(17:30):
and historically they've gottenincrementally cheaper.
That could change with tariffs.
I don't think you're going tosee any leaps in technology.
I think you are going to seeincremental progress.
I think a lot of the biggerleaps in technological advances
are going to be on storage andbatteries, because that's much
newer than solar modules.
Ed Mathews (17:48):
Yeah, and obviously that's not something that you're
dealing with today.
Is that something in the futurethat you're contemplating or
yeah.
Owen Barrett (17:56):
So what's really fascinating about our model is,
historically, apartment ownersonly have insight into the
consumption of their common areameters.
They have no idea how muchwhole building energy is being
used.
Because we're doing aninterconnection into every
single apartment unit, we knowexactly how much solar energy is
coming in, how much utilityenergy is coming in, and so we
(18:18):
can build this holistic wholebuilding energy picture.
And then, once incentives startto take off for onsite storage,
we can then use the data thatwe've collected and go back to
owners and say now it makessense for you guys to install
storage.
It didn't seven years ago, butnow it does.
So we're always payingattention to it, but it works in
(18:40):
so few markets that it's nothigh up on our priority list.
Ed Mathews (18:44):
Yeah, it's interesting you say that because
Connecticut, for instance, hadlegislation it was on the Hill
here in Hartford to talk to.
One of the things they werecontemplating was building
owners had to disclose what theenergy consumption cost was for
each unit, and the buildingowner lobby, the landlord lobby,
basically said we have nopractical way to know what that
information is lobby, thelandlord lobby basically said we
(19:06):
have no practical way to knowwhat that information is.
Owen Barrett (19:10):
Some utilities will give you whole building
energy data, but they will nevergive it to you at the unit
level because that's proprietaryor it's the ownership of the
tenant.
This is an interestingworkaround to that it's value
adding, it's income generatingand you get a lot of data.
Ed Mathews (19:22):
All right, hey Owen, I could go ahead and get geeky
with you and talk about theintricacies.
Unfortunately, they only let metalk for 30 minutes, so we got
to start to get into thelightning round here.
One of the things that I'mreally interested in is talking
with property owners andentrepreneurs and leaders like
yourself and, frankly, whatmakes them tick right, and so
(19:42):
I'm curious about your purposeand how do you think about your
purpose in terms of,professionally, what you're
trying to accomplish and,frankly, what gets you out of
bed on Monday morning.
Owen Barrett (19:55):
So as an energy manager I had the Nitchesco for
a while and now for the last Ithink eight years, I've been
working on decarbonizingmultifamily.
So I don't think I could have ajob that doesn't somehow touch
decarbonization space.
Ed Mathews (20:15):
Excellent.
I love that.
So I'm also interested in thementors you've had in your
professional life and personallife.
What's the best advice you evergot and who gave it to you?
Your professional life andpersonal life what's the best
advice?
Owen Barrett (20:25):
you ever got and who gave it to you.
So it wasn't a mentor, but itwas a potential investor that
ended up not investing in anearlier company and he told me I
do not invest in part-timeentrepreneurs.
It was like if you're notcommitted enough to go all in,
you shouldn't expect anybody towrite a check for you.
Ed Mathews (20:43):
All right.
Speaking of walking away,something I've learned in my
corporate world as well is thatI just don't believe in mistakes
.
I don't believe they're bad.
I fundamentally.
I mean, some of them are bad,right, but the lion's share of
them are simply lessons to belearned, and I absolutely
believe that we learn way morefrom our mistakes than we do
from our successes.
So I'm curious, professionally,what's a decision you'd love to
(21:04):
have back and how did younavigate it?
Owen Barrett (21:07):
I quit a very cushy corporate job in 2012 to
start my entrepreneurial journey.
This was right when LEDlighting was taking off.
I thought the technology wouldsell itself, that I could just
quit this job, start a lightingcompany and buy a yacht.
I went 18 months without makinga dime.
I sold off my entire 401k tosurvive.
I was on food stamps.
(21:27):
I was a week away from havingto move back to Connecticut with
my parents.
Most businesses fail notbecause they're bad ideas, but
because the time it takes to getrevenue is like three to five
times longer what anybodyexpects, and people just run out
of runway.
And the other piece of advicethat I wish someone would have
told me was the second.
You start a company, you are incharge of sales.
(21:51):
Figure out how to sell, becauseif you can't, sell, you're
going to fail.
Ed Mathews (21:56):
100%.
Agree with that as well, and Ilearned that hard lesson myself
with a consulting firm.
I had, way back in the day, allright.
So the other thing that I'mreally intrigued by is how
leaders consume information.
So I'm curious what's the bookon your nightstand, literally or
figuratively, and who are youpaying attention to these days?
Owen Barrett (22:15):
Yeah, literally right now.
It's a book called Money forCouples.
I'm married, I have two kids.
I heard this guy I don't knowwho the author is, but I heard
him on a podcast and he justtalked about how typically in
the U S, in every couple there'sa money person and a non-money
person, and regardless of howmuch money you have, it causes
sort of tension in relationshipsbecause one person understands
(22:36):
everything and the other personunderstands nothing or less.
I heard this and I was like, ohman, like this is totally true
for myself and my wife.
I'm the money person and so I'mreading that book to hopefully
eliminate the knowledge gap andget everybody on the same page
and just see where, if anywhere,it leads.
Ed Mathews (22:55):
Excellent.
And then the last thing.
I'm always intrigued by howpeople define success in their
own world, and so I'm curioushow you do that.
Owen Barrett (23:04):
Yeah, with this company, shine, it's pretty easy
.
It's how many units have wedecarbonized?
For me, I'm driven by impact.
Fortunately, impact andfinancial success are closely
correlated in this businessmodel.
I think we're just lucky inthat regard.
Ed Mathews (23:18):
All right cool.
Owen Barrett (23:19):
So when you're not talking about decarbonization
or real estate or solar,specifically, what do you like
to do for my wife and I justmoved to park city, utah, so
that we can spend more time inthe mountains.
I'm a big rock climber, she's abig trail runner, so just
trying to get in the mountainsas much as we can.
Ed Mathews (23:34):
Yeah, I'll bet.
Oh, that's one of the mostbeautiful places on earth.
A couple of very close friendsthat live out there as well.
If folks want to get in touchwith you or learn more about
shine, what's the best way to dothat?
Owen Barrett (23:48):
Our website's get shinecom.
There's a contact form you canfill out.
We just launched a really coolAI tool where building owners
can see how much solar they canfit on their property, how much
NOI will be generated.
The only social media that I'mon is LinkedIn.
Owen Barrett on LinkedIn.
Ed Mathews (24:02):
Okay, Owen Barrett, thank you so much for your time
today.
I got a lot smarter about yourproduct, so I'm excited and I'm
serious about having thatconversation with you about my
own portfolio.
Thanks for joining us andcontinued good fortune.
Owen Barrett (24:14):
Yeah, thanks for having me.
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