 Thank you so much and thanks so much for having me. This is very exciting. I love being back on the farm virtually if not in person and yes, my husband who also went to Stanford writes for Archer So as you watch that show, he just wrote the premiere episode the first episode from this last week So I hope you checked it out and it's not it's on Hulu So yeah, I am here to discuss energy in buildings and why that matters why I focus on that What energy sort of means in buildings these days how building owners like my company are thinking about energy and how that's evolving as we get towards a path towards net zero and What that means for for all of us. So I'll just jump on in Alright, so buildings and climate change. Why is this important? This is important because buildings are responsible for about 40% of US covered emissions We're 40% of of energy consumption. There's more within building materials if you're getting into that and so When you represent 40% of a nation's energy It's pretty important that We're gonna need any of our climate goals that we address energy use in buildings And so and it depends on where you are obviously in New York buildings are on 80% of energy consumption Emissions not surprisingly because transportation is so low in other places. It's a little less. I think we're about 38% in LA So that's why focusing on buildings as a method of adapting to climate change is really important And I want to tell you just an introduction a little bit about my company We are a publicly traded real estate investment trust active on West Coast markets We have a primarily office portfolio. So I actually have more stuff in San Francisco near to you guys then we do down here in LA, but we're active in major West Coast markets I've been a killer for about a decade. We are a We're developers as well and I'll become important later in the conversation So we both own a we develop own and manage office assets in this region and just want to Give you a little sense that you're talking to somebody who somewhat knows what they're talking about So we're one of the winningest companies in terms of all things Sustainability environmental social and governance. We have committed to achieving carbon neutral operations by year-end I'll get to that a little later for long-time winners energy star partner of the year or the global real estate sustainability benchmark Other words green leasing happy to talk about any of it during the Q&A portion later And yes, please do submit questions to the Q&A portable So I figure that not everybody has a deep understanding So I thought I'd just do a really quick it 101 because it'll be important later for the presentation. So Here is the first thing to think about when you think about real estate and why some might care more about energy than others One is your tenants. So this is what my typical tenant looks like we have a lot of great I'm sure Stanford graduates in there. We serve a primarily tech tenant base. So we have you know, You know, LinkedIn Microsoft's Dropbox box, you know, we serve a largely tech GM cruise client base, and that's great because those companies employ Folks who really care about the environment. So that certainly makes my life a lot easier in terms of Wanting to get a bunch of great environmental initiatives done kind of more difficult if you work in an asset type that is, you know Industrial plants in the middle of the middle of the country where you're not getting that kind of tenant tenant push for sustainability that we do The other thing to note oh is lease structure and this will when we talk about solar This will this will come into play well went too far. So there's basically two kinds of leases in commercial real estate there is There's a triple net lease Which is a lease where the tenant is paying all of their own utilities. They're paying on energy. They're paying your water They are probably paying their own editorial and then there is the full service gross structure That where the landlord is paying all of that up front and then charging the tenant back You know, it seems like well the tenant pays eventually and they do but this becomes important when You want to finance a lot of energy Because it's easier when the energy bill is in landlord name. It also helps us with data I'll just control the spend ultimately our tenants are not, you know it's harder for them to manage energies and buildings and it is for a Company to have me, you know manage energies and buildings and so companies have a largely triple net Portfolio struggle a lot more for us about half of my portfolio is triple net and half is full service gross So I picked this project because this is a great project where it shows a mixture of both So you have actually the building in the middle is a fully lease defender guitar. They're super great But they they fill those utilities and then I'm in the back. You have a building lease to buy a con which has Which is full service gross so it depends on the lease, but some leases make my life harder and others when I'm trying to save energy Proper tax structure So as I mentioned killer is a real estate investment trust There's advantages of that I'll get to one of the advantages in just a second, but one of the disadvantages is that anything related to tax benefits for For things like solar and renewables. We can't take any of them real estate investment trusts don't pay that kind of The kind of corporate tax that you need to be able to take advantage of that So that makes things like renewables projects significantly more difficult and it's something that we have to navigate Okay, great so Hold times. So the other advantage so solar We can talk about how I've navigated that but for The great thing about being real estate investment trust is we are a long-term whole the way our corporate Is we want to hold our assets for a really really long time We don't tend to do a lot of selling of our assets We're not and we when we build them we don't build and flip Well, that's great because then I can do things like do a major mechanical upgrade That's not going to pay itself back for a bit because I know I'll own the building the whole time You have other companies with a different Hold structure where they're in and out of a building in 24 months and it makes it a lot harder to do sustainability So when we're thinking about okay, why does this company do well on energy Efficiency and this company doesn't a lot of it has to do with a lot of the factors that I was mentioning earlier So so I wanted to spend a little time going into the basics of energy So this is where all everybody in real estate started when real estate was like, oh 40 percent That's kind of a lot of energy. We should do something about that We everybody started with lighting and so I'm going to go through sort of the basic energy projects that we do in real estate The big one the big ones is lighting lighting is great because it's not based Often on on on human interaction and behavior I do a lot of lighting retrofits and I still do a lot of lighting retrofits Nice thing is now that the price of leds are coming down and down and down This is an excellent way to save energy use in our buildings I'm also excited to be doing a lot of these retrofits during covid They tend to be somewhat bothersome for our tenants So when you don't have any tenants, it's a lot easier to get these done Mechanical system upgrades we do these all the time. This is a chilled beam Which is a more or less newfangled technology But we do a lot of Mechanical upgrades. These are adding variable frequency drives from the mechanical system. We're Love innovating. We have an innovation lab that I'll talk about a little bit later We do a lot of fun HVAC doodads a lot of pre cooling So that we don't have to heat up as much a lot of you know messing with the filtration media and the fans and You know trying to you know change the the looping systems around how things are being heat and cooled in order to reduce the mechanical load on the building Next is glazing. Obviously, this is something difficult to deal with in an existing buildings to use the actual glazing But we really try to work hard on high efficient glazing where we can't control the glazing because we've bought the asset or the asset is old We do a lot of work in window film including right now We're actually working on a spray on window film, which is really fun Because it's clear. So my architects don't When I when I do it But glazing is a major contributor in in in internal envelope performance is a major contributor to how energy efficient the building is So I spent a lot of my time Trying to make my envelopes more efficient Daylighting. Um, so very related to glazing. Um, we prefer not to we prefer to let the sun Light up our spaces as opposed to using lights to light up our spaces As we all know the most efficient light bulb is the one that's not on And so in all new construction, we really focus on getting Great daylight. This is a day lighting study done on one of my buildings in san francisco I'm a few three random street. Um, and making sure that we have enough daylight so that we don't have to run Lights very often during the day. So that's considered also a major energy efficiency when if you can make it happen Um, obviously, it's important to you know, have it be comfortable So you need shading to they won't have just glare all the time But day lighting is another classic strategy to reduce its energy use in buildings Um, so that's sort of the basics that those are sort of the basic things It's a lot a lot about lighting a lot about mechanical do what you can for the envelope Those are the basics of energy efficiency, but a lot of companies we want to do more So I will always do those projects. I'm doing this projects all the time But we are now they used to be that a building just sort of accepted, uh, you know what the grid gave it and it was a one-way street where builders just consumed energy and the grid gave it to them and that That's how it worked. This is not how buildings interact with the grid anymore buildings. We know what we call prosumers So they not are just they're not just consumers of energy, but they often produce energy on site Setting that energy back to the grid. They're changing when they're consuming energy From the grid in order to be able to help their grid's resilience And so I'm going to talk about a little bit of those projects now Um, so the first thing is solar. This is a picture I snapped of uh, our solar project that we did at my building at 100 Hooper Street in San Francisco Now I mentioned earlier. Hey, solar's a little bit difficult for us. Well, um, we cleverly just don't own on solar So in investment, so we're really difficult Because we can't take the federal income tax credit. Um, so we have our solar owned by um, uh solar developer We enter into a power purchase agreement. A lot of you are probably very familiar with power purchase agreements We are a little bit. We like to be a little bit zany. So we have both this power Agreement and a lease. Um, and so in this case the solar is actually functions as a tenant in my building So this the solar facility is paying me rent In order to be able to lease this space um to be on my roof space Um, so they sign a true lease they pay rent like any tenant would and that able That's great financially because you can cap that at a devalued sale And so that's how we're able to finance our solar our solar projects. Um internally You have about, uh 5.2 megawatts of on-site solar and then we have another megawatt in construction this year and i'm trying to Uh sign a few more. Um, oh, yes sarah's pointing out. I talk fast. I talk super fast. I apologize. I will slow down um The uh, I get this note all the time. Um So, uh So my goal is to get another megawatt signed before the end of the year And i'm happy to answer more questions about solar Tips and tricks things that are making difficult or uh easy depending on the building type Next up is demand response. So, uh, basically The grid does not as you many of you energy Experts know the grid's Energy need to provide is not constant. Um, consumers need more energy at different times of the day Currently and this has actually changed since I started at my company the current Um peak times of the grid are between 4 and 8 p.m. Where well, this is pre-covid when people are coming home from work and turning on their You know all their appliances for cooking the television was going on that kind of thing And so that was for the times where the grid did not Didn't have enough capacity necessarily to Uh provide all that power And cheaper than building a peaker plant to serve to provide peak load was to try to get Buildings to use less energy during that time. And so that's a space we've been playing in for a very long time And there's there's a couple ways to to do that one is load shifting So in our case, we like to pre-cool our buildings that have the ability to retain their To retain temperatures overnight. So we have a couple old buildings built in the 50s Not a ton of glazing huge thermal mass We pre-cool those uh during the nighttime and then we don't run the cooling system during the day that way we are not Consuming energy during the peak parts of the day. The next is uh peak shaving. This is uh getting a little fancier This is when you're starting to turn off systems. Um when a utility tells you Uh, it would be great if you could not use so much energy right now A lot of you have experienced our recent heat waves many of you made me we were asked by PG Or your local utility not to use so much power. We do that in our buildings as well And when we want to get really fancy in it, we do automated demand response Where we install a lot of sophisticated software in our buildings to modulate energy use during peak times Automated demand response works a little bit better honestly in manufacturing than it does in commercial real estate Where I think penetration is something like one percent And so we have been trying to sort of get a little more sophisticated As we try to play with the grid to help it be more resilient to help us Avoid energy when it's the most expensive and that kind of thing. And so what we have done now is Get into storage. So storage um as a general concept is something that's been around for a long time We actually have ice storage. That's what the ice cubes represent thermal storage uh in our in a couple of our buildings that we've had for 30 years You know where they they make ice overnight where the energy is inexpensive And then the building runs off of that cooling during the day now recently we've been installing standalone battery storage. This is a picture I took on my phone of a battery installation We did in our long beach campus. We have 11 battery storage Locations throughout the southern california portfolio And the reason why we have so many in southern california and not elsewhere are a couple one is that uh southern california Edison had to take offline its nuclear power station songs and so The utility found itself in pretty desperate need for for more ability to modulate power quickly And the other reason is for us in san francisco the fire department actually makes it quite difficult to install Batteries because of regulations around clearances and how far you have to be from a wall And so those battery storage installations don't pencil. I'm happy to talk about more battery storage These also are set up to pay us rent. So yes, there are operational savings But we actually take that in the form of a rent payment as well Which works better for us as a landlord and obviously there is storage I should mention it's not going to show up a ton in this presentation. But in terms of eb charging eb charging, you know, then we're charging other people's batteries, right? It's an important thing that we're dealing with in commercial real estate as the need for more and more electric vehicles Are coming online and coming online and I can't install stations fast enough at this point It is it is it is a constant demand. We know that when Some of these six times more likely to buy an electric car when there is a workplace charging And we find that as soon as we put in the station to serve a couple of drivers in that garage all of a sudden 12 more show up within six months. We have to stall more stations and more and more And that's something that well we are dealing with because obviously my job is to reduce energy use in our buildings And more and more electric cars and I am electric car driver myself Increase that increase that capacity and figuring that out is is challenging But but important as we move to a clean energy transition So talking a little bit more about our batteries basically to kinds of battery Installations and this was sort of in the middle of one of our installs There are exterior batteries, which are pretty big. So the idea Pretty obviously is that the building the batteries charge up at night. So when the power is cheap and hopefully cleaner And then the buildings run off the batteries during the most expensive part of the day When the power is dirtier, perhaps because the utility had to turn on more peaker plants to get to get their power And so the building is sort of doing arbitrage on energy. So it's not energy efficiency per se But it's being smarter about the use of energy And now I'm going to talk about the thing that drives me crazy, but it's super important, which is building energy data so The history of buildings is that buildings for a long time were like this They were like trying to drive your car with blind Without being able to see anything imagine driving your car. You have no idea how fast you're going Where you have no you have much gas you have where you'd have no idea how hot your engine is You know nothing that's what buildings were like for a long time. No data whatsoever Then uh folks figured out that if we could get some data out of the buildings, then we would be Then would be great then we could really get into the efficiency We could figure out where buildings were wasting energy where they didn't have to And so now every building owner who cares about sustainability is now playing in the space of building data It's not an easy road So we went from no no building data whatsoever to Tons and tons of software that helped us get to more and more building data And it was like being a candy store, right? Everybody just wanted to buy everything all the time. It all looked very yummy um And and there was this explosion in what in what was called um in my field big data But the issue um with that is that a lot of the data There was too much data and a lot of that data wasn't actionable It was really hard for the building operator to figure out what it meant And everybody sort of felt like they were drowning in data. You could put sort of an iot sensor on every last coffee machine But it wasn't it didn't make a ton of sense on how to use that data to Do something about your building to make it better so um they So now we're in the world of right sized data as we like to call it. So data that is um That is easy to digest where we know or we can use it to help um reduce energies in the building So i'm gonna give you an example here. I'm sorry. I'm just checking the time to make sure that i'm not going over Looks like we're good So um, this is one of my buildings um in uh, San Francisco. This is also the great thing about this company's these were also stanford guys who who built this company um and And this is a report that I get weekly. So almost all the buildings in my portfolio the full service gross ones Where the meter is in my name or killer's name Get this report once a week. Um, and it just shows us uh real on a really simple level what's going on energy Wise in our buildings. This is a pretty healthy looking building You can see it has some spikes some peaks where some equipment is turning on at the hottest part of the data Probably cooling equipment We don't like to see those spikes We like to see those a little more rounded because that's when you're hitting your most expensive parts Of your utility of your utility spend As we'd like to shave this peaks if we can um, but this is looking pretty good We're noticing good good narrow, you know straight lines at the beginning in the end of the day Often you have what's called a shoulder where you have a building that doesn't fully decrease at the end of the day Kind of maybe levels out and then decreases again. Don't want to see that. We're also seeing weekend use You know where it is Saturday and Sunday at about the same as it is at nights during the week Which is also a good sign. Um, you don't want to see, you know The thursday night use being up here and your sunday night use being here I mean something extra stuff is running on thursday. That's not supposed to so everything gets basically this level of insight into building energy use and then I have certain buildings where the building operator where the engineer said, yeah, yeah, yeah, that's all really good sarah I'm ready for the big stuff. So um We then have certain buildings that get a lot more sophisticated So this is when my building's in san diego the building engineer. I love him He's a fantastic nerd when it comes to energy efficiency and he wants more sophisticated stuff So he's you know, looking at heat maps of different space on this floors and Exactly how much energy is being used on a 15 minute level like all the time and and he's done really great with this project And we've seen some good savings from it. So building data can get pretty can be too much It can be not enough. It can be too much We can right size it depending on the level of a desire and sophistication from the person operating on the building So this is another Uh important way that building owners work on reducing energy use in our buildings And now electrification. So this is the new trendy trendy thing We are as we try to move towards a greener Um a greener grid. It is basically there is no path to net zero buildings on a wide scale Um that doesn't really require that all buildings move to being all electric That is hard because the vast majority of buildings use natural gas for cooking Uh and for uh heating and for other important functions But the way that it kind of has to be is the idea is that the grid, you know, california's grid 2045 is going to be 100% renewable powered The natural gas infrastructure can't get there at best. I think it can get to 20% renewable And I think that's even pretty aggressive um, and so if we're going for Total carbon neutrality, we have to get there eventually without natural gas And so here is how we've been working on that. So for the next uh a little bit I blatantly stole slides from southern california Edison But I did that on purpose because I want you to see how they're thinking about electrification Easy for them to say right because they're one of the few utilities that doesn't also sell natural gas Unlike pacific gas and electric which does both sandio gas electric does both But I think sce slides sort of give you the utility perspective on where buildings fit in in the path towards building electrification So this is they see it as pathway 2045. This is how we achieve the carbon neutral future um, and uh, they They know that it's going to require a lot of change by 2030 in a lot of sectors in which buildings are part Um, so the first step as I mentioned earlier is to decarbonize the electric center the electric sector Which means retail carbon free electricity It's going to get there through a lot of renewables utilities to get wind solar geothermal can't do without batteries because As you guys all well know, uh, the sun is this horrible habit of going down every night And so unless we can store on all that power, um, we're never going to be able to retain renewables all day and all night long and then Getting a whole lot of solar not just on single-family homes, but in general a lot more solar throughout their infrastructure around their their sector Um, we mentioned this earlier in terms of electric vehicles. We are seeing the deep need to To have an electric infrastructure a lot of those charging stations as I mentioned are in buildings, which is amount of anxiety as I figure out how to both show reductions in energy efficiency while charging all of these cars um to put the to put that burden into some perspective Los Angeles department of wander water and power Estimates that um, it's going to have to double basically the amount of electricity it can transmit through its Distribution system in order just to be able to charge all of the cars that are going to need to come online To meet a lot of these goals. So it's it's a pretty intense lift And we in buildings did not think we were going to be part of the transportation network We were just where cars parked and all of a sudden now buildings are these hubs where charging happens and it's it's a new paradigm for us That's uh has this learning curve to learn how to deal with And now to buildings so this is this is where um, this is where Edison wants to get us to which is 70% of space and water heating to be electrified and to create codes Around retrofits and other standards to make this possible You'll I hear lauren faberow. Connor will be speaking later, which is great It's she's it's such a pleasure to have in class. Um, and she'll be talking about 100 goals se talks 70% goal, but the point is a whole lot of buildings have to get to all electric pretty soon for us to get to To meet to meet our carbon goals right now. For example, the kilroy portfolio is 19% all electric and that's pretty good. That's considered um, that's considered that's considered Pretty impressive in terms of current real estate very few real estate is not mixed fuel We're being assisted in our transition to All electric construction uh through things like san francisco has a new energy Ordinance that a new building code ordinance that's going to require all electric construction Currently all of killer's office construction is all electric There I can talk about this more if people have questions. It's it's still tricky Um, we we still see a bigger footprint of electric infrastructure versus gas those heat pumps pick up one more room Operating costs aren't always lower because gas is cheap Um depends on a bunch of factors, but it's not it's not always a slam dunk Um, and also a lot of that equipment is is still pretty new and there are some You know, you can you can run a gas fired boiler for years years and years The heat pumps take a little bit more maintenance. So I want to just touch on a little bit of low carbon fuels and what that means the they're calling for natural gas to fall by half Which is pretty intense. So we have to figure out how to sort of wean ourselves on gas as we as we move to the all electric zero and then I don't want to spend a ton of time on this, but I'm talking about How to deal with the the remainder that we can't fully get to zero through sequestration and through, you know, other other means adding more renewables elsewhere and that kind of thing So that all leads us and I think I'm right on time here towards the last part of my presentation and then We will open it up for questions But the path toward carbon neutrality Because this is really where building owners are now realizing we have to get to And it's been an interesting road because we are not even what the environmental community first thinks of when they think of the need for sectors to decarbonize those Folks tend to think about manufacturing or they think about Governments or cities. They think about people who make stuff buildings have this weird Tendency to be invisible like we're in buildings all the time I bet most of you are in the building right now like they definitely sneak up on you. But yet when we're thinking about How we're going to meet climate goals Buildings are not what people are have traditionally been thinking of but that is changing And what I hope to leave you with is that the world has sort of woken up to the importance of Decarbonizing the built environment and now real estate is scrambling To figure out how to get there. I'm lucky that uh, we have been committed to doing this for a long time Because everybody is right now trying to figure out. What is their path? How am I doing this? What's happening? So This is my ceo john killroy Making the announcement that we are going to get to carbon neutral by the end of this year And and he did it at the global climate action summit. Not sure if any of you are following that in 20 Countries and companies from all of the world are coming in and making these big carbon neutral declaration announcement, we were the only ones from real estate because again buildings. Nobody thinks about them um, but uh But it was a really important and really high-profile place to make it and so I want to talk about sort of how we're doing that Um, you're we're doing it through a lot of what we talked about earlier and So it's done through energy efficiency Um, killray has reduced its energy use 17 percent since I got there in 2010 It's through on-site solar and battery storage. So right now about six percent of our power comes from um the On-site solar that we've installed but that leaves A good way junk that's got to come from somewhere else and so For us we're getting to carbon neutral operations through developing a large off-site solar facility ours is happens to be in texas happy to talk about that And that is how we're getting to the remainder to get all the way to carbon neutral So in our case, we're not buying renewable energy certificates But it's an interesting world and we just had we made this announcement in 2018 And we just had a competitor this year just go out and buy all the carbon credits they needed They say hey, we're carbon neutral six months before killer is going to get there And that's true from a carbon accounting standpoint That counts. Um, we we decided to go through uh to do it through Additionality, so we were adding the renewables to the grid as opposed to buying credits from existing facilities But I love that we've now sort of created a competitive environment around getting to carbon neutrality um And another reason we did this is that um also at the global climate action summit We had all of these uh all of these tenants a lot of whom are our tenants So sales force for example is a big tenant of art Say that they were going to get to carbon neutral operations, but not for themselves They were talking Supply chains and we as buildings are in their supply chains And so as I mentioned earlier know your tenant When you have tenants that are really focused on carbon neutrality on energy efficiency on all the rest It then trickles down that those of us who run buildings have to be able to respond And so we were able to sort of make similar declarations and satisfy a lot of our tenant needs around carbon neutrality Um, and it was it was nerve-wracking we're like, uh What's what's going to happen if we do this? Are we gonna is they're going to you know Is anybody going to care or people are not going to like it? You know, there's this view that oh if we don't get there entirely through energy efficiency Plus like a wee bit of on-site solar then it doesn't count. Um, the overall The overall response was really positive. So this was a nice write-up we got in San Francisco business times um, but generally the way of the world right now is that There's not enough happening in real estate in terms of energy carbon neutrality and Being able to sort of be part of the global climate conversation And so we found that when we did enter that conversation. It was a really positive experience And that is about it for my I think I yeah 35 minutes. So That was a great presentation If I talk too fast so that people didn't understand parts of I'm happy to go over it again You've you talked too fast, but you finished early. So that's probably a good trade-off So, uh, Sarah, we have quite a few questions. So One that is uh, you kind of touched on several points that is Electric all electric building mandates. Are those a good thing or a bad thing from your perspective? Well, I'm gonna I'm gonna say with my Sarah had on versus my people have to release my buildings had on I think they're overall a good thing. Um, and I think they even the playing field Um, but they make things difficult from a leasing perspective. Um, for example, we have some multifamily assets And the idea that they're gonna have all electric stoves Is something that the leasing team is concerned about And similarly, uh, the major project for ours that that's going to impact Has a market hall with restaurants and the idea that we have to tell every single one of those restaurant tenants They can't use induction cooking that they can't cook gas that they have to do induction cooking Is I think going to be challenging, especially because that equipment is currently a bit more expensive than traditional gas fire cooking equipment So there are challenges. Um with that, um, I think overall it's a really good thing to get to all electric We just there isn't another to me pathway to full to full carbon neutrality in buildings without An all electric requirement Um, so obviously, you know, we've been doing it proactively. I look forward to a lot of our competitors being forced to follow suit So I think it's a good thing, but there is going to be some growing pains around it. We've had um, there's been You know, a lot of successes at berkeley has done this. I mean, there's been there has been Jurisdictions that have adopted such ordinances and yes, there's some complaining, but I think overall it's gone well Um, but it's it's certainly it's not it's not easy Yeah, then we had a whole cluster of questions regarding um evaluation methods. How do you decide What kinds of energy efficiency and other investments to make so let's start with Kind of a straightforward economic valuation Yeah in the form of do you trade off first cost versus discounted present value savings? Or is there more that you put into that? Uh, there's kinds of assessments Yes, this is a very good question And I should have had a whole green finance part of the presentation and a green leasing part of the presentation, which will be now so Because those two things are highly related so I control As part of my job an energy efficiency or an efficiency budget Um for the company and that budget has to be dedicated towards efficiency projects Which is what we're talking about it goes to certification. So lead Um, well fit well health is not part of this conversation though. I'm happy to touch on it Especially as we can talk probably Importantly about how covet is affecting building energies Um, and then EV charging stations. So I'm the one who puts this in now Uh We there we have sort of a blessing occurs at Kilroy, which is we have green leases And and what is a green lease a green a green lease is a lead as a lease that aligns Landlord and tenant incentives and interest Energy because traditionally the problem is the landlord, you know, the the tenants going to pay the energy use anyway Why as the landlord do I even care about energy efficiency? That's what's called the split incentive And so what my leases say is that I can recover all that capital that I put into an energy Upgrade in my building from the tenant, but I recover it over a payback period Which is better than recovering it over a traditional lease, which is written Recovered over the lifetime of the equipment. Well, you have an le that last 20 years That's not going to do a ton of good. So I'm lucky that we have green leases and we bring them more Since I got to Kilroy. Um, we're part of the inaugural class of green leased leaders in 14 and have been part of that program since then um But it does mean and it pains me to say this is that um ROI simple payback is my financial metric when I make my Decisions as to how to allocate my sustainability budget and I am the I'm first in line as knowing that this is not the best financial metric to use. I went to business school um, but uh, you know NPV IRR, you know Would be better, but because we recover Um our investments in energy efficiency in existing buildings. I have a little more leeway for fun stuff in new construction um Because we recover that over payback period payback periods what I have to use and I am stuck um from us at a three-year payback period Um, the average lease is let's call it five years and you have to assume tenants are moving in and out So yeah, I'm I'm captured a three-year payback, which is which is a bummer uh, because there's a lot of great projects out there that Uh, take need a little more time um to pay themselves back. Um So we're able to sort of get around that in a couple of ways. For example solar. I don't own it It's not an upfront capital investment. So that's fine. You know solar itself is much longer payback But because it's not on our books. That's fine batteries. We're the same way We do a lot of work with our utilities um and on bill financing, which is which is a program that's had a long and rough road Still doing on bill financing projects now. Um, and those utilities set with the payback And that's cost neutral to the tenant. So I'm always trying to find ways to um to creatively Both deploy my capital um in a way that makes sense Um financially and then also find other funding sources that allow us to do longer term Payback projects, but even you know killray has an innovation lab Where I'm doing a lot of piloting of clean tech as it relates to the prop tech sector and even those pilots for the most part need to Need the payback requirements that I mentioned Although there are some utility like field dimension funds through their emerging technologies programs that i'm able to take advantage of So long answer to that question, but um, I use simple payback, but don't you use simple payback? There are a set of uh follow-on questions that have to do what is Directly called the rebound effect. So this I find a very clever question for someone like you Um two related questions. Have you seen customers and tenants? Uh demand increase because of your clean energy and sustainability efforts. This would be because of the cost reduction Uh, and if yes, is it the cost reduction or is there an environment first angle? Which I assume means because it's all environmentally sustainable. We're going to go large just to prove a point So sorry, the question is do I have tenants that use more energy? Just because I've done a good job reducing energy the answer is is not Not on purpose but Um, I have two things right now of which I I've been talking about a lot one of which I just hinted at That are giving me pause or three. There's three things One is tenants are increasing in their plug load requirement. So that's the stuff you plug in You know used to be one person had one monitor and now two monitors and some people have three monitors, right? So tenant plug loads are on average going up as we just plug more and more stuff in Um, so that is causing increases. Um, the second thing is more and more ev charging I'll just give you an example. I have a tenant. I won't say who but um in los angeles who asked for in there Is a new development project they asked for a hundred charging stations 100 um for their one it's a pretty big campus but and and the and our utility said they couldn't do it our utility was But we literally cannot deliver that amount of power to the site. You cannot have that many stations Which is I think indicative of I think where we're going as the demand for ev is going to explode And so ev demand goes up and up and up and up every year The final thing that is making me Really nervous. Um, especially because new guidance just came out on Friday is ventilation or viral transmission mitigation um One of the things that this uh pandemic has I think taught people in a way that I think a lot of us in buildings have been shouting for a long time Is buildings are important buildings have externalities buildings can hurt the environment They can impact your health and give back to your productivity. I think people are realizing now that that's really true and so um But one of the ways that you're supposed to mitigate viral transmission in buildings is by increasing that ventilation Um, and that's really hard because I've been spending a lot of time trying to not use More than we need to for ventilation. Obviously Buildings to be healthy. I believe in the importance of great outside air The whole tedx talk about the subject. Um, but we but you know ventilating all the time Has energy consequences for a lot of buildings that weren't designed to provide a hundred percent outside air all the time And that it's fine now because there's no plug loads, right? Because people are home But I definitely have buildings that aren't decreasing their energies particularly because we have a tenant and he says, okay Well, I might send five people of our 200 in and they better have a hundred percent outside air all the time So these buildings that are just running their ventilation constantly Um, and I'm nervous about what that's going to do to all of the energy efficiency work I've been doing once to be reoccupied most important obviously saving lives So I don't want to discount that but I'm figuring out how to best You know need all of the guidelines while Having efficient buildings is like really going to be tricky Um, so we'll see how that goes. I don't have a magic answer I mean there's some technologies out there like we found a fan that has like, you know allows for A more horsepower, but you know was less pulled less energy than the family were going to specify There's a couple winds like that but and not just ventilation, but it's higher filtration media We're asking our buildings to pull more air through through much much more tighter filters And that also is going to increase energy use. So I just had this happen where I attended who said this is a construction project Okay, we definitely want to leave plenty of building but you have to run the air all the time. We're like, well I can't do both of those things So which one do we want here? And this is already building already It's designed for 30% more than ASHRAE standard for outside air. I mean, it was a good build. It is a good build Um, but yeah, so those conversations are getting are getting tricky So we have a bunch of questions not surprisingly on what I would call um high tech You know, future futuristic type technology some of them you'll probably do it and I So far I've picked up solar power windows low cost very high efficiency Building integrated solar solar tiles things of that nature or you could even go beyond that if you're thinking about something prospectively at this point Yeah, so we are our our photo will takes are currently pretty um Traditional looking. Um, I have been looking to the idea lab. I've worked for company one of the incubated companies did this Of uh solar panels that track the sun. So um, where the where the racking system, you know follows the sun's rays building integrated photovoltaics and those and uh So vertical photovoltaics and then building integrated photo takes currently They're not very efficient Especially when you're building like I do typically which is in like core downtown environments with a lot of shading from surrounding buildings And remember that I don't own my own solar, right? So that my solar is owned by a third party. And so they need High level of efficiency. They're going to finance my project My biggest electric project Is called the flower mart in San Francisco and I Admitted two million square foot project and if we coded the entire south facing and I think and east facing I'm remembering the study we did of facade with integrated photovoltaics It was only one percent of the core buildings energy use vertical. It's not. Um, it's not Super efficient right now. Um, and so you do it for other reasons, but we haven't had those reasons so I have not been playing much in the like Crazy renewable space. The other thing is the financing on those things is is tricky Um, where I do have a lot of more fun playing with new technologies is like I said through the teller innovation lab when we have been piloting um The following that that sort of that nano nanotechnology brand window film, which has worked well, um bunch of Projects, you know, what can I turn off when without bothering users so that we're not using so much uh power We've had some cool pre cooling project so you stick a panel on top of the mechanical equipment and it Uses a little bit of mist to cool the To cool the air so the idea is the problem with buildings is right like that, you know, they're heating up They're often dealing with heating up and cooling air. That's already fine when it goes to the piping It's not and then it heats up and we have to cool it again So how do you deal with that pre cooling so that's not to work as hard? Um, and then that that uh fancy technology is going off by light right now. Sorry that that fancy technology The that was giving really really granular energy data was also piloted through the killer innovation lab and I just signed up another Um clean tech incubator to be another energy partner. Um through it. So I'm constantly looking for opportunities to beyond uh Sorry, I'm sorry. It's just it's just the afternoon life from my window. It looks like I'm It looks like there's some sort of like police siren or something. Um, but it's a um, so constantly looking for those opportunities In addition to always doing the traditional retrofits of lighting windows HVAC It's always it feels like I'm always doing lighting windows HVAC lighting windows HVAC And I want to be able to do um more commercial real estate is typically a really hard market to penetrate We are not easy. It's hard to sell to us Um, there's very few companies that even have the right person to sell to right? I mean, you're lucky I mean, for example in all of los angeles Um for all of los angeles real estate real estate there are six people with my job that I know of Maybe eight depending if you count the studios But their own sort of constraints on things and that's it. There's a lot of real estate and six people even do sustainability and um And so, you know, it's funny like I remember going on maternity leave and one of them They're saying well now I don't have anybody to pitch to because I was like, you're the only one And so we're really hard to get to it's really hard to find the decision maker I mean what happens if you're a real estate portfolio ultimately own some chinese fund that will never come on site Like how do you get that capital allocation? Um, so that's difficult. Um, it's proctech is is a it's a pretty tricky space But real estate and real estate hates change. It's a very honestly, it's fairly the Resistance change industry, but that's changing because what we have now Um, which I mentioned earlier is we have a lot of investor pressure around sustainability So real estate companies can no longer ignore this. I think any of you might have seen black rocks letter around You know financial reporting and sustainability. We have ratings agencies are now buying Um, you know climate change projection software so that you know, they're able to rate large swaths of real estate I'm really sorry about this cloud things that happening outside And uh And so ratings agencies know investors know they're obviously the european and australian investors have been really putting the pressure But we're seeing so many more folks from real estate saying, okay, I can't ignore it anymore I can't just pretend it's not happening. It does apply to me Now I have to deal with it. So I'm hoping we see more adoption of new technologies soon But it's been it's been a little On in the innovation space in real estate for for a long time from the owners Now that we have two minutes left. I'll unfairly ask you the big the big question of the day That is how does how is the pandemic affecting your business? And what do you think will happen once we get past the proverbial End of the pandemic Well, um, we're going to see a lot more waste As we, you know single-use plastics are coming back, you know, no shared utensils a whole lot of ppe that's going to be disposable thrown away I really worry about that. Um This whole never take public transportation thing that's coming out of the cdc is pretty sad So I think we're going to see um, you know, a lot of our scope three emissions go up as people Uh, don't take public transit unless they don't have another alternative And then these ventilation rates, which are going to be tricky So I don't see, uh, amazing things happening from sustainability But what I will say is that I've seen is companies are still making climate commitments in the middle of the pandemic And tenants still care a lot about sustainability in the middle of the pandemic. I could tenants are like, okay What do we what do we do like we both see that there's a problem? It's not like the tenants are like, okay, we can just pretend sustainability isn't a thing So there is no less pressure to have a really Uh, sustainable energy efficient portfolio, but there's a lot of It's going to cause a lot of problems, which we're essentially ignoring right now our buildings are Down 25 to 40 percent. This is funny. They're not down more than that I think well the other thing we've realized in the pandemic is that our building energies is really sticky Um, you know a building goes down to 1 occupancy, but it doesn't 1% of its energy use because buildings were designed to ramp down where we're asking but So basically we're having this giant dip in all things Consumption because there's nobody there in office obviously residential. Everything's up. Um, you know, it depends on your asset type But after the pandemic and whenever it comes back, we'll see Good. Uh, well there was a great deal of optimism in your response. So on that happy note, I'd like to thank you Sarah for a inspiring talk in the audience for a terrific set of questions We're now up to 43 questions. I probably only got through about half of them. So either you can uh, Right to yeah, send them on over Yep, send them on over I think we'll print out a transcript of all the questions that were asked So thanks once again. Have a good day and come visit us after the uh pandemic and Come back to the farm