Solar Development & Sustainability with Dakota Malone

All right, it's Mason McDonald here, and we have a very, very fun, intense episode with three type A entrepreneurs going at it at a hundred miles per hour for just short of an hour with a new person that we're very excited about what he's doing in the business that he runs. But before we get into that, Dan, how are you doing?

I'm great, Mason. It's busy in all segments of the business right now, so. Having fun?

Yeah, yeah. It's the end of April as we're recording this, so business is picking up. The market's, you know, doing what the market does, which is kind of interesting right now. It's a weird market to be in, but I guess we could always say that. But with that being said, the person that we spoke to today, Dakota Malone, has a very interesting business that he runs that I think will weather many economic storms for decades, if not, you know, the next century or two within the United States. So Dakota is a sustainability entrepreneur in the commercial solar space. His company, Community Solar Authority, helps large users of electricity think through enhanced sustainability. He is someone who is thriving, post five heart surgeries, and truly looks at life through the lens of sustainability. And you can see that in our interview today in all of the operations within his business and just everything about him. So let's bring Dakota in.

Welcome to the Big Picture Blueprint. I'm your host, Dan Evercost, along with Mason McDonald, and we're going to discuss all things land, real estate, and business in general with all kinds of exceptional people. Let's get started.

Right.

Welcome, everybody. Dakota, how are you doing today?

I am doing amazing, gentlemen. Thank you for having me.

Awesome. Yeah, it's fun and kind of funny how small of a world it is. An older friend of mine sent me a podcast that you were on. I sent it to Mason, and Mason goes and follows you on LinkedIn and you guys connect, you listen to our podcast, and here you are. Now we get to interview you. So it's kind of fun how these things work out, but let's dive right into it because we've got a lot to talk about. So, Dakota, you own Community Solar Authority. Can you tell us what all does your company do?

Yeah. So I co founded Community Solar Authority about six years ago at this point with someone that I've been working with for over a decade. We both started in the retail energy space running direct sales arms for some, you know, major energy companies. Essentially saw the writing on the wall with the job security that renewables was going to provide just with how large the industry has rapidly grown over the last, you know, half decade and picked up an additional co founder along the way. And for the last six years, guys, we've been consulting alongside some of the most significant solar developers in the country. We have a streamlined interest in, simply put, deploying access to renewables. Our group specifically works with large users of electricity. We help them streamline access to commercial solar incentives. And then on the backside of that, we're working with solar developers at a national level, thinking about where can we put additional solar farms, how can we work with organizations and landowners from a leasing perspective and really what does it look like to manage those assets long term in a partnership type ecosystem utilizing sustainability principles. So we're a lean company, bootstrapped, really practicing what we preach as far as the concept of sustainability. And so at a glance, we're helping large users access available incentives. And of course, as we see the industry grow year over year, in some cases 5, 600% in certain areas, like community solar, which we specialize in, it's, it's a pretty exciting industry to be involved in and that's what we've been doing for the last half decade.

Okay, there is a lot to unpack there. That's super interesting and exciting because, you know, a burgeoning industry that's only going to grow and I think substantially in.

The very near future.

So let me make sure both myself and then also to clarify for the audience, we understand exactly what you're, you're doing. So if I were a large company, let's say I'm, I don't know, Amazon is an extreme example.

But let's say I'm a huge company.

A huge user of electricity. I could approach you to help, whether it's on land I already, we already own or buying more approach you to put solar in so that I'm able to reduce our electric bill and be more energy independent. Is that kind of the core of what you're doing and then the middleman between all the various pieces and parts that it takes to do that?

Exactly, yeah. We're a sustainability strategy arm, essentially a bolt on commercial solar team in the commercial solar space with sustainability and you know, for the purpose of OPEX reductions. And so that may look like on site solar and some of the options that you had spoke on, it may look like off site solar. You know, for example, we're working with an international transportation company right now, $80 billion company, and we took all of their utility accounts, about 1500 of them in this particular state, and they spent $0, they didn't install solar on site anywhere. And we're currently working on closing that deal where they're going to access millions and millions of dollars in electricity savings on a zero dollar investment without having to install solar on site. So there are so many creative strategies when you think about the available incentives, which is really backed by a trillion dollar clean energy economy. Whether you look at that from a government plan type pressure or rather just the need to enhance sustainability. I built community Solar authority off of a thesis that was the more sustainable you are, the more likely you remain in business over the long term. And for us our business is just about, really about proving that thesis to be true. Sure.

And so last thing, and I'll pass to Mason here. Are you doing this for government entities as well?

So currently do not have any government entities that we're working with. We do again, our niche is large users of electricity. We have had government entities reach out to us. They're just extremely slow compared to, you know, the speed we like to execute at. And so we, you know, we're in the business of execution just like any other brokerage, you know, we've modeled what we built off of other commercial real estate brokerages. You know, sustainability and renewables can be looked at as an asset within commercial real estate. And so for us, you know, we're lining up buyers and sellers and being the middleman in between for a good chunk of our business, the brokerage facing side. And again we do municipalities and universities and hospitals and everything in between. But we're really interested in those looking to execute better quickly. And typically that's not government entities, what.

Administration is in place and what legislation is coming through that you're probably tracking regularly to how you sell yourself to these organizations. So you focused on, you know, within the P and L, the operating expense that you're able to reduce through these various incentives and everything like that. But what, what about on the balance sheet of. Are these companies that you're working with, I guess outline to me how they're getting the benefit of the electric because you're talking about the incentives as well. Are they able to capture depreciation from the solar panels? Do they own the solar panels or is it the landowner that owns the solar panel or the solar authority or who owns what in this transaction? And kind of how like say, say Dan and I own a big. We, we own a hospital and we have a huge electric bill. How are you selling yourself?

Yes, great questions. And really the name of the game is all about which strategy to pursue. And that's why, you know, front facing we're a brokerage, but on the backside of that we're really a media company that's educating our users through content, which you guys obviously found me on LinkedIn and checked out my other podcasts. And so we're leveraging at least I am a niche creator model so that people see the content I post, they see the case studies I talk about, they see the work that we do, and they say, I want to do that too. And again, based on, because everything's hand tailored. Some companies may have massive real estate holdings and they need the tax incentives to depreciate and get those tax incentives. Other companies have no intention of owning anything. They don't even want a freaking panel on their building. And they wanted a strategy. And so everything that we do is hand tailored, which is why we ultimately chose to niche, which again, I, I'm obsessed with the idea of talking about like offers and business models in the context of entrepreneurship because I think it's super important in order to stay lean without bottlenecking yourself. We had to narrow down a niche so that we turned away a vast majority of business and only said yes, in our case to the largest users of electricity. So they come to us with one specific problem or maybe two, which is they need to enhance sustainability and they need to lower operating costs. And then based up, I see my emojis going off and then based on those two things will determine which strategy is suited for them on site. Solar, offsite, solar, solar, leasing. That's really like the gamut of what we deliver. And of course there's a bunch of, you know, rainfall strategies underneath that. But again, in the context of a hospital, they may not have the roof space to be able to put a solar system on that offsets anything meaningful. Hospitals obviously run 24 7, they use a lot of power. And so we look at all different types of solutions. Again, what we would really do is come in, assess, you know, from our expertise and you know, all of our developers as well, which is also the benefit of it is we keep everything in house, meaning you don't have to go talk to 20 different solar developers and get their opinions on, you know, what we should actually do. It's we're pulling one on the back of over half a decade of experience in the space directly doing these exact rollouts and strategies. But then also our ecosystem of partnerships, you know, some of our mentors in the space were the people that literally wrote some of these incentives into legislation and made them available at a state level. And so that helps. Right? And again, that's our unique value prop. And so I hope that answers the question. It may be a bit of a dodge, but it really depends on what the strategy is, what we're trying to do. But really it's based off of are we enhancing sustainability in ESG reporting or are we actually just looking for OPEX reductions or are we looking for value add with passive leasing through, you know, solar incentives? Again, that hospital may have a parking lot that just so happens to be in a great, highly incentivized area. We throw carports over the top of it and all of a sudden you're not taking on any of the power, you're just adding an additional asset to your balance sheet as a tenant and you know, the solar developers taking care of all the work to just pay you an annual lease payment for it.

That's fascinating. And I think for the, for the savvy business owners and operators that are listening, they might hear what you're saying and get confused of niching down and then also having all these, you know, potential agreements and everything like that and be like, no, that doesn't make sense. But it, it really, really does. Of the, the execution of the strategy is going to be almost the same regardless of what, what the desired demand is from, from your potential client. So one more question kind of on this and then I think we can potentially kind of start talking about the landowners and the way these, this solar leasing side of the business works. Hospital administrator by trade. So I got it like talking about hospitals and not the, the highly, highly regulatory, you know, environment that, that it is when you're talking about maintaining so many of these positions in house. And I'm, I'm going to speak to healthcare because, you know, it's one of the, you know, three things I know about and it'll make me sound smarter with going in and putting in on site or offsite solar into a hospital as a client. Hospitals have requirements where they cannot have power outages. They have all these generators that are involved where if power goes out, you know, all this flips, which I imagine, you know, in implementing a new power system into, it could potentially cause issues or anything like that. So what is, what is the engineering or electrical engineering component of your team look like? Is that something in house or is that something that you guys contract or how does that work? Because if I was a hospital CEO and I was like, hey, this stud just approached me on LinkedIn saying that I can reduce our operating expense, but you know, what do they know about engineering? You know, how do you kind of approach that and what's your team look like?

I love this question, Mason, and thank you for asking it. I don't think I've ever answered it publicly on a podcast, so prime example. And you know, typically we start with community solar because it's the lowest barrier to entry. Let me just explain community Solar a little bit and it would make sense why our brand is Community Solar Authority. So Community solar is off site solar. It, it is the concept of shared solar as a way to help utility zones clean up their own local energy grids. And so the wind up in the pitch of Community Solar similar to what I talked about with that international transportation company. Another example is right now we're working with one of the largest water authorities in the country. And very similar question. They're like, hey, we can't have any sort of mishaps in electricity if we were to sign up for something like this. So if you're saying you can save us hundreds of thousands of dollars, great. But, but like what is the downside and what's that risk? And with Community Solar, the amazing piece is that when you are choosing to participate in community solar legislation, what you're actually doing is transacting on really more of a financial instrument, meaning that in exchange for participating in a local solar farm, and you can look at this just like a commercial real estate lease. If you have a strip mall, you have an anchor tenant, a Target, Walmart, etc. And then you have a bunch of backfill, that anchor tenant is really there to de risk that commercial real estate asset. Same exact thing on a solar farm. So those large users hospital would be joining a local solar farm, taking up a majority of the project and essentially making it financeable so that we can fill it with the rest of small businesses, residents, et cetera, and really bring that into an operating asset. So it is not an environmental sustainability practice, it's a business sustainability practice. This and the difference is, is that they are joining to help clean the energy grid and display environmental stewardship. But that's about it. In exchange, what's actually happening is their utility account is receiving a bill credit based on how many solar panels they're taking up on that solar farm. And so it is just a financial model in this case where there is no demand issues because it's not 100% electricity coming back into their building. In fact, it's no clean electricity from that solar project coming back into their building. It's really just A financial instrument for OPEX reductions. It helps them display environmental stewardship. It helps the utility clean their energy grids. And that really comes down from a commitment from a state, you know, New York State, for example, saying, hey, we're going to be 100% renewable energy by the next 10 years. Well, the way that they actually are doing that, or a driving factor is this community solar legislation where they're building these clean energy assets, pumping that clean energy back into the grid, that's then distributed into the grid and not necessarily the business participating. So pretty niche answer. I hope that answers the question, but we deal with that and that's actually a fantastic. I appreciate that. Definitely going to clip it. And I hope that kind of encapsulates the answer because it's. It's really a safe way to capture available incentives without actually risking your. Your asset or your clients in this case, or customers, which would be, you know, people using the hospitals, relying on, you know, life support or breathers or anything else going on in there. You know, my sister's a charge nurse at a major hospital in my hometown in central New York down in the er, and so I totally understand those concerns there, but. But I hope that answers the question.

Oh, it does, it does. I. And, and it's fascinating of it, once again shows whenever you are presenting to someone how you're able to display the value proposition that you're able to create here as versus saying, like, look at all these 50 different million things and don't worry, we're also an electrical engineering firm and, you know, all these other things. So fantastic answer. Really, really fun concept here. And it's just. It's getting my brain working in ways that it. It doesn't usually get to work.

Yeah. Before. Before we move on, Mason, I think I want to explain just a little bit further because I think you did such a good job of touching on it, which is really the business model where maybe a new entrepreneur would look at that and be like, well, that's not niching down. Or like you have like 10 different offers. And really what it is, is it's the same exact process which we decommoditized. And so again, Community Solar is just like any other energy product, which is commoditized in a sense, meaning really anybody can sell it, anybody can do it. You have to have the connections, you have to have the right relationships. But really what we've done is we systematized it and decommoditized it by naming it something else completely. And for us, we call it Our sustainability fast pass. And it was built off the idea of like, you know, you go to Disney World, you get the fast pass, the line's long, the, you know, crowd, the park is packed, it's super hot outside, you have to wait hours to get in line. But if you have a fast pass, you arrive to the front of the line and you get all the value. That was literally how we built our sustainability. FastPass was the idea of going to Disney World. And so in that same instance, what we're actually doing is we're offering that FastPass offer in all of these different strategies. So it may look like solar leasing. It's the same four steps. If it were community solar, which is what we had just kind of talked about. And so again, just like it's a way to vertically integrate your offers by running the same exact operating system over and over and over again. And, and you're serving it to a niche audience. And so really just like you're vertically integrating your real estate business by, you know, owning the construction company that also owns the development company that also owns the, you know, paycheck company, we're doing the same exact thing in the commercial solar space. So I just wanted to touch on. Interesting.

Yeah, no, thanks for that clarification and agree with Mason where you got my mind going. There's a million follow up questions, but I, I wanted to stay on track here and we'll get to how this could potentially be useful for land investors. But before we hit on that, I want to make sure I clearly understand what all the potential stakeholders here. So using the hospital example, Mason and I, let's pretend we own a hospital. We take your idea, great parking lot, strong incentives. So we put carports and we put solar on top of those carports. Now, to be clear, in this scenario, there's potentially the option for the developer, the solar developer, to still own those panels after installed and then just pay us a rent payment, a lease, right?

100%. Yeah. And I'll give you another example right now, and we had talked about this before, we hit record, which is like the timeline of deal structures and how if you're willing to wait out the, you know, three to five year deal cycle, that could be some of the most profitable and beneficial deals that you could do and really get yourself off the hamster wheel, which is a whole different concept in entrepreneurship. But to that point, right now we're working with actually one of our consultants at Community Solar Authority and his family operates one of the largest malls in the state of Rhode Island. It is a 25 plus acre mall that we are looking at converting into what we're deeming sustainable urban oasis. And so as we look at the consumer data of do people care if a entity is representative of sustainability measures or principles? The answer is a clear cut, yes. But also, not only would they receive the value add passive income, but they would have complete O and M taken care of. So all of the snow and ice removal would be done for the mall and that solar system would be operated. They would just receive a annual income payment, but that would also come with EV chargers and overhead parking. So it's really solving like a three tiered solution in exchange for just creating some value on an available asset and you know, swap that parking lot and map it over to a hospital C and I site. Manufacturing doesn't matter what it is, it's really just can we make the incentives work? And again, that's really our value prop is because we work with some of the most significant financiers, because we work with the A plus development teams. And again, you know, Mason, to your point, we're not saying, hey, we can.

Do this and this and this.

We say, hey, we're connected to all the people that you need. We can streamline this for you based on our expertise and experience. And it just so happens we know the exact process to get you to the front of the line to claim these available incentives before somebody else does. And that's really the ecosystem to what we're doing, sir.

So really you're just the expert, you're the consultant in the middle, juggling all the different stakeholders, potential tax strategies, what each stakeholder wants and kind of putting all the pieces together, which takes us to the other potential stakeholder, where let's pretend for, you know, Mason and I, or any example, we don't have the space, we don't have the land, and we want to go approach a landowner and have, have the solar assets put on their land. Or Mason and I maybe want to target our marketing towards parcels that would work for this, this sort of process. Can you speak to that as a land investor? Where can we get ourselves involved with parcels that we own?

Yes. So there are definitely requirements when we're talking about leasing land for solar and how to turn your raw land into passive income. I've mentioned it on other podcasts before, happy to attach it in the show notes as well. We have a lead magnet, you know, that we host for people that are looking into this and it's really just a how to guide of how we turn your raw land into passive income and in there are all the requirements. We can go over it. I'll make sure that I get you guys a copy. And in fact we have a very detailed landowner's guide that we sell for money. I'll see if I can't get my team to just kind of pass it to you guys for free. We were just talking about it this morning, like running some Facebook ads on it to like fill up our funnels. But I think that it could be extremely valuable to some landowners in the group. But here's what we typically look for a minimum of 30 acres, we need raw and flat land. Slope is okay. It depends on how much it needs to be zoned appropriately. Meaning if It's a residential 30 acre lot that is probably not necessarily going to be a good fit compared to something like agriculture or mixed use or otherwise. We can go ahead and change the zoning. It just makes it more complicated. So don't take this as black or white, but rather preferential of how we would like to receive, you know, leads because we get many of them after we go on podcasts. So if you have more than 30 acres and that could be all the way up to hundreds of acres, people send us and it is flat land, it's something that we don't necessarily need to clear. Another big factor is the substation. And so those substations essentially where the interconnection happens, those substations need to be damn close to the parcel that you guys would be bringing us potentially. And the reason why is that it is expensive to essentially trench lines into a substation. The closer the better. And I'm talking half a mile to a mile. Anything above that we can get into millions of dollars in upgrades which we are not willing to pay for, but our developers are sometimes willing to pay for and their financiers just all comes down to the economics of the deal. Again, if there are two parcels that are look alike, but one's, you know, two miles closer than the substation, they're going to take the closer substation. And what we'll actually do is again, if you have land that you guys feel would meet these requirements and we encourage everybody to go to lease.community solar authority.com we do this whole process where for free, we'll look at your land, we'll let you know if we think it's a good fit within seven days. If we do and you guys want to move forward, AKA the landowner, we would have them sign a non binding loi again, completely non binding, no, no strings attached. But you know, we put some work in to run our process. If they're willing to wait around, you know, that 60 to 90 days for us to run an internal RFP, get a couple of different opinions, see if anybody wants to take on that parcel, then we would happily do them for that. We would do that for them. It wouldn't cost them anything. We don't make any money off of the lease. So these landowners are completely unaffected. It's a really non biased way for them to benefit from renewables without getting not screwed or snaked over by the developer. But it's just an extra verification step. And again, transparently we get paid a fee from all of our developers. Go back to the vertically integration. Doesn't matter if we're talking about a land lease or community solar deal or an on site solar deal or otherwise. We get paid a fee based off of how much access to renewables we deploy. And again, you know, there's peace of mind for the landowner that they can bring us their stuff. We'll do all the work because I don't want people trying to hit up six different solar developer. Again, like our whole point and mission here is to streamline sustainability and that same offer for the hospital fits in for the landowners. But those are essentially the little bit of the criteria and I'm sure we want to drill down more. And lastly, I'll say that, you know, when we look at their parcels of land, we'll look at the substations and see if there's what's called available load, meaning can solar even be installed on the substation? Sometimes they're too old, sometimes they're already maxed out with solar. It really depends on where it's at. But again that's part of the research that we would do.

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Oh, that's great. And I think that criteria is in general pretty obvious of how you can find these parcels that would work well. And I think if they don't fit that criteria, make sure not to submit them to Dakota's company. But the main question I have is the substations. I know it Sounds like you're doing the research. But for those of us that are transacting, you know, 1 to 100, you know, parcels of land a month or a year or whatever it is, how would we go about finding that information of where the substations are and being able to say, hey, Dakota, I'm looking at acquiring this land and, you know, we can talk about what those solar leases and, you know, what the Performa on something like that would look like, which, you know, it's obviously attractive, which is why it's such an exciting strategy for landowners out there. But substations, how do you find that information out and whether they're upgraded or not or just where the location is?

Yeah, so we have an internal GIS team that does all of the research for us. If you wanted to do some research on the front end, just to save us some time, which I encourage. But it's, again, it can be complicated. You have to dive into utility grids and get on their maps, which usually aren't always the best. And so, you know, there's oftentimes tools that you need to purchase, but you can essentially look at your utility zone and look up the utility maps and find the closest one. The good news is there's always going to be a substation somewhere because of the amount of electrification on our grid and how interconnected everything is. So even if it's desolate, you know, again, there's a good chance, like someone sent me a parcel in the middle of nowhere with no access to it, and for many reasons, it wasn't qualified, but it still had a substation that was within a couple of miles. And so, typically, even if you're looking at something in a remote area, there's going to be a substation somewhere. I'm sure that our team can find it probably a lot quicker than a landowner that doesn't know the first thing about it, but that's how they would do it. And again, if that's just something that they don't want to do, I would encourage them to submit the land anyway. We pay our land team to go through all of the data anyway. We review thousands and thousands of parcels a year at this point. Um, and that wouldn't be a problem to add a couple more.

No, that, that, that's great. And it's good to know the information's out there and if, if this is the strategy, I think, just like with, you know, to, to make a point on business in general, of. For us entrepreneurs, whether you're in the land investing space, or just real estate investing in general. You'll hear the strategy and it's, it's kind of shiny object and sexy sounding. So if, if you're willing to pursue it, I mean, make sure you're doing your research and it makes sense within your business as it operates as versus just trying to, you know, say, hey, I have a lead on a property that might make sense. It's in southeastern Colorado in the middle of nowhere. There's no access, there's no substation at all. Don't think that you can turn this into a deal whenever it's actually not. But no, I think it's exciting. I think it makes sense. And I think for landowners, gosh, I mean, you can really add value and help a community out and make money with, with a relatively simple strategy whenever you have someone like Dakota and a company, the company that you run that's able to come help out. But Dan, I know you want to follow up to this too.

Yeah, yeah, no, that's, that's a good intro, but let's get a little more granular here. So right now Mason and I are looking at a bunch of parcels eastern Colorado, east of Colorado Springs, east of Denver. And there's lots of 35 acre, totally raw agricultural pieces out there. And I'm not sure where all the substations are, but I'm sure we can find that out. But let's say we did get one of those flat paved road access and it is within a mile of a substation. What's the potential like for. For revenue and, and time frame to get to that and just kind of everything involved? If real lead out there, if we were to submit a real lead out there, that works.

Totally. Yeah. Colorado is a great market because it actually has community solar available. Not too much development going on there, but it's, it's definitely there. And that would be Excel territory, kind of the Denver region. There are other utilities we've looked at in Colorado. I want to say one was called like Blackfoot or something similar in like southern Colorado that really didn't have any net metering. And again, it comes down to, first of all, the utility, as far as qualifications. Does this utility allow net metering? And that's essentially solar. Sometimes utilities like municipals, they don't want anything to do with it and they don't have the legislation in place to allow for it. And so you might run into some of those municipals, but that's what we would check for first is, you know, where is this parcel located? Does it have Available net metering, or, you know, even community solar, which are really those lower, you know, 30 to maybe 60 acre parcels. Anything above, you know, 60 plus acres, but really like hundreds of acres, is going to be what's called utility scale. And that's where the utility is actually in control of those assets. Developers can be as well, but it's typically for the utilities energy grid, specifically where they're controlling. And so both opportunities are great. Again, Colorado happens to be a place where we can transact. And what we would actually do is we'd take a look at your parcel. So you'd submit it within seven days. We would let you know, like, hey, here's what our LAN team found. They saw that it's close to a substation, there's available capacity. As far as we can tell, this parcel looks good to us. If you'd like us to move forward, we can submit it to our network and ecosystem of developers. It's going to take us maybe 60 to 90 days for us to get some answers back as to whether we think it's a good fit or not. After that 60 to 90 days, we may come back with, hey, there's nothing. There's nothing here. Nobody wanted anything, Sorry. We may come back with a couple people who are interested. This still looks good to us and we'd like to move forward from there. It's going to take 18 to 24 months to go through the environmental studies and the interconnection studies, the utility studies. And really this is the due diligence period, a little bit longer than any other. You know, maybe not atypical for commercial real estate, but definitely, you know, more than land diligence and residential diligence, let's call it. So it takes some time because there's a lot of studies that need to do. And this is when we talk to landowners and say that solar leasing is an exit strategy. It's not and can't be the only exit strategy because if people buy land thinking that it looks good because we told them to, but then, you know, and I had mentioned this before the show, two years down the line, we come back and for one reason or another, the solar asset can't be built on that property due to something in the diligence period on the utility side, the interconnection side again, for example, we just got a study back after one of our partners did after 13 months, and he got a letter from the utility saying that it was going to be a $20 million upgrade in order for them to put their solar asset on the property. And all of a sudden they were super excited for that parcel. And then that news came in and the project completely dead. And so again, it needs to be, you know, a hammer in the tool belt, if you will, not the sole exit strategy that a landowner is relying on. There's a lot of unknowns in that process and that's why we encourage people like, you know, a lot of landowners hold on to their portfolio or they hold on to kind of the larger parcels while they're churning and burning a lot of the smaller stuff. And for those like we had talked about that are willing to wait it out and really see if there's an opportunity there, that's when they can score big. And again, you know, we're seeing over 1000 bucks an acre at this point per year for, you know, the term is 20 to 25 years. But transparently, those solar developers want those projects there for life because if it's already built and at the end of the 25 year cycle, they bring in new panels, recycle the old ones, they still want to be able to produce that power. And so, you know, you're able to take potentially a generational asset from, you know, your parents that passed you land, turn it into income producing asset that you no longer need to sell and all of a sudden that is on your balance sheet for the rest of your life potentially as something that, yeah, took a little bit of time to do. But you know, those, those bigger risks come with the bigger rewards.

I have about 10 things I want to say, comment on and ask, but one thing that specifically comes to mind too is just almost a whole new sub asset category of real estate where I'm envisioning aggregating a whole bunch of these, right where, where you buy the land, you have the solar put on it and you keep the land. And as you consolidate, more and more and more, selling off a huge portfolio to a big buyer at a high multiple, because right as you're able to consolidate and help these big funds find a means to get a return on their capital, they'll pay a premium for that. Because as the, you know, as it's more consolidated, as we're talking about larger sums of capital becomes harder and harder, harder to get a return. And so of course that's what hedge funds are doing, right? That's what these, these big pension managers are doing. They're looking for an opportunity to get a return on their capital because it's not easy when it's a billion dollars. And so I wonder, I Don't even wonder. I'm sure that will be a play down the road here where somebody aggregates a huge amount of land in solar with very long term leases that are likely to be renewed and then sells that off at a huge multiple. But you answered the question because I wanted to ask if there was any way you could do this in the short term and then develop the property down the road. But it sounds like the leases are long enough where that's probably not feasible. But before I pass it to Mason, the main question I wanted to ask is to your specific example, the $20 million CapEx example that killed the deal, what was wrong, that was so expensive, that needed improved with that parcel?

Yeah, so, and this is the biggest reason why solar basically has not been able to grow. So what happens is there is a pipeline of new solar development and again this is like state by state and drilled down into the utility. So some are not nearly as bad. Other utilities are super progressive and they're finding ways to clean up their pipeline. But essentially what happens is there's a log jam of potential projects of people saying here's this land, I want it to go through, make it happen. And then on the utility side they're saying our substations aren't upgraded, you need to pay for it. Solar developers, and we're not going to update our own infrastructure. And so really like that is the clash between private utilities that transparently don't necessarily want to see power to the people. They don't want to see other people owning energy, which we don't need to get into. The conspiracy theories and anything else behind that, really just more greed than anything else. And that's really what it is, is there are a lot of upgrades that need to happen at, at an interconnection level, at a utility level. And utilities are just delaying the process because they don't want to pay for it. They're trying to put other people like solar developers into the queue to pay for it, saying hey, if you want to build this asset, you upgrade it. And again, there is a threshold. We've seen millions of dollars done in upgrades. I have not seen 20. I don't think I will just because the economics aren't that good. But that's the reason why that deal ended up falling through.

I guess to expand on that though, say, say it is what, what is that threshold of if I have a thousand acres and it's going to cost me $10 million to upgrade the substation for the utility company, what benefit do I get from Upgrade, or I guess on my, on my P and L, what is that? Just 10, $10 million that the utility company essentially received from me for free? Or is it, do I own that substation now? Or like, I guess, how does that work? Because, I mean, with, with the right investor of, hey, $10 million and I own this. A thousand per acre plus of if I own 10,000 acres and can put 10,000, I mean, you get the math. I do 1,000 times 10,000 and then a $10 million upgrade to a station, I mean, that, that's moot because you're, you make that back in your first year.

Yeah. So the landowner would never pay for the upgrades and they would also never own the substation. And that's kind of the, the cat and mouse game with the utilities is that they're saying, hey, upgrade our stuff for us and you'll get the benefit, the developer of being able to build your project. Otherwise you can kick rocks like that. That's the basics of it. And so the solar developer would be the one willing to pay that. And again, the threshold that I've seen is a couple million bucks, maybe three to four million dollars max. And the reason is, is because the economics of the deal starts to not pencil after that point. You know, there's only so much of a delta when you think about the arbitrage between what it costs to build a solar asset, which is tens of millions of dollars, and the revenue that it's going to create on the back end. And so, you know, just like any other thing, it's a financial model based on what financier we're talking about. Some are willing to go a little bit more aggressive. And again, it also depends on the legislation. So like for example, in Massachusetts, traditionally for the last decade or so, they've had the SMART program, which has been extremely lucrative. Anybody who's built solar assets in Massachusetts has made out like a bandit because of the available incentives at a local level. And so again, it really depends on where we're talking about, what it looks like, what the incentives are. And then of course, there are emerging markets going kind of going back to the landowner. Opportunity is you could get ahead of the curve. You know, there are states like Pennsylvania, Ohio, Wisconsin, Michigan, these are all opening for community solar legislation, which back to job security, watching go nationwide. It's a bipartisan piece of legislation. It benefits many people, and the economic model of it makes sense. And so as we're watching more and more states adopt community solar legislation, now all of a sudden there are new Assets that need to be built and new markets that have otherwise been untapped. And that's part of the strategy that we're kind of diving into is, like, what's emerging? What does it look like? We want to run the same strategy of the people who made out in Massachusetts, as you know, you know, we want to see what that looks like for us on this next wave. And so, you know, the good news here is that. And the silver lining is that there's a lot of scalability here as far as what this looks like over the next 10 years for solar and, you know, for the right land investor that's on the lookout for these types of stuff, which, again, you know, we're building a database. We like to stay in touch. People hit us up all the time saying, hey, I don't have anything yet, or I don't have anything right now in my buy box. But, like, what are you looking for and what does that look like? You know, that's going to be something that we start communicating with our list and other people of saying, hey, this is where we're looking. This is what we're looking for. If you can bring us back stuff, you know, in this wheelhouse, this could be a potential opportunity for you to tackle. And again, the difference being is, like, states like New York and Mass. That have been open forever, really not a lot of pickings left. I mean, there is, but there isn't. And again, you kind of get down to the point where, okay, well, the only option for me to build Left is a $10 million upgrade. Do I want to do that or do I want to just not do this? Utilities. And of course, the utilities are starting to catch up. They're starting to make legislation like National Grid New York. They are a utility company who's really doing their best to unjam, you know, that logjam of millions of projects in the pipeline that just are never going to work. And so they're cleaning it up, making it easier. And again, that just goes back to kind of streamlining it all where you've got to have an efficient way to be able to execute. And that's what we built our company on. But that's also some of the stuff we deal with in the operational work that we do.

Yeah, I mean, that's great right there. And it shows the opportunity, whether it's now or in five or 10 or 50 years down the road. But look, you know, kind of kind of diving into case studies in general, say, say you've got 100 acres there's a substation within half a mile that's been upgraded. Everything looks good for everyone on the team. You know, environmentals come back. Great. Like it's. The site is primed and ready for solar. Walk me through. Once the solar asset is built, walk me through the flow of money. Where does it start and where does it get dispersed out to? Who's making money in this? Who's, you know, just the whole pipeline of money in an operation like this.

Yep. So there's typically milestone payments that are involved. And again, during that contracting and due diligence period, that landowner may see a small chunk of change come in somewhere and like, you know, maybe five to ten grand a year just for saying, hey, we're going to be doing some studies, sorry to tie up your land. It's, you know, what we're willing to do. But until we know more, we can't really invest into you in any sort of monetary way. After those studies are done and we get to what's called ntp, which is the interconnection study is done, we know we can essentially build the project, NTPS notice to proceed. And that means like, hey, we're good to go. That will usually trigger a milestone payment to that landowner saying, hey, we're going to come and build this project. You know, we have this land under lease and we intend on building this asset. And so they would receive a payment at ntp. The farm would. Again, depending on who you're working with, we like to work with asset owners that are going to own these projects long term. Sometimes a lot of development companies will just do everything to get it ready to go to NTP and then they'll sell it to a giant company that's buying up portfolios long term, which, you know, to your point, Dan, that's already happening. You know, just like the 8020 rule anywhere else, there are 20% of long term operators with lots of money that are buying up 80% of the assets. And we're seeing that in the space now. And so depending on what happens at ntp, that developer will then go ahead and build that project. So they'll receive milestones during ntp and then once that farm hits cod, which is commercial operations date, essentially it energizes and starts powering to the grid. They would then receive their annual lease payment amount. And so again that will be broken up into milestones. But then on an agreed upon annual date, they would receive a one time annual payment every year of 1000 bucks an acre times 100 acres, whatever the deal is. And they would see that as a yearly annual payment from the developer specifically. And again, we get paid a fee based off of what gets developed right off of the incentives as well. So really the financier holds all the money, they disperse the payments. We do not interfere with the landowner or their payment. Or get paid for us and then pay down. No, we don't, we don't really believe in any of that. And so that's kind of the ecosystem there.

Awesome.

Interesting. Okay, more questions are coming to mind. There was one simple tactical question and then a follow up about these entities that are already buying these solar farms. So more tactical, I guess I have assumptions around where this can be done. I think of sunny places, but you mentioned Ohio. The sun never comes out there.

It's terrible.

So does the UV radiation that comes through the clouds. Can solar panels still absorb that and produce electricity on cloudy days or are those less desirable because it's far less sunny there?

Yeah. And so again, this is why it comes back down to legislation more than anything. And same thing with New York. Right? You would think that it's often cloudy. I'm originally from upstate New York. And so compared to a state like New Mexico or California, we get a lot less sun. But the reality is, is there is what's called production factors. And those production factors are essentially a multiplier based on how big a solar farm you have. Based on where it is geographically sitting on the, you know, x and Y axis, longitude and latitude. Based on where it's placed, it will have a certain production factor which is essentially the output that you'll get based on past weather conditions. And so even though there are lots of cloudy days up in Wisconsin or, or Ohio or Illinois even, not only can the sun and UV go through clouds and still produce power, it will produce a set amount, which is again, just like any other real estate. It's all a numbers game. And they have those calculators kind of on the back end that they're thinking about. And that's really the power of it, is that as long as the incentives are there and there's an opportunity to build those assets, the economics may look different based on where we're at just because of the production factor alone. That's one of the reasons. But it is still available. And that's why is essentially because you can still produce power and there's still economics to the deal.

Okay, that makes sense. And then to your other point, I'm curious with these pieces that you're seeing bought up by some of the Bigger players. What are you seeing them trade at as far as a multiple? And for our listeners, anyone who doesn't understand, right, commercial real estate sold on a multiple of net operating income.

So if something sold at a 5.

Cap, right, that's a 20x multiple. And so has that been established or is it mostly people developing it themselves and then just adding the portfolio? Or are you seeing these trade where there's some sort of norm as far as a multiple?

Well, I'll tell you, that's where all the money's at. You know, the financiers are playing that game for a reason. You know, while we're busy lining it up and getting these deployed, there is plenty of incentives in that value chain. But first and foremost these solar developers would not be solar developers if there wasn't money in it for that. And the financiers that are backing them. And so that's why you have these massive organizations and that's why it's a trillion dollar clean energy economy. Because with the incentives available, they're able to monetize many of these assets in a really insane way. I don't have exact numbers on the multipliers there guys, but I will tell you that that's the reason why we're stepping into the co development space is because we want to own equity in parts of these assets. I'll tell you that these, these solar firms are essentially long term annuities where you know, you're paying a little bit to get it going and operational you fund it just like any other real estate deal through private money or otherwise. And really what's happening is when you get a project to ntp, let's call it, what happens is there may be some costs associated with getting it there, like getting the interconnection fee in and a lot of small time developers will do that. But after ntp you may have like half a million dollars that you need in order to build the project or to get it started or just to pay the interconnection application. And so that's why a lot of small time developers will flip it to these much larger organizations that just say, yeah, here's $2 million, like let's buy this asset. And then all of a sudden they have a 12 plus ROI tacked on just by owning that asset, benefiting from the incentives, getting the depreciation, and again, those solar firms make money in multitudes of ways. They generate power and sell it back into the grid. They claim money from the incentives and so they're able to monetize that in several ways, which makes it worthwhile. Short answer.

That's great. And just another thing to think about for the long term goal of the private equity firm and ways to add assets to the portfolio that are beneficial in a lot of ways. And I think one of those ways, and what's so attractive about this is the sustainability aspect of everything that you're doing. And I think we'd be remiss if I know we're wrapping up pretty soon. But let's talk about sustainability. How do you feel like you and looking at your bio and just chatting before the episode. You've survived and you're thriving through five post or five heart surgeries. Tell us your story and how you have embodied sustainability as part of the mission and everything you're doing in your personal life as well as your business.

I love it. Yeah, no, happy to first, sustainability is a core value of our business. I think that in a world where there's a lot of, and this may be a little bit esoteric, but we'll go there just because it's, you know, it's my experience, it's my lived experience after dying multiple times, the perspective you have on life changes. And so these are just, you know, as I see it, don't, don't take it as anything other than that. But in my experience, you know, sustainability has been a core value from a kid for those reasons. You know, I experienced and went through five heart surgeries by the time I turned 18 years old. And really the dial on my life was changed at a young age. It allowed me to initiate into a new perspective. You know, I felt like I was given a second chance. And really for me came the existential question of, like, how do I want to spend it? And thank God that I initiated that way as a kid because it opened me up to so many additional opportunities, but including entrepreneurship and really being able to build an entity as a force for good. And that's what I believe in. And part of that is sustainability. You know, I'm also an Eagle Scout, so we learned about like Leave no Trace and as like a five year old in the woods, like trying to, you know, go and camp for the first time, but really interact with nature. And to me, that's something that's been such a staple in my life is just the awareness that we are so much more than our egos, our bodies and, you know, where does the line draw between who we are and what everything else is? And so I see life from a very, you know, law of the universe. Perspective. You know, I think the fourth hermetic law is as above, so below. And to me, that's like everything in our external environment is really just a reflection of what's going on inside of us, inside of our psyches. And so through my many heart surgeries, as a way to heal from my own physical trauma, I got really deep into hypnosis. And it was a way for me to use the power of language to start to shift some of the traumas that I had in my physical body. And that led to my emotional and then mental and then spiritual. And all of a sudden, I'm in a totally different place and I have all of this new awareness. And so for me, I just think that, you know, I'm in a position of service. I have been for a long time now. I look at leadership and sustainability as the opportunity we have to bedrocket into humanity and really help our future. You know, it's not necessarily about ESG or government pressure. For me, I really could care less about that. And I think, like, carbon offset even is really just like a metric. And like, how do you encapsulate the concept of saving humanity and really taking care of each other and being a good steward of the earth, ourselves, our psyches, what we, what we care and think about, how do you encapsulate that into a carbon offset metric? You know, you can't, because it's so much more than that. And so that's how I look at sustainability. You know, again, like, efficiency is also a core value of our business. But I think, again, you know, I look at entrepreneurship and building entities as exactly that. You know, it's funny because language really reveals to us everything that we're mapping out here, which is like, what is an entity? Well, an entity can be an individual. It could be a business and a corporation type point. But the point is, is that that entity carries what's called an egreguer or a story. And those stories that these businesses and entities put into the world got us to where we are today, which is not necessarily a pretty place. And so the challenge and really what we're trying to do through our work is to bedrock sustainability and the idea that there is a different way to do business. There is a future that looks a lot different. And to me, I think the future of business is going to be more like a family of businesses working together and the custodianship of healthy families, from the employees to the customers to the stakeholders. I think that part of the work we're doing is set to or hopefully inspire other people to think about the service that they want to give to the world, the people that they want to show up as the work that they want to do through their entity. And again, it doesn't. And maybe it's just fallen on me to be that heroic. I don't think that it necessarily needs to be. I don't think about that, you know, day and night. But when I, you know, just unconsciously I recognize that my place in the world, my opportunity to show up and serve, I don't take that lightly. And I take it as an honor to be able to serve the way that I do and think about business and work with people. And so that's just a little bit about me. And I hope that paints a nice picture.

No, it does, I think very, very beautifully and well said that, you know, you have this definition, we all do, of whatever the, you know, asymptotic truth of reality of the goodness is. And we all have some part to play in approaching what that asymptote is and through the things that you are doing in your personal life and sharing your story and how your business embodies it just moves us closer to whatever that, that goodness is. And I, I think that you said in a really, really great way and not, not a lot of people will have that transcendent experience of a near death experience whenever they're, they're young and going, going through, which is going to absolutely change your perspective from the biological side of it. Trauma and true trauma, whether that's, you know, emotional or physical or through surgery or whatever it is, will physiologically change your brain and potentially change who you are as a person, which we don't have to get into the debate of, you know, who is a person. As you know, you've got Robert Sapolsky all over my shelf in the back that talks about biological predeterminism and everything, but it's. No, I think that was really, really well said, Dakota. And I think that having just a mission focused business makes it more simple to operate within the parameters and ethics that you need to. And being able to niche down and talk about the processes and how they're all applicable depending on the strategy that you're working with, with every client is, is amazing. But we can talk about philosophy and all this other fun stuff another time and offline. But to wrap things up, are there any questions that we did not ask that you wish we had?

I would say, where can people find you? I encourage people to find me on LinkedIn, just as you Guys, did I try to create a lot of content there? Again, sustainability and solar aside, if you have zero interest in either of those things, if you do have an interest in entrepreneurship or lean principles or anything we really talked about today, I love kind of just building in public and just being transparent about what I'm doing in business and how I think about it. And I would love to connect on LinkedIn. And so that's just LinkedIn.com in Dakotam alone. My first and last name. That aside, if you guys have parcels or anybody listening has those 30 plus acres where they might want to have it looked out, have our team check it out. Again, completely complimentary. That's lease.community solar authority.com and those would really be the two plugs I have. And then that aside, I'm just super grateful that you guys reached back out to me. I know that I hit up Mason. I said, hey, man, I love what you're doing. I think it's super cool how you guys are not only skimming the surface of land investing, which is what you guys do every day, but really diving into some cool kind of verticals within that. And I think with we did a really cool job of doing that today. And so I'm just super grateful and appreciate both of you guys.

Yeah, this was fantastic. This is one of the more fun interviews we've ever gotten to do, I think. And it probably could go on for hours, but we'll make sure to link all of the links that Dakota just mentioned in our show notes. And this is Mason McDonald with Dakota Malone and my co host Dan Haberkost for the Big Picture Blueprint signing off. And that's it for today's episode of the Big Picture Blueprint. If you found it helpful, please share it with your friends or anyone you think that it could benefit. Don't forget to subscribe and leave a rating and we'll see you in the next episode.