In the commercial real estate world, most buildings offer tenants what's known as a NNN or Modified Gross lease. These leases have been around for a while and are pretty reliable, but they've had one big problem: they don't give building owners a good reason to make improvements.  

So....Why?  

Well, when building owners foot the entire bill for a project, and tenants get all the energy savings, it's no wonder owners don't see a financial reason to move forward. The result? Nothing gets done because there's zero ROI.  

Tenants want modernized buildings and lower costs, but this misalignment of incentives stops any action that could help both owners and tenants.  

That's where our new Ancillary Income offering called Efficiency Dividends comes in (you might know it as our "Rent" offering). Some of our biggest customers are now using this, and they're seeing roughly $20k - $40k of new ancillary income for the average 100,000 sq. ft building. And these are fully occupied buildings with tenants on long-term leases.  

So here's how we're making building improvements accessible to nearly 100% of buildings out there. Let's use a 10-building pilot rollout as an example.  

Step 1: Building Owner Implements Projects, Tenants Enjoy Lower OpEx.  

We partner with building owners to rapidly analyze their portfolios and identify buildings with significant financial potential. The building owner pays a 3rd party contractor to carry out the energy improvement projects. Once the projects are implemented, the building's energy costs drop. In our example, the energy bill was reduced across ten buildings by $400,000 ($40k per building).  

With Efficiency Dividends, the building owner can now split the $400,000 in energy savings with the tenant.  

In this step, tenants first realize the $400,000 in energy savings in this step. A new line item, Energy Reduction Service, is added to the CAMS by the Building Owner. This represents a $320,000 reimbursement that the tenant pays back to the building owner. Tenants will get a net OpEx reduction of $80,000 / year. $400,000 in energy savings - $320,000 reimbursement = $80,000.  

Step 2: Continuous Monitoring  

The energy savings service added to the tenant CAMS is what we, Carbon Lighthouse, provide to the building owner. It's a combination of data, software, and technology that offers ongoing monitoring, energy savings identification, and validation. This service is what creates the energy reductions and ensures the accuracy and validity of Efficiency Dividends calculations based on measured energy savings.  

The building owner sends us the $320,000 in service fees collected from the tenants' Energy Savings Service reimbursement. From this, we retain our fixed fee, which in this case comes to $70,000 per year.  

Step 3: Building Owner Receives Efficiency Dividends  

In this final step, we distribute Efficiency Dividends to the Building Owner. From the $320,000 we received, we keep our $70,000 fee.  The building owner receives $250,000 / yr in efficiency dividends.  

   Here's the math:  

1. Building Owner implements energy savings building improvements
2. Tenants see energy usage reduced by $400,000
3. Tenants reimburse Building Owner $320,000 for Energy Savings Service
4. Building Owner sends Carbon Lighthouse $320,000
5. Carbon Lighthouse retains $70,000 fee for services
6. Building Owner receives $250,000 in Efficiency Dividends
7. Building Owner generates ROI.
8. Tenants enjoy net reduction in expenses.

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Here's how it looks to the tenants.  

Pretty simple, and pretty boring, which is great!

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Want to see how this would work for your CRE portfolio? Contact us at sales@carbonlighthouse.com  

Want to learn more about Efficiency Dividends? Download the brochure here  

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