Hello, everyone, and welcome to today’s Propmodo webinar. My name is Franco. I will be moderating this. As always, I’m the editor and cofounder of Propmodo. And today, we’re gonna be talking a little bit about data and AI and how it’s being used to manage energy use in buildings. The topic that gets brought up a lot, but I think it’s more complicated than most people make it out to be. I think not only are you dealing with all of the building and property factors, but there’s lots of other variables that, have to be taken into consider consideration. Right? We got changing energy prices, energy mix, right, sustainability mandate, changing climate, if you believe in that. Lots of, kind of trend lines that are all, coming together to to make it a little bit of a, you know, difficult proposition to really understand how to lower energy and, you know, hopefully, carbon carbon footprint. So I’m gonna be going over some trends, you know, some specifics about how to actually do it. As always, this is a live webinar, and, we won’t be saving any time at the end for questions. In fact, we’d rather you all just throw your questions out as as we’re talking. So do you see we have a chat here? We have a you know, you can ask questions. Feel free. Jump in. If they’re pertinent, I’ll bring it up to the panelists, and and we’ll talk about it right on the spot. So appreciate everybody here. I know I see a lot of sophisticated people that have signed up for this. I know you guys all have, some opinions and and some, questions, so we’re we’re looking forward to building that as as they come. So, before we start, I would like to introduce my distinguished panelists here. First, we have Cass McFadden. She’s a Hlobal head of Sustainability for Cortland. They’re, as probably most of you know, a large multifamily owner and operator. Hi, Cass. Hi, everyone. Thanks for having me. Thanks for coming on. Next, we have Matt Houser. He’s Director of Enterprise Sales at Omnidian. They’re a solar service provider. Hi, Matt. Hey, Franco. Yeah. Looking forward to looking forward to your, you know, insights about all of the the renewable because, you know, that is another another fold to this that makes it very, tricky to to understand, you know, energy and and energy usage. And last but certainly not least, we have Tony Liou. He’s President of Partner Energy. They’re an international due diligence and engineering firm. Hi, Tony. Hi. How are you? Doing great. Excited to be here with everybody. I got some, great minds, and, hopefully, we can, you know, hash out some of these kind of difficult difficult scenarios. But before we do, I always like to start these out just by talking some of the trends happening right now. I think this kind of sets the stage, for everything we’ll likely talk about, later on in the webinar. I think probably foremost on most people’s minds is is what’s happening with energy. I think, particularly now, it seems like sustainability is kind of taking a back seat to profitability, at least for a lot of, you know, occupiers, a lot of firms. Profitability is difficult right now when you’re looking at what are likely changing energy prices. Right? So I’d like to maybe just talk, to all of you about kind of what where you see the the energy mix going, right, both, you know, where we are generating energy in in the country, and, obviously, that changes by utility. But, also, you know, just generally where where prices are headed, you know, maybe, how prices are getting calculated is changing through a lot of utilities. So just kind of interested to hear what you kind of think is is happening as far as the energy mix in that country. Tony, I’d love to start with you on this one. Yeah. Sure. So, I mean, it’s tough to talk about energy, energy pricing, energy needs, well, without talking a little bit about demand. You know, I think data centers, AI, this is the topic here. AI is very data center, it’s very high demand data centers, and data centers are one of the biggest drivers of our energy needs in this country, really, in the world. So when we look at it, the demand from data centers, electric vehicles, even electrification, these things are all gonna drive energy prices up. You know, in my world where we looked at kind of more engineering due diligence in the CRE space, one of the biggest things that a lot of our clients are looking at and concerned about is the change of regulatory environment. Right? There are a lot of jurisdictions that are requiring energy benchmarking, energy audits, and then there’s the kind of the the the the tougher one, which is building performance standards. So there are jurisdictions. So if you own real estate in New York or Maryland or Denver, they’re rego they regulate the amount of carbon, amount energy buildings can use, and this is certainly gonna drive up continue to drive up some of the cost throughout that. Absolutely. Matt, I’d love to kinda have you expand on that, you know, particularly when it comes to to on-site generation. Right? Like, what what are your clients seeing as far as the the the trend of energy prices and kind of how that fits into how they’re able to make, renewables pencil. Yeah. The, the calculus has changed quite a bit, quite frankly, over the last couple months. Solar just got about thirty percent more expensive effectively for projects that have not be begun development due to the passage of the One Big Beautiful Bill. But in addition, as everybody is seeing in the news, it feels like on a rolling, like, monthly basis, utility rates are going up. Ten, twelve, thirteen percent in lots of regions. And so I think right now, there’s a little it’s it’s in a weird spot. People are trying to recalibrate, figure out, okay. Where where does this where does this best pencil in for my portfolio? However, the demand is continuing to rise. Right? Usage at particular buildings, especially with electrification, are continuing to drive these things. ESG mandates are still although are a little bit full shaky right now for some folks, I think, generally speaking, people are still very strong. And so there’s just a slight recalculus of things, but demand is still strong for solar. So we’re still seeing continued development of of on-site solar plus storage where it makes sense. It’s just a little bit different now. So there’s just a right now, it’s just a a period of of recalibration. Yeah. Yeah. And it’s kind of going the opposite way, I think, people thought. Right? And drill, baby, drill, going back to fossil fuels. I think people kind of assumed that might drive down energy prices and certainly has not, and I haven’t seen any evidence that it will, right, in in the near future here. Cass, I’d love to hear from you on this end. I know that, you know, you guys are know a lot about these, these mandates, so I I’d maybe love to hear from you about that. Right? How are both energy prices and these kind of city mandates, dictating the way you guys are thinking about your energy usage? Yeah. Sort of new things that are added. I mean, there are EV structures. There are data centers. From a multifamily perspective, you know, we’re thinking about, amenity spaces. You know, if there’s a new fitness center and and folks want sort of that Peloton bike, okay, we have to plug all of those in, and there might be, other things that, you know, residents are interested in adding to the individual units over time. If you think about, you know, how many chargers you have now and how many devices are connected to that. So, that list continues to grow, and so we have to think about it from that perspective in addition to the common area spaces. So these are our, you know, amenity spaces that residents, go in, utilize for their enjoyment. We try to control those expenses over time, but we might have some continued exposure in areas where, we may not have total forecasting or price control or maybe we’re under a contract that still has a high price, etcetera. So that’s how we kind of think about, how energy pricing and demand really hits the the different assets. And then I think on the other side, when you talk about the markets and the regulatory inputs that we often have to contend with, I mean, most of them that are currently in place really try to drive us to energy efficiency. But in the middle, we have to probably execute a new project or a new, you know, sort of technical or infrastructure component that is going to have a cost consideration, and then we have to do, you know, some math behind that return. There might be an upfront cost, but long term, we might be gaining the the energy efficiency or the contract control that we need. So, well, there are a lot of factors, again, impacting energy pricing. I think for us, it’s really thinking through gaining efficiencies. Ultimately, you know, everyone’s in a a race towards zero whether they think it or not when it comes to efficiency, but while also, again, in the multifamily space, thinking through how do you not sort of put a damper on the resident experience. They’re going to wanna add things, like I said, to their units. They we’re in a different space in multifamily now where there’s a different demand around amenity spaces. I mean, I’m sure if you think back to your own first apartment experiences, all the bells and whistles of the added, you know, amenity components and and the new services, it it’s just very it’s very different now. So that ends up hiking demand at each asset, and we now have to factor in, how are we going to forecast and control that component. Yeah. I’m interested to hear from you about that forecasting. Right? Because, you know, how far ahead do you look? And I’m thinking particularly about EVs here. Right? I think, you know, when they first came out, we saw that everybody buying them up. The you know, they were growing in their percentage of sales. I think, you know, oh, one day, are we gonna have to have every single parking spot have an EV charger? Well, that is a significant pull, right, for a property is you need new, you know, direct power lines, a lot more amperage. Right? So, you know, how far do you look at, and and how much do you think that demand for EV is really gonna change, in the, let’s say, next ten years? Yeah. I know. If I was answering this maybe a few months ago or, like, a year ago, I’d have a different response. You know? Things have clearly changed in terms of electric vehicle incentives. But, again, thinking about multifamily and the asset, I will say there is a bit of a, you know, chicken and the egg dilemma that a lot of multifamily operators kind of deal with at the outset. You know? What is the demand? How many spaces should you plan for? Is it two chargers, six chargers? Is it, you know, a whole floor? And there are specific market demands around the amount of parking that you have to supply maybe for your residents or within a given area. But once you get past checking those boxes, it’s really thinking through what is the owner’s appetite, especially given that that one asset might not be their only EV infrastructure investment. Right? It might be thinking through two hundred and sixteen communities. Some might wanna, you know, sort of pilot six and then see if residents really like, you know, maybe the level one or level two. I think level one’s probably a little out of level two charters that you’ve put in place. And if there’s growing demand and you’ve got a good financial system around it where maybe residents are, you know, sort of paying for their usage, there might be an amenity fee, etcetera. Just a good setup so that you can control the cost, but the residents are also happy with the experience and the product, then you might look to scale from there. So I think it’s going to vary, you know, based on the owners and operators, but, ultimately, at least my personal perspective is that you have to get to a pilot phase to understand the true demand, saying that you have, you know, four hundred units and multiplying that out across residents and trying to dial in how many might have EVs or how many might be interested. It’s a little tough to do. And I’ve heard percentages thrown out, you know, plan for ten percent of your your space. And then there are jurisdictions where, you know, the regulatory bodies are working closely with the utilities to maybe plan for all spaces being EV capable. So it’ll vary market by market, but I think as an owner, you really have to start to pilot so you can see what your individualized demand would be. Yeah. Yeah. Absolutely. And market to market, I mean, California, we see a lot of them and, you know, obviously, other places a lot less. Tony, what do you guys hear from your clients about EV charging? Right? That’s a big new power draw. I think, you know, everybody wants to put as much as they can in, but I think there’s a lot of limitations, right, about how much, you know, you can actually provide? Sure. You know, I I think when you’re selecting sites, I think the the the dynamics have changed. Right? It’s like electrical capacity is just worth its weight in gold. Right? You don’t have to have a nice building. It doesn’t even need to be particularly clean from a environmental perspective, but you’re next to the grid and you have a lot of power going to it, it it definitely there’s a lot of opportunities for that particular site. But the piggyback off that answer from Cass is I think we gotta look at the technology too. I think technology has evolved so that the amount of time it takes to charge some of these EVs are are getting comparable to how much time you spend at the gas station. Right? If you look at it, you know, I mean, I have a an EV. If I go to a high charge high speed charger, it takes me about thirty minutes to get to eighty percent. But if you look at some of the new technology, that time is significantly dropping down to ten, twenty minutes. Right? If you’re comparable to a gas station, you you all of a sudden, you don’t have to build EV infrastructure everywhere. You can just have centralized EV charging stations, and I think that works pretty well. So I think technology is gonna come into play certainly from that perspective. But, otherwise, I think it’s it’s an amenity. Right? It’s an amenity folks wanna build off. I think, like, you everyone’s saying, I think dynamics have changed. But I think in terms of building owners just wanting to understand, I’d at least need a few. Right? It’s it’s may not be, you know, ten, twenty, thirty percent of it, but I need a few. So, you know, we we do find ourselves often is often seeing, yeah, how much electrical pass is that building? How much does it cost to drag, you know, a two forty volt wire from the from the main transformer down to the parking lot? Right? So these cost considerations are being considered during due diligence as well as us. Matt, I’m I wanna hear from you about, you know, EVs, but, you know, with your specialization, I I think what’s interesting to me is how EVs represent a little bit of a charging pattern, right, that or, you know, a different kind of load pattern that might not jive perfectly with solar, yet they also do store energy. Right? We can, you know, kind of charge them at certain times when when the grid isn’t as expensive. So how do you think that kind of solar on-site generation and EVs kind of, play together the best? You know, it’s it really depends on a property by property level. We’re seeing a lot of deployment of PV plus battery plus EV charging. Some of it’s mandate driven. Some of it is, you know, really just about amenities per site. You know, I think what it comes down to is ensuring you have enough generation, right, on-site. If it’s kinda directly powering those chargers either directly from the PV plus battery, ensuring that’s set up correctly. But I think, you know, another thing that we’re kinda learning through the process is, you know, up to I think it’s, like, thirty percent of EV chargers are down at any given time. It’s a lot. And for those who drive EVs, you ever pulled up to an e a charger and it not and it was not operable, it’s frustrating. I mean, if thirty percent of gas pumps were out were out of service at any given time, there’d be riots in the streets. Yeah. Very frustrating. And so, I think folks are trying to learn that and understand, like, hey. Like, if you’re offering this as an amenity and it does not work, that can be you you could be in a worse position than even before offering it because because you’re kinda dangling in front of them, and it’s it it there’s the frustration of trying to make it work and whatnot. And so, you know, we’re you know, folks are starting to learn about understanding, you know, how how how do we service these things? You know, how how do we keep them online? Because, ultimately, what good is an EV charger? What what good is an amenity if it’s not, you know, providing that for for for the customer? So, yeah, that’s kind of a little bit about what we’re seeing within the space. What about do you think it, increases the desire for solar and on-site? I mean, like, most people charge at night. Solar is generating during the day. Right? How did how do those play together the best, do you think? Oh, of course. I mean, you’re I mean, the the low profile for a charger, depending on its structure, can be quite substantial. And, you know, it’s an you know, it it for folks, sometimes we have that has to be paired with solar plus storage. And so, you know, with with, you know, with the storage component, that can be better paired for amenities charging at night and through the early morning. We’re seeing a lot of deployments, especially around carports, around with with solar plus EV charging too, which is a great amenity for corporates or any sort of business that’s You know, having, you know, customers during the daytime. And so, yeah, you know, it just kinda depends on the profile. But what what we’d say is that, you know, if there’s a solar plus storage component, that can be pretty comprehensive in how you want to deliver EV charging. It gives a lot more resiliency. Yeah. Absolutely. Before we get into the the data part of this conversation, I do wanna touch on one other piece, which is financing. Right? You’d kinda talk, Matt, about, you know, prices are going up. Right? There’s less subsidies kind of helping you, but, you know, a lot of financing options still exist. I’m thinking particularly about CPACE. Right? This is a state by state run program, so the federal government has not been able to dismantle it yet. You know, do you do you think that people are still able to make large investments in, let’s say, sustainability, you know, generation or even kind of, you know, power reduction improvements? It will make make those work? Oh, absolutely. Yeah. We do see CPACE financing as as something that is growing, but, you know, PPA structure still remain very strong. And so I think for portfolio owners of of commercial real estate who are looking to deploy solar, there are lots of financing entities that that are willing to offer those offer PPA structures, you know, with, you know, portfolio tranches. And so even for, you know, smaller systems, right, if if especially for, you know, multifamily and other entities where and usually, the the the ability to to deploy solar can be on kind of a smaller scale, you know, looking across a nationwide footprint, yeah, there’s absolutely financing structures that are available. I’ll just add, you know, the the irony of rising energy costs is the investment in energy efficiency renewables gets better. Right? It’s it’s changing constantly. Right? So certainly the federal rebates going away have a big impact, but you gotta look at local rebates, and then you gotta look at utility rebates. But you also need to understand what the cost of energy is, right, what the cost of electricity is in in your local markets at that particular point in time. So, you know, as energy prices go high, it’s it’s it’s higher. It certainly makes capital investment in efficiency and renewables better. Cass, how about you guys? I mean, I I think what’s so interesting to me is that, you know, it’s hard. Right? You’re hitting a moving target. You don’t really know what your energy expenses are gonna be. Whereas if you do invest in something like on-site renewables, solar, you you kind of do. Right? You you kinda take an unknown and and create a known. I mean, how are you guys thinking about, you know, that kind of investment, and and how are you able to to maybe finance them? Yeah. I think, obviously, starting with just raw data, we understand energy consumption year over year, and then we have a pretty good pulse on, understanding in the regulatory environment when rates are going to graduate. And there can be spikes, but, you know, we have a renewable energy procurement strategy where we really try to control the cost where we can, and where we know we’re financially responsible as an owner. I think beyond that, as we think through different opportunities to model, you know, the financial options, one thing that’s trending is kind of the combination of, you know, public and private funding so you can reduce risk and attract more capital. Right? So we look at that structure thinking through energy as a service. You know, there are different vendors who, talk through options. It could be like a solar and storage combination, that we’ve kinda touched on. So without potentially owning the equipment, you could, you know, reduce upfront costs, etcetera. Right? And that’s probably more favorable, sometimes for, let’s say, asset managers that are very nervous about, infrastructure upgrades because it might, you know, impact the structure in a way that a seller might not find attractive, for example. So that model is still there. I think, you know, CPACE or generally, like, PACE kind of financing. You know, I I still think there’s a there’s a cap. People have to remember that, like a cap on loans for renewables and resiliency upgrades. And, through that, I mean, you have to decide in your business structure. So this these are things we think through. You know, do we really want to have things prepaid through tax assessments even though there are favorable terms? Are there other components of, you know, a contractual agreement that, again, aren’t favorable to maybe our old periods and what our investors might want? So those things can sometimes be limitations. But I know Matt also mentioned, like, existing you know, the existing PPA structure or even virtual power purchase agreements. I think that’s ultimately a financial transaction. But folks in this environment where especially if you haven’t started a solar project or you haven’t procured equipment or started, you know, any work that might qualify for, these sort of umbrella periods that are covered. Now I think practitioners think through shifting strategy or shifting timelines. We don’t know when, you know, the incentives might be reinstated or extended. And so, again, I think that some of those financing options, especially the combining public and private funding, if a firm can afford that, might become more viable if even for a limited period. Okay. So let’s get into some of this data. Right? I think everybody, is curious to understand how. You know? It sounds great. Like, let’s lower your energy. Let’s lower your, you know, carbon footprint, but it’s not always that easy. So let’s talk about first kind of getting the data. You know, what kind of data do you think that, is the most valuable for this, and how granular does it have to be? I know that utilities often they report, right, monthly. Right? They don’t give you, I’m sure, the kind of the kind of granularity to your needs that you need. So, Cass, I wanna stick with you on this one, and then I’ll I’ll go to the rest. Yeah. For you know, on our end, I feel feel pretty spoiled now in that everything is pretty streamlined. You know? We have an external vendor that we work with, who helps us sort through the bills, capture, you know, electricity at the the kilowatt hour metric. We understand what the rate is per kWh. Same thing for our gas metric, oil if we have it for any place for for generators, etcetera. We also have this for many other things, water, waste, etcetera. So, we’re capturing it at that granular level. I think, how much of it you need, it really depends on your team and what they can withstand when it comes to, you know, analysis. So if you have a perfected integrated sort of AI system that can spit out, you know, interval data or even, like, a weekly snapshot, etcetera, you think, okay. Well, your operational teams can kinda see where there might be spikes, where there are drops, and and physically at the asset level react to that. But we do have a centralized, utilities team that usually looks at this on a monthly basis, accounting for any variances, etcetera. And then as we combine that with our, you know, internal sustainability function, we’re really looking for what really stands out. If in a market, there is an asset that maybe is no bigger or smaller than another one, but we’re seeing very high usage somewhere, it could be related to common area EVs, whatever it is. That is what we want to tackle. Because like I said, there’s a bigger sort of, like, road to zero, but, we also think of NOI or just, like, the financial performance at the asset. And it’s not something that if we can tackle it and make it more efficient or bring it to zero, it’s not something we wanna keep spending money on in terms of, like, audits and reassessing this every year. It’s like we’ve assessed it. We know the historical performance. Let’s get to it. And one other thing I would add is this is a little broader, but it’s sort of like your maintenance metrics. You know? You want to know, it’s not the same as sort of like a kilowatt hour or whatever it is or a therm, but, just understanding, you know, how often you’re going to have to respond to something, you know, that’s part of your infrastructure is important because that just becomes part of your cost management. Yeah. Absolutely. Tony, when you guys work with clients, you know, what do you often, recommend as far as, you know, getting a little bit more sophisticated about the data they collect? Sure. I I I think, to back up a little bit, I think it’s it’s it’s largely driven to from my perspective, kinda on a couple of data points. Right? It’s the size of the building. Like, certainly, a million square foot office building is a little bit different than, you know, a five thousand square foot retail center. The asset type slash the lease type. Right? Is the owner paying the bill, or is it, your multifamily or tenants paying everything? And then the last piece really, which is a newer factor is what’s the regulatory environment? Right? Are you located in a building performance standard where there’s, you know, an impending fine which can reach into the seven figures if you don’t hit a certain performance metric? Right? So for a large building, like, the example, in a a big office building in Denver, Colorado. Right? The more granular, the more detail, all that capital is really worth it. Right? So these control systems, they right? When you have large buildings, they really operate like a large computer, and there’s a lot of data going in there. So there is technology today through AI, through traditional controls, sequence operations that it is managing. Right? So any optimization can result in a very big impact. Right? So I would go down to the you know, what time is the chiller turning on? What pumps are sequencing on and off and during what time of day? Right? So looking at these details for a large building and investing in a sophisticated control systems will have a payback to it. Right? A reasonable one because you’re using a large lot of energy. It’s it’s it is directly impacting, the owner. So I think those types of investments make all the sense in the world. But for a smaller building where perhaps the tenants are paying their own utility bills and it’s not located in a jurisdiction, I think it’s a little bit tougher. Right? I think having, you know, monthly data about, you know, how much gas and electric the tenants are using and giving it to the owner might make sense. But I think here is kinda where you play the end of useful life game. Right? It’s like you’re not really controlling, what the tenant’s doing and how much energy they’re using. But upon end of useful life, this is where you can probably make the most impact. Right? As opposed to going for like for like replacement of a of a split system, you go more efficient because in the end of the day, it’s gonna help your own carbon and energy usage as well as the tenant. So that that could be where the the the line is. I think you look at the size, the type of regulate regulatory environment really dictates what the strategy be. Yeah. So you’re saying it’s it’s sometimes it isn’t even worth it to, you know, invest too much in getting every single super granular piece of data. Right? Like, that’s Yeah. What are gonna do? Your tenant’s gonna use the energy no matter how much you know about their usage or not. Right? Or yeah. Or or or if they use a twenty four hour a day versus one hour a day, it just doesn’t make that big of an impact. Right? Again, a small building, it just doesn’t impact it that much. Right? I think sky size is really where it makes the most impact. Yeah. Yeah. And multitenant buildings, obviously, right, because now you’re kind of comparing, you know, different usages to each other. Matt, I should hear a little bit from you, particularly as it comes to, like, the data that you need to really understand solar, right, and the impact of solar. I think a lot of people are probably considering going solar and, maybe don’t have, like, the clear road map of exactly what they’re gonna save when they’re you know, when the peak, how you can shave your peak usage and all of that. So what do you think is kind of that critical data for every building owner to understand? Solar generation data is the probably the most important component. I mean, if a if a sole if if a solar plant doesn’t have enter energy generation data associated to it, did it even produce energy? That’s a big question that we have to actually answer quite a bit. When it comes to granularity, the the devil’s in the details. And as much as we’d love to just look at a month’s worth of production data or maybe even a day’s worth, you’re not gonna find issues necessarily with that. You have to go even further in. So when it comes to, you know, on-site generation, granularity needs to be down to about five or ten minute intervals and as many signals as you can get from a system. Right? That can be energy. It can be power voltage, other alerting, anything and everything that can pull with a given hardware on-site. But, to my kind of my first point that I wanted to to elaborate on, this is all contingent on perfect communications from devices on-site. Right? Enter the Internet of things. And it’s great when it works. But what happens when you lose that communication? What kind of assumptions do you make? Do you assume that things were working as intended and you normalize the data and go from there? Or do you assume that nothing was working as intended and we have no signals and it actually means there was no generation or whatever signal you’re pulling from? Those are things that asset managers need to think about and have a contingency plan for, because those can oftentimes be the most complicated and time consuming scenarios, when faced, with, that lack of data. And I I’m thinking back to our previous conversations, Matt, about how you know, I assumed solar panels to be infallible. Right? You stick them in the sun, energy comes out the other end, but, you know, they especially kind of when you first install them, right, there are possible problems. Like, they they tend to have little blips or or they go down. Right? So how can maybe, you know, building owners really best install them and and keep them from, you know, any of these kind of little little power outages? Yeah. Set it and forget it. Right? Turns out that was a Great dream. Some baloney. But that’s why I have a job, so that’s good. You know, it’s all about expectations, right, and planning. Right? So somebody somebody builds the builds the solar, and then it gets handed off to somebody who operates it. That milestone is very important. Very important once you go from, you know, construction to operation that everything gets handed off in a clean slate. You know exactly what’s installed. You flag any sort of issues, etcetera. So asset owners are starting to realize that investment of, hey. If we invest a little bit more time and money at that milestone and say and, you know, check everything and make sure everything’s corrected, and if not, we bring it back to the installer and they remediate it typically for free. That’s a lot cheaper than not doing that, waiting five years and realizing, hey. They forgot x, y, and z, and now we have issues that are causing reputable damage. Those those types of investments people are realizing that are very important. And then also just better expectations of budgeting. Right? With any technology, when you install it and when things go live, there’s a higher incident rate of failure in the beginning. Right? You’re ironing out the kinks. It’s no different with solar. So just a it’s a better expectation of, hey. When it when it goes live, things will break at a higher incident rate initially and then cool down a little bit over time and budgeting accordingly. Yeah. And and, obviously, not every, property owner is lucky enough to have someone like Cass, right, who’s, like, an expert on just a bit. So I I’m sure a lot of property people kinda think, it’s kind of outside of my purview. Like, I’m just gonna hand it off to the installer, and they know what they’re doing. Right? But you’re saying you do have to to really kind of educate yourself and and sit on top of this this process when it’s coming on. Hundred percent. Yeah. And making sure you have somebody from the outside looking in. Right? You don’t want, you know, the installer checking off, you know, signing off on tell you everything’s fine. I’m sure. Yeah. Of course. Have somebody else. You know? It’s a it’s a little bit more, you know, it’s a little more investment, a little bit more time, but wow. I mean, so much pain can be alleviated, and it’s for everybody’s benefit. Sure. Yeah. Hold on. I just wanted to add one more thing. It’s interesting, you know, thinking about what data you need for better energy management. So there was a time in multifamily where, again, we were just concerned about the common areas. Those were our bills, and the residents, you know, would pay their own, different utilities bills. And I think there is this growing need to understand demand per unit. And I think Tony was alluding to this. There are jurisdictions where it’s really hard to back into that information. But I think on the market, I’ve seen folks coming up with creative ways to back into it, whether it’s different, honestly, like, regulatory loopholes or is it through resident authorization, etcetera. Because, ultimately, when we’re reporting, to investors or different frameworks, you know, whole building consumption is what we are responsible for. And, so whether or not we have line of sight or whether or not we can control sort of resident behavior and consumption, we’re still responsible for it. So I think that’s getting that granular data is becoming a new focus, getting a better understanding of what the residents are are being billed in some way, especially as there are more resident protections around billing. You know? If you are using a third party provider, whatever it is, there are certain billing allocation methods that are in place. In some areas, there are caps on what residents can charge. And and, generally, if they notice that their energy bills are going up, for example, you know, if they are upset and don’t feel great about it, the owners become responsible for that relationship and reaction. So just wanted to put a fine point on I I think there’s a growing maybe obsession is a strong word, but I think it’s an obsession with what’s going on in the units and and how we can get better data around that in a way that doesn’t impede privacy and that is helpful to the resident experience. Yeah. Great point. Love to, talk a little bit about these insights. Right? Okay. So let’s let’s assume that we’re getting all the data that we need. You know, it’s all kind of coming in clearly. You know, what can it tell us about the building? And and particularly, like, you know, how can it be used to actually drop energy usage? Right? We’ve already talked about you know, a lot of times these are kinda controlled spaces. You know? Cass, I’ll stick with you here to talk about multifamily, and then I wanna expand it to some other property types. But, you know, like, how do you you know? Okay. We know that this unit is using, you know, way more energy or this building is using way more energy than rest of our portfolio. How how do you actually go about bringing that energy usage down? Yeah. I mean, you either have, an integration that you’ve selected that can automatically adjust things for you. That’s sort of the technological fix. But, ultimately, it’s up to the teams that are analyzing the information to choose the most financially optimized and and least disruptive pass pathway forward, you know, for the asset. I don’t wanna oversimplify it, but, you know, we can get into the the dirt of, like, how you pick vendors and how you pick solutions. And I think every company goes about that very differently, but, ultimately, that’s what it takes. You know? Assume that you have the best data possible at a certain point after you’ve done your QAQ saying scrubbing, etcetera, and then figure out your strategy for integration, you know, tackling it, reducing it over time. I think for there are different vendors who have sort of different solutions over time. You know? Tony kind of, again, talked about sort of the automation feature. So if you have something that can kinda detect your threshold, you set that as a business. Maybe it can adjust. I love to use the thermostat example, because there are ones that are very smart and that can adjust in certain spaces over time. But, again, going back to the residential unit component, unless you are able to get those upgrades in ahead of time and communicate that to the resident as a feature, and maybe some make clear sort of your, you know, ownership desires around how they operate, maybe that thermostat. You know, leave it alone. Don’t touch it. Let it be set at these different times, which who knows if they’re going to adhere to that. I think the in unit transition is a little more complicated. Yeah. Yeah. And, obviously, there’s an opt in aspect of it. Right? Some people are, like, you know, super sensitive to anybody messing with, you know, their status or anything in in their home. So that makes sense. Tony, let’s maybe, like, expand this to to talk about some other property types. Right? We have, you know, retail and office. They still have mostly contented, you know, tenant controlled spaces, but now you’re dealing with maybe corporations that have sustainability mandates. Right? They might be a little bit more willing to work with landlords. Likewise, I know a lot of these systems actually do kind of do reporting and and work with the the landlord or with the tenants as well. So, you know, how do you think that maybe the property industry, property owners can kind of use data to bring down the energy usage in places where it’s not as easy as, you know, turning off a light when no one’s there? Yeah. Sure. So I wanted to find what the perfect dataset is before I answer that question. You know, I I think when you look at traditionally, like, age and agent condition of existing equipment. Right? That’s everyone’s kinda familiar when you buy a building, you order a PCA, and you see age and condition, and that’s generally how CapEx is being specked. Right? It’s it’s end of useful life. This system is, you know, has is is ten years old. Useful life is twelve, and we’re replacing it in two years. And and then we kinda layer in energy information. Right? The perfect information is, you know, at the unit level having utility bills. Right? We know exactly how much energy this tenant is using. Right? But then we can collate in controls too. We know when the chiller’s turning on. We know when the tenant is occupying the space when they’re leaving the space. We also know carbon performance over time. Right? Carbon is dynamic. Right? So so, you know, I few months ago, would say the grid is decarbonizing. I’m not too sure about that anymore, but there is a certain bit of the grid will decarbonize over time and perhaps it’s getting cleaner so that if your goal is to decarbonize, you need to understand what the carbon performance is gonna be of your building if you do nothing. And then I also wanna add in the perfect amount of data. It’s also considering resilience into this as well. Right? I think we we we we when I just have to bring it in because efficiency and resilience sort of go hand in hand. Right? When you’re looking at the PCA, it’s not just age and condition is if you do have an adverse event. Right? Acute climate event like a wildfire or hurricane or or or or a flood, how is this building going to fare? Right? And it’s we should look at all these items when considering CapEx plan. Right? So you take that office building. Right? So we wanna look at, hey. When is the chiller end of useful life? I can, at this point in time, decide, do we stay with let me take a gas boiler, for example. Right? Do we go more efficient with gas, or do we fuel switch? Right? That’s an end of useful life item. Right? If we look at the the carbon performance of a time, it is a penalty. Well, I’m gonna incur a penalty. So I might wanna advance that capital, improvement to fuel switch from gas to electric. But at that very same time, I’m looking at, hey. I’m more prone to flooding. Right? The last big hurricane, I had a little bit of water damage. My next one is predicted to be higher, so I might wanna relocate my boiler from the ground floor to the first floor to the rooftop. So these are all the various considerations that we have to look at when we’re doing CapEx planning. Energy is a focus, but we’re looking at traditional due diligence. We’re looking at which age and condition, but you also gotta factor in resilience too because at that point in time, that makes all the sense of the world. You hate to do a big old capital improvement project and miss one of the most glaring risks that that building owners have, which is, some of these climate events that can happen. So, you know, again, office and and and retail, it’s it’s looking at all these data points. Right? It’s it’s what impacts this particular asset the most and looking at all these various factors and and analyzing it. Right? I think it’s so data tells you everything. And it’s and I I my my my personal concern is there’s just too much data. Right? Cass, I mean, the amount of subject matters you had to become proficient at in the past ten years probably tripled. Right. I think that’s part of the concern is how do you manage all this information? Yeah. I mean, there’s a a lot coming in and and a lot to consider. I mean, do you think the building owners are maybe getting better at understanding the the trade offs? Right? I think the the past was much like you said. If it’s when it breaks, we’ll figure it out. Right? Once it breaks, we’ll we’ll but now I think that we’re starting to see, you know, particularly if you have sustainability mandates or your, you know, buildings in a place where it they have to. Right? Well, maybe this pizza, they’re broken, but it’s just starting to like, the efficiency is starting to drop, or we could significantly boost our efficiency by replacing this, you know, even though it isn’t necessarily broken. Do you think owners are getting a little bit better about kind of weighing those? I I I think if from my perspective, it’s it’s institutional capital. Right? If you’re raising it from punch and funds and life insurance companies, there are kind of broader goals. I think those owners are very sophisticated. I think when you’re located in a jurisdiction where there’s, energy efficiency or carbon force of clients, they have become sophisticated. I think the rise in property insurance costs and I and and and and the inability to get property insurance, some instances, are making owners more sophisticated. So I think it just kinda varies. It it just there are extrinsic factors that make people more sophisticated because real estate people are, in general, smart, and they want to they’re very bottom line driven. But if there’s no ins there’s no reason, incentive, or or requirement, it’s it’s a little bit of passive lease and resistance. Yeah. Absolutely. Alright, man. I wanna bring you in here just to hear what you have to say about, you know, kind of using this data to to understand how to, you know, lower energy bills. Obviously, you know, you’re looking at things from a renewable standpoint, but, you know, I’m sure that a lot of people maybe are pushing back on, you know, do we need that right now? Maybe if we wait a little bit, these you know, a lot of these incentives might come back. I guess it’d probably be three years at this point until we get another administration. But, you know, what what is the kind of way that people, building owners, and managers are able to use data to understand where their, you know, on-site generation is now and and maybe where it could be with with some investment. Yeah. Optimization is all about dollars. Right? It’s for how many how how much does it for how many kilowatt hours that we can increase out of a system, how many dollars will it cost to do that? And to understand that question, it really all comes down to the why. Right? If a if a system is you know, on-site generation is not meeting the efficiency or output that it’s intended to, you have to answer the question, why? You know, if a if a plan is at fifty percent generation and it’s due to either, you know, widespread failure of equipment versus soiling versus snow coverage, the cost to increase the performance due to those reasons are vastly different, completely different. Some some might not even require you to do anything at all. And so, you know, understanding the payback period for for for those types of remediation pass are very important because, ultimately, it comes down to dollars. And so, you know, to to answer the question of why, it goes back to data too. Right? Having the right dataset and being able to analyze it, look at trends, and say, hey. This this is why this asset is underperforming, and this is what we’re gonna do about it. So, you know, we’re seeing that, you know, if if if if it there can be a clear articulation of a of a of a payback period, folks are making that investment in in remediation. How good are, you know, some of these models at understanding, like, the sun, for example? Right? How many cloudy days? How much sun at what exposure you’re getting? Are they are they pretty accurate? Can can the property industry kind of rely on those? Absolutely. Yeah. We actually you know, for for very large solar plants, they usually use on-site instruments to to measure the irradiance and wind speed and other factors. We actually use satellite irradiance data to analyze our fleets, and we actually find that it’s, you know, it’s actually more efficient, cheaper. You don’t have to maintain anything, and it’s extremely accurate. And so you’re able to see down to, you know, kind of the site level what the expected irradiance is for a given project, and that helps you answer why. Right? If a site’s not generating as much as you anticipated it, but there wasn’t much sun that day, that could be why, comparatively to a day where there’s a lot of sun. So, yeah, that’s, those are those are extremely important signals. And with advancements in recent years, we can actually get them remotely, which is a lot more efficient. That’s cool. Well, let’s talk about upgrades. Right? I mean, there is this idea of impactfulness. Right? There’s the cost, the benefit, and then the impactfulness, I think that when you bring that and you’re starting to look at, you know, your sustainability, your greenhouse gases, right, all of those things that maybe aren’t just the top and the bottom lines. You know, what are some of the best ways to determine what are the upgrades that are really going to impact the property the most? Cass, we’ll start with you on this one again. Yeah. I think understanding, you know, your overall I I mean, we’re in the midst of our strategy right now where we’re aiming towards, like, transition planning. And so as that plan is really put together, what we consider to be impactful will be, you know, what are the costs that are high that we know we can drive down, what is actually going to drive down emissions, etcetera, what’s gonna translate to the highest valuation if we decide to sell an asset, and, ultimately, what gets us closer to the returns profile that we’ve, you know, promised investors. So those are some of the things that we think about. But I think, you know, everything at this point is around, okay, how can we be predictive? So we think being predictive is going to be impactful, whether it’s around, you know, energy usage, whether it’s around water conservation. You know, that’s why sensor technology exists, etcetera. Doing those things helps us prevent what could be catastrophic, whether there’s variability in energy consumption with changing pricing or whether there’s a leak that we didn’t catch in time, and now this is something that, you know, we’re going to have to pay for. So I think from a sustainability standpoint, from a utility standpoint, we think of energy, water, waste emissions, and those are the categories that we need to tackle until they’re completely controlled. And, you know, I think in other areas where, you know, it’s gray, not everything’s black and white, like, where we might think, okay. This could be impactful, but we don’t understand if it’s truly going to deliver during the return period, or maybe we’re not sure about the hold of this asset, whatever it might be, we think about scenario analysis and piloting. Right? Seeing within a short period of time what is financially optimizing something. And if it’s not working, we need to pull it off quickly, again, in any of those categories. So that’s the the lens that we have in terms of thinking through most impactful upgrades. But, again, it’s thinking through energy, water, waste, emissions, and then, you know, what ultimately fits with what we can do at the asset. There’s a lot to consider from just a community management perspective. Sure. So yeah. We we got a question here, and you kind of answered it, but I’ll just maybe bring it out because it kind of puts things in a different light. It’s like, ROI models or frameworks do you find the most effective for quantifying the value of, say, AI or AIoT, but really any investment. Right? Any investment, like, where does the sustainability aspect fit? Where does the kind of, you know, future proofing fits? Is the model just how much we’re gonna spend and how much we’re gonna save? Like or or do you kind of, bring in all of these other factors as well? Yeah. I think there’s I mean, we lead with the, you know, quantitative thinking through. And then you think about the I don’t wanna call them normal return periods. I think that has changed a lot even for, like, solar modeling Where we thought it could be within three or four years. There are some scenarios where they might model it a little further out. So, but there’s something customary about each type of project. You know, when you do, like, an LED retrofit, for example, you expect some immediate change in your consumption and cost profile. So I think each one of those categories has their own methodology and expectation. There are others that are a little more qualitative, and that’s specifically around climate. So qualitative in the sense that, you know, you have to do some level of a sophisticated assessment. You know that you need to be able to speak to high level quantification of the financial risk as tied to whatever climate risk that you’ve identified and whether or not it’s in orange or red. Right? And then you dial that in, for example, in multifamily with your operations team to say, this is how much of the risk we’ve considered in insurance. This is how much of it we’ve considered, via what we can do operationally, whether it’s through early warning, wrapping pipes that we don’t want to burst, etcetera, and that gets very granular per asset. So I think it’s a mix of both, but I really do think there are some of these projects and categories that have their own expected timeline even with the shifting market and and incentives. And then it’s up to your individualized business to determine, like, what is your, your appetite for that. Right? If a seven year payback on a solar model doesn’t work for you because by then you expect to sell the asset, then you gotta think about something else in your strategy. So Yeah. I hear that over and over again that, you know, some these upgrades only make sense if you’re a a long term hold kind of kind of an owner. Right? Because then you’re pushing out this modeling way longer and a lot more things, I think, makes sense. Sure. Tony, I’m interested to hear from you. Obviously, you guys deal with, again, the office, the retail, all of these other asset classes. Right? So, know, what’s the kind of the the way to the best way do you think to model this? Obviously, you you guys just present to the information a lot of times, but I’m sure you see, the feedback, right, when you’re dealing with your clients. Yeah. Obviously, simple payback is is is very common. Another one that’s kinda common too is is looking at the energy savings and maintenance savings incurred by certain capital investments and then capping that savings. Right? And then looking at that multiple of that investment. So that’s another metric that, you know, a lot of these things would two, three time multiples over what the initial investment is. Right? So even people that have short term holds, right, if they can prove that, hey. You’re gonna appreciate lower operating cost, lower energy costs. That’s a value that you can sell to the, to the buyer. So that that’s something that we look at quite often. I say again, I I don’t wanna beat a dead horse here, but, you know, again, jurisdictions where there are penalties for carbon performance and energy performance, you gotta integrate that. It’s not just in your whole period. Right? So what you really gotta look at is in your disposition, is the next guy that’s buying your building is is that person going to experience a substantial penalty? Because if they are, they’re gonna negotiate for that. So that’s something you need to capital plan for during your whole period just because, you know, that that potential buyer is gonna know about it. And there’s gonna be some transparency there, and then and and there’s gonna be there there there will be negotiations happening. So it’s not just your whole period. It’s the next. And and then talking a little bit more about, you know, resilience and climate hazard. Think that that’s just, you know, a lot of properties. Again, it’s it’s it’s the the the the yellow and it’s the orange and the and the red. Right? If you have high acute risk, medium acute risk, it it pays to look to see if some best practices are there depending on the hazards. Right? Cass mentioned, you know, pipe wrapping. That makes all the sense in the world. Freeze detection. You know, the the just, you know, wildfire. Just just, you know, tree landscape management, removing wood chips. Right? Those are very cost effective ways to reduce significantly your hazard risks for particular climate hazards. And, again, I think what we’ll see in the future a little bit is insurance companies are gonna ask for more data. Right? I think there are it’s just the the if you look at it, like, five years ago, no one really cared about what all the data around the physical properties are for climate hazards. Right? You just got property insurance. You did the address, the size, and the type. Right. You got a quote. But today, it’s become a lot more sophisticated with a lot more folks asking for cope data, which is construction, occupancy, protection, exposure data to underwrite physical risk insurance. Right? And with good data, you will have good rates. And then with improvements, you can further improve your rates or just or, matter of fact, just get coverage in general. So I think that data just becomes a a a a it’s it’s just things you just gotta do to even get insurance from that perspective. Yeah. Again, I think that’s a a great, kind of point to end on, right, is that we talked a lot for a long time about this kind of green premium. Right? If you make a very sustainable building, it should be worth more. Right? Your kind of your your terminal value when you sell the building should go up. I think that we have seen that some places. I don’t know if it’s one hundred percent showing up everywhere, but I think that we what we’ve already seen is that, you know, the other side of that, which is we call, like, the brown discount. Right? Particularly in a place like you’re talking about that has, you know, fines that are going to start at some point for where you are, I think we’re already starting to see those buildings start to sell for for less. Right? Now you know as an as a buyer, you’re gonna go in, particularly when you use, you know, company like Partner, and they tell you all the things that is wrong with the building. You you know there’s gonna be a big expense coming in. Right? And so you expect at least that much of a haircut off off of the price, and I think we’re starting to see that a lot more. And, you know, hopefully, that will push sustainability to this point where now you are getting this kind of green premium. But I know that that, certainly, those those fines can can add up and and can scare buyers off. Right? I certainly would think twice about buying a building where I do. You know? And especially with the the changing regulatory environment that we’re in right now, right, the fast forward a couple years, and it it the fines could be a lot worse, and and things could could be worse. So I just wanna thank all of you for joining. I wanna remind everyone watching that this will be available on demand. If you use the same link to use to log in to this, you can watch it later, share it with your friends and family. Also, if any of you would like to be put in contact with any of the panelists here, please send me an email, and I can facilitate that. It’s Franco at Propmodo dot com, f r a n c o at Propmodo dot com. Cass, Matt, Tony, thanks for the great conversation. Thank you so much. Thank you.