Owen Barrett 0:00
I decided to get involved via syndications as an LP, and the first deal that I invested in happened to be a master meter deal in Texas where the owner spent, I think, $200,000 a year in electricity. So I asked the, you know, the group a GPS, what are you guys doing to eliminate reduce that? And they said nothing, which I thought was fascinating. So that led me on this, you know, just a learning curve of what is the multifamily world? How do people buy buildings? What are they doing from an energy perspective? And at the end of that sort of learning cycle, I realized that multifamily owners are sort of the least innovative when it comes to energy management. And so there’s this huge opportunity to not only become owner of buildings but also really lead an industry in energy management, which is just getting more and more important.
Welcome to CRE PN Radio for influential commercial real estate professionals who work with investors, buyers and sellers of commercial real estate coast to coast whether you’re an investor, broker, lender, property manager, attorney or accountant we are here to learn from the experts.
J Darrin Gross 1:12
Welcome to commercial real estate pro networks, CRE PN Radio. Thanks for joining us. My name is J. Darrin Gross. This is a podcast focused on commercial real estate investment and risk management strategies. Weekly, we have conversations with commercial real estate investors and professionals who provide their experience and insight to help you grow your real estate portfolio.
Today’s interview is sponsored by Building Insurance and Risk. When you invest in real estate, it pays to work with a real estate investor protection specialist to protect yourself and your investment from catastrophic loss. The experts at Building Insurance and Risk focus on real estate investors protection. They provide you with multiple insurance coverage offers and a side by side coverage comparison. To learn more, go to Building Insurance Risk.com.
Today, my guest is Owen Barrett. Owen founded Rayven to decarbonize existing buildings at scale. Rayven has the world’s first net zero real estate investment platform, every property they buy is converted to true net zero, no offsets involved by partnering with 1000s of authentic retail impact investors. Owen, Rayven, Owen and Rayven, and every single investor will decarbonize the world, one apartment building at a time. And in just a minute, we’re going to speak with Owen Barrett about impact investing, you can invest and help lower the carbon footprint of commercial real estate.
But first, a quick reminder, if you like our show, CRE PN Radio, there are a couple things you can do to help us out. You can like, share and subscribe. And as always, we encourage you to leave a comment. We’d love to hear from our listeners. Also, if you want to see how handsome Our guests are, be sure to check out our YouTube channel. You can find us on YouTube had Commercial Real Estate Pro Network. And while you’re there, please subscribe. With that, I want to welcome my guest Owen Barrett. Welcome to CRE PN Radio.
Owen Barrett 3:17
Yeah, thanks for having me.
J Darrin Gross 3:20
I’m looking forward to our conversation. Before we get started, if you could take just a minute and share with listeners a little bit about your background. Yeah,
Owen Barrett 3:29
I started off in finance and kind of got a knack for financial analysis. I enjoyed the analysis piece I didn’t enjoy the finance piece. So I went to grad school for environmental science that launched me into a career as an energy manager for Fortune 100 company. So it was my job to save the company money by saving them energy, got a lot of exposure to really every different technology clean technology that makes economic sense. And then I turned that into my first business to took that experience started a company called Loomio did the same thing for public school districts around California ended up working with about 40 school districts and sold that company. And that’s when I started getting involved in real estate investing. At the time, I did not know that sort of my background in energy management was going to meet this interest in real estate investing. But I decided to get involved via syndications as an LP. And the first deal that I invested in happened to be a master meter deal in Texas where the owner spent, I think, $200,000 a year in electricity. So I asked the you know, the group a GPS, what are you guys doing to eliminate or reduce that? And they said nothing, which I thought was fascinating. So that led me on this, you know, just a learning curve of what is the multifamily world how do people buy buildings, what are they doing from an energy perspective and at the end of that sort of learning cycle, I realized that multifamily owners are sort of the least innovative when it comes to energy management. And so there’s this huge opportunity to not only become owner of buildings, but also really lead an industry in energy management, which is just getting more and more important.
J Darrin Gross 5:20
That’s fascinating. The just the notion that that expense 200,000 was just like, no big deal.
Owen Barrett 5:31
Yeah, they actually said we don’t, we’re not going to do anything we just grow at 3% a year. Right now. Not the right perspective.
J Darrin Gross 5:39
Well, and I wonder how unique that is? I would, it sounds like you looked around and found that that’s kind of more common. You know, it’s, I know, the people I’ve talked with, it seems like more of just the bottom line, noi, is that number you’re trying to get to and, and get the rents up and maybe cut a few expenses. But it seems like and I hope we get into it here with our conversation. It’s just what’s all involved in some of the work you’re doing. But let me let me ask you this way. So Raven, you founded that, or you are an investment firm? Is that correct?
Owen Barrett 6:18
Yeah, it’s a Regulation A offering, which is a an exemption via the SEC, that allows us to market to accredited and non accredited investors. So it’s a little bit different than how most syndications are put together. Those are usually reg D.
J Darrin Gross 6:34
Okay, and what I guess I’m kind of curious, what is it that distinguishes the A from the D.
Owen Barrett 6:41
So reg D, there’s, there’s a 506 C, in which you can mark it to accredited investors. And then there’s a 506 b, where you can accept investment from non accredited investors, but you cannot market it. So there’s sort of this conundrum of, well, we want to mark it. And we want to go after non accredited investors, because we feel like there’s a whole community of people out there that are pissed off about the lack of action against climate change. But they may not necessarily be accredited, it’s hard to be an accredited investor. And so Regulation A is sort of this unique combination of both of them where we’re allowed to market. I mean, not any way we want, but you we have to do things within how the SEC tells us but there’s a lot of freedom with how we can market and we can take investment from accredited and non accredited investors. So it really opens up the the universe to everybody.
J Darrin Gross 7:34
Got it. And just to be clear, is that Reg A is up from the the jobs act, is that?
Owen Barrett 7:39
It is. Yeah. Okay. So it’s called a nickname as a mini IPO.
J Darrin Gross 7:43
Okay, I sometimes I lose track of the different variety of options available. But I was thinking that that did come about as the jobs I got it. So alright, so the the ask the class you guys focus on? Is it primarily multifamily?
Owen Barrett 8:01
That’s all for the time being, it’s all multifamily.
J Darrin Gross 8:04
Okay. And is there a particular size of asset you guys look to buy,
Owen Barrett 8:10
just for economies of scale from like a property management perspective, it’s usually 100 units or higher. Occasionally, we’ll like we have a deal under contract that’s 252 unit properties that are close to each other. So we kind of view it as a, you know, 104 unit deal. But that’s, that tends to be sort of our our baseline.
J Darrin Gross 8:32
Got it? And is there a particular territory you invest in
Owen Barrett 8:37
There. I mean, there’s not we so it’s funny. We go after cash flowing assets, and we tend to find the highest cash flow in the Midwest, sort of North Dakota through Texas. That tends to be where electricity is cheapest. And there’s sort of the worst solar regulations. You know, the best solar regulations are tend to be on the coast and liberal areas, but we don’t invest there. So it’s a little bit of a conundrum between where our solar model works the best versus where we have the best luck finding cash flowing assets. But at the end of the day, for us, it’s a real estate deal first, and then it’s a decarbonisation opportunity second, so the fundamentals of the real estate are the most important thing, and then it has to be a good opportunity to decarbonize the sort of how we evaluate our opportunities. Got it.
J Darrin Gross 9:29
You mentioned when we’re talking about or just kind of your your experience with the does an LP The separate water metering and that do you do things in addition to the solar or is it primarily solar is at your, at your, your primary, you know, act as far as I guess, energy neutral or or, you know, improving the energy efficiency of the properties.
Owen Barrett 10:01
Yeah, now we do a lot more than that. It’s it’s challenging to give sort of a blanket statement for what we do across every property because a lot of properties are different. Sometimes we’ll replace windows, you know, go from single pane to double pane. Sometimes we’ll upgrade lights from incandescent or compact fluorescent LED. There’s a lot of efficiency work that goes into our properties, upgrading H vac, potentially electrifying domestic hot water systems. But across the board, we install solar. So we do efficiency first to reduce the load on our building. And then we install solar. And we also really focus on solar, because most people are familiar with solar. Like if I tell someone I’m selling VFDs, they’re not going to have a clue what I’m talking about unless they come from the energy industry. If I tell someone I buy apartments and install solar on it, that usually clicks for most people, because they’re familiar with that technology.
J Darrin Gross 10:56
Yeah, that makes sense. So on the properties that you’re you’re investing in and you’re buying, or is there any particular like a mix or a style is it is it in a multi storey building, single storey are an age that works best?
Owen Barrett 11:18
Yeah, so this is pretty exciting with our business model. Because this has changed recently. We always go after garden style properties. So one or two stories, because we need the maximum amount of roof space, it’s a lot cheaper to install solar on the roof than it is in a parking lot. In certain markets, you can get additional value from covered parking with markets where it’s really hot Phoenix DFW, occasionally you can charge tenants for covered parking. And in those instances, it’s actually better to install like covered parking solar. But most times, it’s more cost effective to install it on the roof. So that’s why we look for garden style. When we started, we were looking for Master meter deals. So think like a 200 unit apartment building and one electric meter. Because that made it a lot easier for us to install solar was a single interconnection point, it was one set of plans to permit. But with Master meter deals comes a lot of deferred maintenance, because most of those properties were built in the late 60s, early 70s. So about probably three years ago, we started to try and figure out how can we take the same sort of value, similar value add model, and apply it to submitter deals, so you know, 100 units, and 100 electric meters. And at the time, we couldn’t do it, there was just we could do the installation. But there was no way to manage the billing. So if you have 100 units, each with their own electric meter, you’re actually installing 100 small solar systems, one system into each unit. That means every month you have to figure out how to Bill, your 100 tenants for the amount of electricity that they used from the solar that we installed and paid for. And up until recently, that was a manual process. So every month, you had to go into what’s called the inverter system and look at how much energy was produced, you had to turn that into $1 amount. You had to bill your tenant, it’s really burdensome process, and it doesn’t scale. So we actually just built a software product that now automates Silla billing for us. So now we can implement our model on sub metered properties, which is super exciting, because we really want to get away from those older properties, a lot of deferred maintenance.
J Darrin Gross 13:32
And I hear you. So I’m curious the gift the challenge with the multiple meters in that your software, are you still hooking directly to the individual systems? Or have you been able to now have one one solar system that then you’re able to then I guess, mathematically apply the the credits back to the different residents, electrical bill.
Owen Barrett 14:05
So in a few states, there’s something called virtual net metering. California is one of them. Some of the states, the New England states have virtual net metering. And that allows you to do exactly what you just said you the utility lets you install one large solar system and sort of virtually allocate the benefits to all of your tenants. That would be nice if that existed across the country, but it doesn’t. And it probably never will. We actually see sort of net what’s called net metering going the opposite direction. So it’s going from more solar friendly to least solar friendly or less solar friendly. So with us focused on the Midwest, where there probably will never be virtual net metering. We still install one solar system per meter because that’s the only way you can do it. It’s a little bit more complicated from an installation perspective. There’s a lot of what’s called the interconnections. So every time Have you installed solar systems sort of into the utility infrastructure? That’s the, that’s an interconnection that requires a permit. So now we’re permitting 100 systems, you know, but they’re all exactly the same. They’re all three panels, three inverters, one interconnection point. So we just like replicate the permit set. And that’s not a huge deal. It’s more the billing, that’s been challenging. But that’s now been solved with the software.
J Darrin Gross 15:22
Interesting. Now, I’m sure the permitting fee is to give that away, I’m sure they are happy to see. Exactly. So, so let me ask you so that the properties that you’re buying, you mentioned you you’ve worked on some of the older properties. Now you’re looking for newer properties? Is there an age range that you find that is most agreeable?
Owen Barrett 15:49
No, it really works on everything, I think, internally, we’ve sort of set up a benchmark of after 1990. That just tends, you know, it’s a little bit arbitrary, but we just want newer properties we don’t want we’re okay with with value add, where you’re, you know, renovating the interiors, and raising rents, but we don’t want any huge, like plumbing issues or big H fac expenditures. So we just tend to set our, our sort of minimum year at 9090. And look for deals after that.
J Darrin Gross 16:21
Yeah. Been older property is a lot of character and stuff, but Oh, my God, the capital improvement can eat you alive.
Owen Barrett 16:31
I mean, it just takes one to really, you know, ruin a year’s of return to something that is extremely hard to predict or impossible to predict.
J Darrin Gross 16:42
I get it. So the projections that you guys provide for your potential investors and, and that de do some sort of a comparison as to the property with and without the, the energy saving upgrades that you guys do? Or is that just part of the presentation. So we
Owen Barrett 17:05
used to do that when we were seeking capital from institutional investors. You know, we would say here’s, here’s the deal, as is, here’s the deal with sort of what we would call an optimal amount of energy upgrades. So up to a certain point, energy upgrades, improve the returns, they help your IRR. But once you go past that inflection point, and start going to net zero, which is sort of where all buildings need to get to, if we’re going to really have a chance against climate change, you start to chip away at your IRR. So you know, regular deal may have a 15% IRR, you do some energy efficiency and some solar, you may get it to 1717 and a half percent, but then you go net zero, and you may bring it down to like 12 to 13%. So we used to show that comparison. And what we found across the board is that every investor, whether they touted themselves as an impact investor or not, just wanted to maximize IRR, that’s all they wanted to do. And so after talking to these institutional investors for three years, and hearing the same thing coming out of all of their mouths, which was just a lack of authenticity, we pivoted and said we don’t want to work with family offices, private equity institutional investors anymore. We want to go after retail investors, because we think there’s a huge amount of people that will be okay and excited about a 10% annual return, knowing that they’re supporting net zero real estate. So now we don’t show any comparison, we just say if you invest in this deal, you will earn a 10% annual return. And you’ll be you know, you’ll be encouraging and allowing net zero real estate, which is where the whole industry needs to move to and net zero real estate without offsets. Everybody’s focused on offsets right now, and it’s not the right attitude.
J Darrin Gross 19:05
The offset thing to talk a little bit about that what it is, I guess,
Owen Barrett 19:11
So a carbon offset is the equivalent of one metric tonne of co2. So the idea when they started, it was a great idea. But like a lot of things people have figured out how to take advantage of a good idea. The idea behind offsets is, for a lot of properties, you can only reduce your load so much on site via on site energy efficiency and onset renewables. Think of like an industrial plant a manufacturing plant. There’s just not enough surface area to install on site solar to eliminate your load, like 100% over the air to get net zero. So the group that invented the carbon offset was thinking okay, if buildings implement energy efficiency to the best extent that they can, and then they implement renewable energy to the best extent that they can. And they still haven’t hit net zero, then they can use offsets, to eliminate the rest what they can’t eliminate, because they just don’t have the surface area. And that’s a great approach. The problem is sort of twofold. Now, companies are just using carbon offsets. So they’re, they’re foregoing energy efficiency and renewable energy. And they’re just saying, it’s a lot easier and cheaper for us to go Net Zero via offsets. And then the second part is, the offset industry as a whole is immature and kind of lacks credibility. So there’s been a lot of big offset programs that have gotten busted for, you know, putting forward sort of phony offsets, they’re saying that they’re doing some forced the forced dri project overseas turned out they weren’t. So there’s been a lot of that. So now, when you see companies sort of pegging themselves as net zero, carbon neutral, whatever the buzzword is, on carbon offsets. If you dig into it a little bit more, more often than not, they’re just kind of false promises.
J Darrin Gross 21:14
Hear the talk the talk, but don’t walk the walk.
Owen Barrett 21:19
Exactly. But consumers are getting, you know, they’re getting more educated is going to take time, but there’s companies now Nestle’s a good one that just walked back there Net Zero commitment. Because consumers are starting to demand more, they’re, they’re starting to demand actual action, not just buying the cheapest offsets you can find.
J Darrin Gross 21:40
Right? Right. Now, it is frustrating, I think when you do look under the hood, and look for the actual results, a lot of times the given and a lot of the laws that get passed, I mean, they’ll have the title will be, you know, helping, you know, single mothers and in, you know, children, and you find out that it’s the details, it’s making the, you know, corporate, you know, some sort of corporate welfare as opposed to the, you know, what the title says,
Owen Barrett 22:13
Well look at like the inflation Reduction Act, I mean, I’m a huge advocate of of that, but it’s not going to do anything to inflation, or it’s not going to do it fast enough. So it was just inflation was a buzzword at the time still is. So they passed a huge piece of legislation with that as part of the title,
J Darrin Gross 22:30
Marketing, baby. That’s yeah, exactly. That’s one thing I know is that in America, we know how to market. So all right, so let’s talk a little bit about the, the system’s on 100. Unit. property, you mentioned that the systems, you know, they vary depending on what you’re what you’re doing. But I’m assuming based on everything you’ve talked about, between separate metering the permits and all that kind of stuff? What kind of a cost would you budget? For a, you know, 100 unit? You know, Midwest, garden style apartment solar system, what would you expect your your cost to run?
Owen Barrett 23:16
So if you’re trying to go net zero on 100 unit property, it’s probably about 125,000. And then I, you know, I would expect that you’re probably going to save on 100 unit. You know, it’s hard to say exactly, but somewhere in the neighborhood of like 50 to $100,000 to noi
J Darrin Gross 23:39
So you get your multiple on your cap that, that I know what your cap rate is? Do what kind of a How many years do you expect it to take to be a complete payback based on on your projections?
Owen Barrett 23:55
So generally, it really depends on you know, where they’re what the cost of electricity is, in California, like I said, we don’t invest in California, but the paybacks, like if you take tax credits into account, so tax credits are really interesting. Normally, we didn’t take tax credits into account, pre inflation Reduction Act, because as a real estate investor, you have a ton of depreciation, you’re most likely doing a cost segregation, study and save a lot of depreciation. So a tax credit, on top of all that depreciation is kind of worthless, doesn’t really hold the same level of importance without the depreciation. But now, because of the inflation Reduction Act, the tax credits are transferable, so we can actually sell our tax credit for cash. So now we do factor the tax credits into our economics because even if we don’t need them, we can sell them and right now that market is pretty new. It hasn’t really emerged. We’re seeing Seeing the discount rate of like 20%. So if you have a million dollar tax credit, you may be able to sell it for $100,000. But over the next year, we’re gonna see that market mature a ton. And it’s probably going to be like a 5% discount rate. So you’ll sell a million dollar tax credit for $950,000. So in California, the paybacks about probably four years. In Texas, sometimes it’s 10. But we don’t really evaluate it that way we look at what’s the cost of the project, what’s the tax credit, that’ll give us a net cost. In certain utilities like Texas, where encore provides a lot of the electricity, there’s an additional rebate on top, so that’ll drive your net cost down even more. And then we take the NOI that that project will generate and apply a cap rate to it. And if the value created exceeds the cost, then we deem it a good idea. Even if it equals the cost and it’s a wash, I still think it’s a good idea. Because as a, you know, as a building owner, as a community owner, I feel like it’s everyone’s responsibility to do some level of good, that good doesn’t have to be environmental, it can be social, but a lot of sponsors out there kind of you know, they’re talking about how they’re improving the community, and they’re adding amenities at the end of the day. They’re just justifying rent bumps, which most tenants don’t want. So I feel like it’s it’s our responsibility as an industry to have some level of positive impact in these acquisitions.
J Darrin Gross 26:31
Yeah, no, I would guess that most tenants would be in agreement with you.
Owen Barrett 26:37
You don’t care if you resurface the pool and bump their rent 250 bucks, they’d rather you not bumped around.
J Darrin Gross 26:43
Right. Right. Right. And I think there’s also a level of, you know, things are supposed to work. You know, why are you charging me for making them work? Yeah. I get it. You mentioned some of the tax credits. Are you? Are you able to finance these just on capital you’re raising? Or is this figured in to come some sort of a capital improvement? Budget? Or are you getting any grants? Or is there any, any other kind of options for, for financing the, the energy savings?
Owen Barrett 27:24
Yeah, we’ve found that the best way to finance it, at least for us is just to put it in the, you know, the initial capital stack as a part of the capex. And so depending on what kind of debt we’re using on our acquisition, some of that cost to solar is coming from equity, and some of its coming from debt. There, I wish there were better commercial financing options available for specifically for multifamily, but it’s just kind of a gap in the industry. Most lenders want to see you know, three years of of a p&l to make sure that you’re kind of financially sound, and they won’t let you show p&l from a previous owner, which doesn’t really make any sense, right, like the operations of multifamily, you’re buying them on the assumption that you’re going to improve noi. But so if I buy a property today, I have to wait three years to show three years of p&l is under my ownership before most commercial lenders will even, like entertain a conversation with you. So there’s just there’s some issues in the in the lending space around commercial solar, specifically for multifamily. And so because of that, we just put it in our capital stack from day one, and then we don’t have to deal with any of these lender issues.
J Darrin Gross 28:45
Problem solved. It’s good. What about the the actual ownership of the system? I know I’ve talked with other firms that their their single mother and their investment strategy was to own the the solar system and put it on buildings and that and and, you know, then have a title to them or something like that is is this? Are you just in his his part of the building and when you sell the building, the the next owner will get the benefit of the system?
Owen Barrett 29:20
Yeah, most times so sometimes. So we bill our tenants back for electricity generated by solar that’s that’s the only justification that we have to install solar on solar in the first place, we have to be able to monetize energy created. And in some states that requires that the the equipment itself is owned by a different entity than the entity that owns the building, but it’s all the same, you know, managing members, so like, there’s no control issues. The problem with those third party ownership structures like the one that you mentioned, where they get rid of the upfront cost, which is great, but then there There’s, then there’s this issue of what happens to the what happens when someone wants to sell the property. Because if that next buyer doesn’t agree to all of the language in the contract of the entity that owns the solar, it holds up the sale. And that’s why you see a lot of specifically real estate, residential real estate agents don’t like trying to list houses with solar that’s owned by third party because it always holds up the sale. So we’ve strategically made a model where whether it’s the same entity owning the solar that owns the building, or a different entity that owns the solar, but really, it’s just like a subsidiary that owns the building. It doesn’t hold up the sale in any instance. So we’ve done that kind of methodically. And I think that’s a big part of the reason why solar really hasn’t penetrated the multifamily market, because multifamily owners don’t think it’s worth getting into a third party ownership contract, if there’s any chance that it’s going to hold up the sale and they need to exit.
J Darrin Gross 31:10
Yeah, no, you’re not looking for ways to gum up the works when trying to exit. Yeah, that’s a little extra explanation to your investors. What about the power that you’re generating? And I don’t know what 100 unit apartment building average power usage is. But can you compare like a pre solar versus a post solar, as far as the, I guess, the the energy used from the grid for a, you know, the, the, I guess the complex? Yeah.
Owen Barrett 31:55
So there’s, there’s kind of two scenarios, there’s a scenario where a utility has what’s called what’s called net metering. And then there’s a scenario where there is no net metering. And so net metering is the ability to export electrons back onto the grid, and you get compensated for those electrons. And the way that you get compensated usually is a credit starts to build up on your bill. So in the northern hemisphere, most solar systems over produce in the summer, so you start to build up this credit on your bill in the summer. And then in the winter, the opposite is true. So then in the winter months, you kind of chip away at that credit. And if the system was designed correctly, over a year, your bill should be about zero. So that’s kind of how you net out your bill. In a non net metering scenario, you don’t get compensated for any electrons exported to the grid. So you can either design a system so that it does not export or exports very little. What we do is we still say there’s net benefit to the grid for exporting electrons, even if we’re not compensated. And so we still go net zero, and just export some of the electrons to the grid, we’re just not compensated for it. Because our perspective is, we can’t let utilities like control whether or not we’re going to make a net zero building utilities are inherently against solar, because it takes away their revenue. So of course, they’re going to try and do things to prohibit solar installations. So if we just play to the utilities rules, it doesn’t really get society anywhere. So we’ve figured out a way to, you know, raise money, pay our investors a return that they like, and do Net Zero Real Net Zero buildings, anywhere in the country. We don’t need net metering rules. To do it, the economics are better, but we don’t need them.
J Darrin Gross 34:00
That’s funny. You mentioned that I’ve got a couple of property set in Florida that I remember learning that it was like illegal in the Sunshine State to put solar on your roof. And I was like, wait, wait, wait, wait, we’re solar, his sun driven, you’re the Sunshine State? And I think it wasn’t until they came up with a way to make sure that they were, you know, remain compensated or or were in control of it. I mean, I think that’s the case. I didn’t follow it that closely, because I don’t have any.
Owen Barrett 34:33
Yeah, I mean, it’s, it’s some of it’s a bit of a joke. And a lot of states you can’t build a an off grid house like that. The technology exists now with solar and storage. You still need to bring utilities to your property even if you don’t want them. And that to me is just an outdated model. I mean, utilities. The utilities could be on the other side of this making money from solar from Evie chargers, like they could figure out this As transition is happening, how are we going to get ahead of it? And how are we going to make money from it? Instead, they’re just doing what, you know, a lot of big old dumb corporations do, which is they try and stop it or slow it as long as they can, but like, you can’t, no one will stop this transition, it’s happening. And it’s gonna happen faster and faster, as we, you know, get closer to this net zero economy. So, I think I think a lot of utilities are going to lose in that perspective.
J Darrin Gross 35:26
Yeah, well, I’m pro, you know, kind of bucking the system a little bit, and, and especially if there’s something good comes out of it. And, and sometimes it takes a little while to make the powers that, you know, I think that I think this is true in a lot of things is that anybody that’s in power is going to do anything they can to protect themselves. I mean, I’ve seen it just in silly ways. And then different things where, you know, an agency or a person or an industry is just, you know, this the way we do it, you know, and it’s like, well, that’s kind of silly, but no, this is the way we do it. And, you know, if that’s if you’ve got a stake in that, and that’s your livelihood, and, and you’ve got enough people that are affected by it, he can really slow the rate of change. But, you know, here’s the system, we have
Owen Barrett 36:23
a real short term perspective, though, right? I mean, like the the ignorance of thinking that you can slow progress is just mind boggling. Sometimes. I mean, there’s a gazillion examples of corporations that have had that mentality, Polaroid comes to mind. And look what happened to them. I think utilities are gonna see similar fate unless they start understanding that this is an opportunity for them. And right, and maybe they’ll start encouraging some of this progress.
J Darrin Gross 36:56
Well, it’d be nice to, you know, especially with all of the things that we’re facing, I like said, I’m an insurance broker. And, and there’s clearly, there’s clearly a consequence, for the way that we’ve, you know, you know, the way we’ve been behaving or way we’ve been acting stuff, and, and anything I think we can do to, you know, turn the corner or lessen the impact, I think is a good idea. So, but he let me ask you, so on what’s going on? Oh, on these systems, do you? Is there a straight line depreciation mentioned? Or cost segue? Do you guys what, how long do these systems? How long do they last? And how long do you schedule for depreciation.
Owen Barrett 37:52
So we usually you could do bonus depreciation 100%, year one on solar, so we do that. But they generally last 25 to 30 years. I mean, there’s a lot of instances where they’re still performing past 30 years. But usually the there’s just like a couple of key components to solar systems. One is the racking on the roof. The other is the inverter that, you know, takes I was mixing us up DC energy and converts it to AC or AC to DC. And then the third is the module itself, the the panel. And so the panels are usually warrantied, like a production warranty for 25 to 30 years, inverters are usually 10 to 20 years racking, you don’t really have to worry about so we’d appreciate everything here, one. And we expect these systems to last at least 25 years.
J Darrin Gross 38:42
Yeah. Hey, Owen, if we could, I’d like to shift gears for a second. Now by day by day, I’m an insurance broker. And as such, I work with my clients to assess risk, and determine what to do with the risk. And there are three strategies we typically consider, we first look to see if we can avoid the risk. And that’s not an option when we look to see if there’s a way you can minimize the risk. And when we cannot avoid nor minimize the risk, we look to see if there’s a way we could transfer the risk. And that’s when an insurance policy is risk transfer vehicle. And as such, I like to ask my guests, if they can look at their own situation. Could be your clients, investors, the utilities, you know, public policy. You know, however you would like to identify what you consider to be the biggest risk. And again, for clarification, while I am an insurance broker, I’m not necessarily looking for an insurance related answer. And so if you’re willing, I’d like to ask you Owen Barrett, What is the BIGGEST RISK?
Owen Barrett 39:53
Yeah, I think it’s easy. It’s climate change. I think it’s climate change. For a number of reasons. From a utility perspective, I mean, look at the heatwave that we have going on now, in the Southwest US, how are utilities going to keep up with all that demand? Assuming that this is like the new normal. From an from an insurance perspective, we’re seeing major insurers pull out of entire states, because the climate risks are too high state farm just pulled out of California due to wildfires, and Florida due to Hurricane risks. So there’s so many adverse effects of climate change that are going to just perpetuate through all different pieces of the economy. Agriculture is a huge one too. I mean, thinking about your food supply and how that’s gonna get affected. There’s just there’s so many risks of climate change, that it is just mind boggling to me that it’s not everybody’s number one priority to do everything in their power, whether as an individual or corporation and institutional investor to solve this as fast as possible, because I think we’re moving entirely too slow.
J Darrin Gross 41:12
I get it. Good stuff. Hey, Owen, where can listeners go if they’d like to learn more connect with you?
Owen Barrett 41:19
So for me personally, I’m on LinkedIn. Owen Barrett. That’s really the only kind of social channel that I use personally. And then for the company, Rayven, it’s R A Y V E N in our handles, our join Rayven on everything, every major social platform.
J Darrin Gross 41:39
Got it. Owen, I cannot say thanks enough for taking the time to talk today. I’ve enjoyed it. Learned a lot. And I look forward to doing it again soon.
Owen Barrett 41:50
Yeah, thanks for having me. It’s fun. All right.
J Darrin Gross 41:53
For our listeners, if you liked this episode, don’t forget to like, share and subscribe. Remember, the more you know, the more you grow. That’s all we’ve got this week. Until next time, thanks for listening to Commercial Real Estate Pro Networks. CRE PN Radio.
You’re listening to CRE PN Radio for influential commercial real estate professionals. For more information on this or any of our guests like us on Facebook CRE PN Radio.