Frequently Asked Questions
FAQ
Why does Carbon Lighthouse pay rent?
- Carbon Lighthouse pays rent to landlords in 2,100 buildings in 46 states to overcome the landlord-tenant split incentive.
- In most commercial leases, landlords pay for projects that reduce opex but tenants get the savings. The landlord can usually recover their investment at cost or a small return, but this is not enough upside for landlords to prioritize investing time and millions of dollars.
- This is resolved when we pay rent. Now, landlords earn an above-market return on investments benefitting both them and tenants. The more projects the landlord invests in, the more rent they get.
- Over the past 15 years, our customers have invested more than $70,000,000 in opex savings projects.
- The average return-on-cost landlords have achieved is 62%.
How do you pay rent?
- The system works like an escrow. Whatever the measured savings at a property are, they go into the escrow.
- For example, if the measured savings at a property are $100,000 per year, the first $50,000 get paid to the landlord as rent. Next, we get paid a fixed service fee. The remaining dollars, typically ~45% of the total savings, then go to the tenants.
How do you measure the savings?
- We measure the savings in two ways. At each individual piece of equipment in the building - e.g. at each pump, fan, compressor, boiler, lighting circuit, etc. -and in the monthly utility bills.
- Our software reads the data from each building every fifteen minutes, and whenever it detects a problem that would waste >$1,000 / year it automatically emails the site team. This email says exactly what the problem is, which equipment is responsible, and has a Carbon Lighthouse engineer cc’d to help troubleshoot.
How long until I receive my first rent check?
- We begin renting a square foot of space in the mechanical room as soon as the lease is signed.
- As the landlord completes more projects that reduce operating costs, the amount of rent increases.
- Within the first year, most landlords should expect to receive $40,000/yr in rent.
How long is the rental agreement?
- Our standard lease is 10 years, with two 5-year extensions optional at the landlord's discretion.
- The lease may be cancelled by the landlord at any time.
- Nearly all landlords prefer a long lease since they cap the value of the income stream at disposition.
Where do the opex savings come from?
- Most opex savings come from upgrades to the existing building control system, or through the installation of new controls at the central equipment.
- These are primarily low-cost programming changes to reduce simultaneous heating and cooling and ensure equipment is operating efficiently. Fixing of root cause issues is often involved, e.g. a valve is leaking, a damper is stuck, etc.
- If a building has not yet completed an LED lighting retrofit, savings from lighting upgrades are realized as well.
What types of buildings does this work in?
- The best fit buildings are multi-tenant commercial office and outpatient medical facilities, sized 30,000 - 150,000 square feet. The average return on cost to landlords for these assets has been 62% over the past 15 years.
- Any commercial building >20,000 square feet is a potential fit, and we have successfully worked in buildings as small as 10,000 square feet, though landlord returns tend to be lower.
How much does it cost?
- For budgeting, a typical building controls upgrade costs $65,000 and generates $40,000 per year in rent.
- The landlord pays the $65,000 to their preferred HVAC controls contractor directly.
- Carbon Lighthouse charges a fixed monthly fee that varies depending upon property size, starting at $250/month.
What are the steps?
- Pre-qualify your portfolio. Start by making a free account here, and upload the list of buildings you control. Our software will automatically provide you with expected financials by building, based on trailing results from similar buildings. If the financials look good, we will then help you rule out buildings that are a poor fit for non-financial reasons.
- Sign a lease. Once you’ve selected 5-10 buildings for a pilot, we sign a lease with you and begin paying rent for a square foot of space in your mechanical rooms. Our engineers will get data from your assets and work with your property teams to identify and quantify high-return, hvac controls projects.
- Implement projects. As your preferred contractors complete these projects, Carbon Lighthouse continues to increase the amount of rent we pay. Within the first year most landlords receive annual rent of $40,000 per property from us.
Who else is doing this?
- Since 2010, we’re fortunate to have worked with hundreds of landlords in 2,000+ buildings in 46 states.
- Our customers collectively control more than $2,000,000,000,000 in Assets Under Management and include private equity firms Goldman Sachs and Blackstone, and REITs Ventas and American Healthcare REIT.
- For video and other testimonials see here.
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