Owen Barrett: 0:03

my hypothesis is if there are more building owners that are buying buildings to decarbonize them, then we will scale the decarbonization of existing buildings much faster than we're doing now. The challenge with that is that it's really capital intensive and you have to understand how to operate buildings as well as how to deploy clean technology. So it's not an easy solution by any means, but I do think it's the most efficient

Tom Raftery: 0:29

Good morning, good afternoon, or good evening, wherever you are in the world. This is the Climate Confident podcast. The number one podcast, showcasing best practices in climate emission, reductions and removals. And I'm your host, Tom Raftery. Don't forget to click follow on this podcast in your podcast app of choice, to be sure you don't miss any episodes. Hi everyone. Welcome to episode 129 of the Climate Confident Podcast. My name is Tom Raftery and before we kick off today's show, I want to take a moment to express my gratitude to all of our amazing supporters. Your support has been instrumental in keeping this podcast going, and I'm truly grateful for each and every one of you. If you're not already a supporter, I'd like to encourage you to consider joining our community of like-minded individuals who are passionate about climate. Supporting the podcast is easy and affordable, with options starting as low as just three euros or dollars, that's less than the cost of a cup of coffee, and your support will make a huge difference in keeping this show going strong. To become a supporter, simply click on the support link in the show notes of this or any episode, or visit tiny url.com/climate pod. Now, without further ado with me on the show today, I have my special guest, Owen. Owen, welcome to the podcast. Would you like to introduce yourself?

Owen Barrett: 1:54

Yeah. Thanks for having me, Tom. My name is Owen Barrett. I spend most of my time in San Diego, although I spend the summers in Mammoth. So if I see him out of breath, it's because I haven't fully acclimated to 8,000 feet yet.

Tom Raftery: 2:09

Nice, nice, nice. What do you do, Owen? Why are you on the podcast?

Owen Barrett: 2:14

Yeah, I mean, I think the easiest way to sum it up is my life's mission is decarbonizing existing real estate. The reason that I've chosen that is, real estate accounts for about 40% of global greenhouse gas emissions. And there is a decent amount of focus on building new buildings the right way, which is great. We need that. However, of all the buildings that exist in 2040, two thirds already exist today. So if all we're doing is focusing on building new buildings the right way, then we're missing the bulk of the problem. And so for the last. 10 years or so, I've had sort of a variety of different businesses that are all tackling the same problem, which is how can we rapidly decarbonize existing buildings?

Tom Raftery: 2:59

Okay. How can we rapidly decarbonize existing buildings?

Owen Barrett: 3:04

Well, I would argue that the, the fastest way you can do it is to become the owner. You know, the problem, as I see it, is not technology. We have the technology that we need to solve climate change. The problem is whether or not we can deploy it quickly. And anyone who's been in sort of the sustainability or clean tech industry will have a similar experience in that they've delivered proposals to business owners, to building owners, to CEOs, COOs, you know, VPs, whoever the decision maker is, and the proposal can make all the sense in the world from a financial perspective. And it falls on deaf ears, or it's not the right quarter, or they don't believe in the technology or they don't have the money, or, you know, there's a million different excuses why not to do the projects. And so my hypothesis is if if there are more building owners that are buying buildings to decarbonize them, then we will scale the decarbonization of existing buildings much faster than we're doing now. The challenge with that is that it's really capital intensive and you have to understand how to operate buildings as well as how to deploy clean technology. So it's not an easy solution by any means, but I, I do think it's the most efficient.

Tom Raftery: 4:15

Okay. And how do you go about buying the, all the building stock that's out there and decarbonizing it?

Owen Barrett: 4:24

So we've focused on multifamily, but you know, this model works on really any asset class. It actually works better on some asset classes. I just kind of fell into multifamily and now really understand it the best. What's interesting is that,

Tom Raftery: 4:38

just to clarify, you know, last, sorry, Owen, to cut across you, but just to clarify for people listening, when you say multifamily, you mean like apartment complexes?

Owen Barrett: 4:46

I mean apartment complexes. Yeah. Although, you know, it could be like single family homes at scale as well, I guess would be considered like commercial, residential real estate. But we focus on apartment buildings, so generally 50 plus unit apartment buildings. Real estate is sort of the oldest, whitest, least innovative industry that I've ever come across. There really hasn't changed very much in, you know, hundreds of years. And it's interesting for me because, I've spent a decade sort of getting trained to recognize energy costs as an opportunity where, and by, by that I mean if you can figure out a way to eliminate them or reduce 'em through energy efficiency or renewable energy, that's straight, that's money straight to the bottom line. So instead of paying your utility, it's either net profit if you know you're operating a business, if you're operating real estate, it's net operating income. And so what I recognized sort of eight years ago is, There's not really anybody in the multifamily real estate space that understands that. That understands if you can save energy in a cost effective manner, you can make your property more valuable. And so we're looking for multifamily deals that are great real estate deals on the surface. And then if we layer in our energy efficiency and renewable energy, not only can we convert 'em to net zero buildings without carbon offsets, which I think is a really important point to distinguish. But we're also making the properties more valuable than they would've been without clean technology. So it's sort of this nuanced understanding of how to find and acquire multi-family buildings and then operate them, but also how to implement energy efficiency and renewable energy projects in the properties that we own.

Tom Raftery: 6:30

Okay. Where does the money come from for this? Because as you said, it's capital intensive and either you've got a very nice bank manager or you've got a very big bank account, or you're finding some other way to source money to buy all this real estate.

Owen Barrett: 6:46

Yeah, it would be nice if it was all coming from my bank account, that definitely simplify the process, but I'm not there quite yet. I mean, it comes from a variety of places so, we have syndicated deals from friends and family, meaning that our friends and family friends of friends, et cetera, are writing 50,000, a hundred thousand, $200,000 checks. And, and that's nice, but it's a little bit cumbersome. You know, you never really know and doesn't scale very well, doesn't scale. I mean, some people have been successful in scaling it, but it takes a long time, and I would argue that time is the one variable we don't have with climate change. So true. I don't have the time to figure out how to scale a network of rich people who are gonna write me $50,000 checks. So then we kind of moved into private equity and family offices. So these are families worth, you know, 50, a hundred, 500 million that are writing 10 million checks and that's easier. But my experience is that those groups are not fun to work with. They, they generally don't care about environmental impact, even if it's all over their website. So they may say one, say one thing, they may market one thing, you know, and then you get in a closed door meeting with'em and it's the total opposite which is a little disheartening to learn. So what we've shifted to most recently that I'm really excited about is basically democratizing the ability to do this. So, In my experience, the people that have the ability to write 50,000 or 5 million dollar checks don't care about climate change. They just wanna make as much money as humanly possible. I'm still optimistic that there are people out there that care about climate change and wanna spend their money in a way that fights climate change. But I think it's at the individual level, not the institutional one. I think it's at the retail investor level. People like you and me, people like our friends and family. And so we've created a new brand called Rayven that is more retail investor facing, and we've lowered our investment minimum to $250 and we offer 10% interest from a returns perspective. So our hunch, our hypothesis is that if we market this opportunity. If we can tell people that we can buy existing buildings, we can convert them to net zero, we'll pay you a 10% annual interest and the minimum investment is only $250. What we think is gonna happen is that we're going to grow that community of people that really do care about fighting climate change and wanna get paid in the process of doing so.

Tom Raftery: 9:11

Okay. And if I give you $250 you are then committed to giving me.$25 a year every year for, is it a fixed number of years or is it in perpetuity or how does that work?

Owen Barrett: 9:29

Yeah, so a couple, that's a good question and there's a couple answers. One is we're targeting five a five year hold right now. So that's, that's our plan right now. It's hard to predict where the market's going to be in five years. Obviously, we don't wanna sell properties in a downmarket because that's how you lose a lot of money. So there is some flexibility on the hold period. But the other thing that's happening that's really cool is, and I don't understand this space as much as other people, so I'm not gonna be able to answer a lot of questions about it, but this whole concept of tokenization and tokenizing investment opportunities, would offer liquidity to our investors. And so you could actually set up a marketplace where people could buy and sell tokens in our investments. And so you could shorten that that five year hold horizon, you know, down to a day or less. But that's not available yet. It's something that companies are working on. It's probably gonna be available in a year or so. And so we're keeping a close eye on that because I think at the end of the day, if we can offer more liquidity, the same investment terms, but more liquidity. I think it's just gonna be even more in demand cuz a lot of people don't want their money locked up for five years.

Tom Raftery: 10:39

Sure, sure, sure, sure. And how are you decarbonizing the real estate?

Owen Barrett: 10:48

Another great question. It depends, right? Not all buildings are built the same way, but at a high level it's energy efficiency first and renewable energy second. We, so there's something now called the Inflation Reduction Act in the US, which is, yeah, amazing. It really, you know, puts a lot of money behind electrifying and decarbonizing, which is great for us cuz we never anticipated that happening. So now it's just, it makes our you know, our business model more valuable. The easiest way for us to make a true net zero building is to take a property that is mostly all electric. So at the apartment level you'll have electric appliances and then domestic hot water might be gas. And so that's really easy for us to electrify the domestic hot water system. We can electrify apartment units that have gas appliances, like gas stoves or potentially gas dryers. The thing that we run into is, If you have a hundred unit apartment building and every apartment unit has say a hundred amp panel, and there's a gas stove and a gas dryer, and now you electrify the stove and dryer, you need to upsize your electric panel to probably 150 or 200 amps. And so now you're upsizing a hundred electric panels that all come back to a transformer. Now you have to increase the size of that transformer. That transformer is usually utility property. So now you need interaction with the utility, which takes a lot of time, is usually expensive. So we tend to kind of cherry pick properties that don't require a huge amount of electrification just because it lets us operate at a scale that's faster and more impactful than, than otherwise. And then part of our team has a ton of experience in installing solar, commercial solar, residential solar, utility scale solar. So once we've kind of optimized a property from an efficiency standpoint, then we'll install enough renewable energy on site. So that our properties produce as much clean energy as they consume on an annual basis.

Tom Raftery: 14:07

Okay. That's gotta be challenging though, because if you are looking at a, for example, 50 unit apartment complex. Or even a 20 unit apartment complex, where will you get the space to install enough solar to provide enough renewable energy for those 20 apartments?

Owen Barrett: 14:28

So we generally look for garden style apartments, which are usually one or two story. And we do that because there's a lot of roof space. It's more cost effective to install solar on the roof than it is in a parking lot. And so we can usually fit all the solar that we need on the roof again, because we know what to look for. We know how to identify properties that have enough roof space. But it's also nice to install solar in a parking lot in the right markets because sometimes there's actually a, a premium to covered parking. Mm-hmm. So it may be a little bit more expensive on a per watt basis to install carports than solar on the roof. But if you're getting 50 to a hundred bucks a month from tenants for covered parking, now all of a sudden the, the cost effectiveness of carport solar is better than rooftop solar. The other big thing is EVs. So electric vehicle charging is probably the most in demand amenity in multifamily housing right now. Mm-hmm. Of course, no owner is ready for this, for this pressure from potential tenants, and so with, with solar in carports. You're, you know, you're already trenching back to your electrical service. So it offers this really, sort of seamless way to also install EV chargers. So there's a lot of, of different sort of variables that go into the decision, but we've never, we've never bought a property that we couldn't install enough solar on to offset an annual load. But we're also not buying, you know, we're not buying high rises or mid rises. We're specifically targeting garden style.

Tom Raftery: 16:03

Okay. Okay. Okay. And what then, do you flip the properties or do you hold them, or what do you do?

Owen Barrett: 16:14

Yeah, so this is interesting. We, so when I started the first company that was really focused on buying and decarbonizing properties, it's called ZNE Capital. It was started entirely as an environmental company. And really that's because I didn't have a clue about real, the real estate industry, but I'll never forget this. I went to it was like a 35 million apartment building in Mesquite, Texas that was listed for sale. And it was the fourth time in 10 years that the same broker was selling it. Wow. So every two and a half years, an investing group, investment group would come in and buy the property. They're trying to hit, you know, 15 to 20% IRR. All these investment groups are the same. They're trying to hit a 15 to 20% IRR. The way that you do that is you, you increase revenue and you cut expenses. Well, increasing revenue means you're increasing rent and cut expenses means that you're making the property worse to live at. You're, you know, you're cutting services generally. So every two and a half years, tenants were basically facing high rent increases, new ownership their service requests were not being fulfilled and I couldn't believe it. And that day I decided I'm never gonna be a short term apartment owner. I'm always gonna hold for the long term because this simple act of just holding for 10 years gives tenants stability for 10 years, right? And so you can introduce this massive social impact without doing anything beyond just holding the property longer. And it seems obvious to us, like we can't be an impactful company if we're, if we're disregarding social impact, it's just hypocritical. So we try and hold for at least 10 years. In a perfect world, we'd hold forever, but you know, a lot of our equity partners don't want us to do that. They wanna get their money back, they wanna get a certain return on their money. So if we can figure out this tokenization angle. We can figure out how to offer liquidity to these retail investors that are investing $250 there. I mean, there's a, a real opportunity to create a vehicle that buys and decarbonises properties and, and has this whole host of social impacts in perpetuity. And that to me is like, that's what real estate, that's how real estate investors should be looking at these communities. But not a lot of groups are.

Tom Raftery: 18:45

Yeah. Yeah. No, there's a lot of short-termism out there, which yeah doesn't work in most people's favor, I gotta think.

Owen Barrett: 18:52

No. Yeah. It's pretty sad when you think about it, but I mean, it leaves an opportunity on the table too to really solve a, a major problem.

Tom Raftery: 19:00

Yeah. Yep. You. Are from how you're describing it, you, your process means you're quite picky about the properties that you buy necessarily. Low rises, X number of tenants, enough roof space, not too, not, not too many gas appliances. That's kind of in conflict with your aim of decarbonizing all real estate stock, no?

Owen Barrett: 19:30

Not really. I mean, there's hundreds of billions of dollars of properties that, that fit exactly our model that we could buy. I mean, the reality is we don't have enough money. We don't have enough time to decarbonize all of the properties that fit our like our box. Right? What we need is we need other people to, to understand what we're doing and to copy us. And we actually just, you know, we've been doing this for, since 2017. About two or three months ago an American billionaire Tom Steyer announced that he was gonna do the exact same model. And a lot of people reached out to me when these, these headlines started coming out. You know, asking if, are you guys scared, Tom Steyer's copying your business model? And we're like, no, this is great. Like, let's, hopefully Tom does this and other real estate owners do this and everyone does this because the reality is we're not gonna make a drop in the bucket. I mean, we're gonna have a tiny little impact even if we hit massive scale. We could buy a hundred thousand apartment units and it's still drop in the bucket. So we need other people to copy us. We need other people to, you know, reach out, ask us how are you guys decarbonizing properties? How are you getting the, the economics to work out? Because ultimately it's gonna take a lot more apartment owners than just us to really make a big dent on, on emissions from this from the sector.

Tom Raftery: 20:45

Okay. And where to next? I mean, what, what's, what's your kind of five, 10 year plan?

Owen Barrett: 20:50

Well, you know, we just launched Rayven. So Ray ven's interesting. It's within real estate investing, there's a couple different ways that you can legally raise money. There's something called regulation D, so whenever you solicit funds from investors, it has to be approved by the SEC or qualified by the SEC as securities and exchange commission. And so regulation d as in dog, there are two options. There's a 5 0 6 B and a 5 0 6 C and the 5 0 6 B. And both of them are really easy to do super fast. You know, couple weeks you can have a a one of these exemptions up and running. But a 5 0 6 B, you cannot market, but you can take money from non-accredited investors. So it's really like a friends or family round. So, The nice part of that is you're legally allowed to take money from friends and family. The bad part about that is you, you can't market it. So your ability to raise money is confined by your personal ecosystem, like your personal Rolodex. I don't have a lot of really rich friends and family, so that for us, wasn't, wasn't gonna work. And then the 5 0 6 C as in cat, You can market that, but you can only take money from accredited investors who are people with a net worth exceeding a million dollars, excluding their primary residence, or they're making, you know, two to $300,000 a year. It's not the majority of Americans. Mm-hmm. Most Americans are not accredited investors. So, but that one's really nice because you can market it. The other option that people have is something called Regulation A which is called the Mini IPO. That's a nickname. So the idea was to, and this came outta Obama's 2012 Jobs Act. The idea was to offer liquidity to small companies, small private companies in sort of a more cost effective manner than raising an IPO. And so, now we can market our opportunity and take money from non-accredited investors, take investment from them. So it's sort of the best of both worlds. The downside is, even though they tried to, to structure this regulation A, so it's more cost effective than an IPO, which it is, you know, it takes about a year and it takes hundreds of thousands of dollars. It's not free. So we just got our SEC qualification, so, at the end of March. So we started legally raising money and marketing in April. And we're, you know, it's working. It's, it's going, we have marketing all over the place, all over social media channels. We're bringing in investment, we're having webinars, we're talking to investors. I mean, it's really cool. But I say all that because we're at the very early days of our first Regulation A offering, this brand new business model of Rayven. If it's successful, which I hope it is, I think it will be We're just gonna have Regulation A offering after Regulation A offering, you know, keep buying multifamily. We may go into different asset classes. Industrial is really interesting cuz they're, you know, huge warehouses with a ton of roof space and almost none of them have solar. Yeah. And so I think for us, if this first one is successful, it's figuring out how to, how to build this piece out and scale. So we keep buying a lot of multifamily properties. Then it's also figuring out how to go to go into different asset classes because there really are some, some really interesting asset classes. Industrial's one. Conditioned self-storage is another. So, you know, you see these huge self-storage facilities that are climate controlled. Huge roof space, no solar. So it's just, there's a lot of obvious places that we can go next, but we gotta make sure that this first one's successful before we start, you know, dreaming too big.

Tom Raftery: 24:33

Okay. Okay, nice. Owen, we're coming towards the end of the podcast now. Is there any question that I haven't asked you that you wish I had or any aspect of this we haven't touched on that you think it's important for people to think about?

Owen Barrett: 24:47

Yeah, I think you should be asking why aren't other multifamily owners or real estate owners doing this? Right? It sounds so obvious. That's the question we get all the time. This sounds so obvious. Why aren't other people doing it? The answer is they don't have the expertise. I mean, solar. Just solar. So we do more than solar, we do energy efficiency and solar. But just thinking, do storage, one of those, we don't do storage generally because we don't buy in well, so this is, could be changing. Historically we haven't evaluated solar because we like to buy in cash flowing markets, which is usually the Midwest. In order for storage to pencil out financially, you need a really big delta between on-peak electricity costs and off-peak because the storage is, is great in the event of a power outage to keep your lights on, but the way that you justify it is you kind of arbitrage the on-peak and the off peak energy costs. Yep. In the Midwest, you know, in California on-peak electricity is like 60 or 70 cents a kilowatt hour. Sometimes I think it goes over a dollar, which is crazy. Wow. And then off peak is like, 10, 15, 20 cents. So obviously there's a 60 cent gap. That's a huge opportunity to arbitrage. In you know, Nebraska, for instance, on peak is like 15 cents, and off peak is nine. So the, the storage costs the same, but the delta, your opportunity to arbitrage is just a lot smaller. So we have not figured out a way to make that pencil out. Now I will say, In the US and this could be happening elsewhere, but in the US there's a huge push for virtual power plants. You know what those are? Mm-hmm. Yeah, yeah, yeah.

Tom Raftery: 26:26

So, but, but I, I do, because I've, I've talked about them, a lot of conferences, but people listening to the podcast, let, let's assume they don't.

Owen Barrett: 26:35

Okay. So this, this is a fascinating topic. I, I call it cloud computing for energy. Yeah, that's a great, yeah, that's a great way to, to frame it. In the US electricity demand has not really increased since the late eighties, early nineties when we started putting air conditioning everywhere. So demand has increased, but that's kind of been offset by improvements in efficiency and renewable energy. So it's, it's basically flat lined, but now with the Inflation Reduction Act pushing electrification and with the EVs, the US is gonna see massive demand increase in electricity. And what happened in the late eighties and nineties is utilities built a lot of gas peaker plants, which are hugely expensive, which equates to increases to rate payers so your electricity costs go up and they're really dirty. So today, with climate change on everybody's radar, there's no way that we can justify building gas peaker plants. The only other option is if virtual power plants take off, so as sort of the grid hits its limit, instead of turning on a gas peaker plant and increasing supply, you basically, the grid sends out messages to buildings and says, you know, now is the time for you to curtail demand. You need to cut demand. And the way that you do that is you flip off buying energy from the grid or taking energy from the grid. And instead you get it from your storage system. So that's important because that's the way to make storage more cost effective in markets that don't have big deltas be between on peak and off-peak. Because in those instances, the utilities are actually paying homeowners to curtail their demand. And so it's, it's another way to offset the costs. And so, we are keeping a really close eye on these VPP markets that are becoming more popular. And we'd love to buy an apartment in one of these markets and then put a storage system in every single unit so that we're returning our entire complex into basically this huge battery. Mm-hmm. And then we'll get paid when the grid hits these peak demand moments. So it's, I mean, that's a really cool part of the space. But it's just beginning, like that's gonna be a huge next 10, 20 years, it's gonna be massive. Yeah. Yeah. But going back to the question that you should have asked, why, why is nobody else doing this? And you know, it's because real estate companies are real estate companies. They're not clean tech companies. So there's a huge amount of momentum to, to get real estate companies to decarbonize and a lot of 'em are coming out with net zero commitments that, you know, are just, they're absolutely meaningless. They're just promises on paper. There's no plan to get there. But that pressure is gonna get stronger. And so what I think is gonna happen is real estate companies are going to have to start building out their, you know, their, their ESG departments, their sustainability departments, their energy management departments. It's just, it's, the only way for this to happen is real estate companies somehow need to get more expertise in-house with energy efficiency and renewable energy. So I think that's, you know, it's a huge opportunity for people if they wanna like get ahead of future employment patterns. I think that's gonna be a big one.

Tom Raftery: 29:52

Nice, nice, nice. Cool. Owen, if people would like to know more about yourself or any of the things we talked about in the podcast today, where would you have me direct them?

Owen Barrett: 30:03

So they can find me on LinkedIn, Owen Barrett. And then our company is Rayven with a Y R A Y V E N. Our website is join rayven.com and all of our social handles are at Join Rayven.

Tom Raftery: 30:16

Perfect. Perfect. I'll put those links in the show notes. Owen, that's been fantastic. Really, really interesting. Thanks a million for coming on the podcast today.

Owen Barrett: 30:24

Yeah, thanks for having me.

Tom Raftery: 30:25

Okay, we've come to the end of the show. Thanks everyone for listening. If you'd like to know more about the Climate Confident podcast, feel free to drop me an email to Tom raftery@outlook.com. Or message me on LinkedIn or Twitter. If you like the show, please, don't forget to click follow on it in your podcast application of choice to get new episodes as soon as they're published. Also, please don't forget to rate and review the podcast. It really does help new people to find the show. Thanks, catch you all next time.