JF2069 : Improving Your ROI Through Energy With Scott Ringlein
Scott is the Founder and CEO of The Energy Alliance Group of North America, who was raised as a farmer, educated as an engineer and trained in the auto industry. In this episode, Scott goes into some details on what you should be thinking about when it comes to reducing your energy cost and improving the efficiency that can help improve your ROI.
Scott Ringlein Real Estate Background:
- Founder & CEO of The Energy Alliance Group of North America
- From Ann Arbor, Michigan
- Raised as a farmer, educated as an Engineer and trained in the auto industry.
- He Suddenly Lost his job after 20 years of working as a Chief Engineer in the Auto-Industry.
- He Has been the Technical Advisor to the U.S. Dept of Energy in 2009 and 2013
- Developed and executed global strategic business plans to secure incremental business with sales revenues of $250+Million.
- Managed a 50+ member international design and development program team.
- Say hi to him at : www.energyalliancegroup.org
- Best Ever Book: Credit Secrets
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Best Ever Tweet:
“Investing in efficiency conservation and renewable energy solutions definitely help the bottom line. They can generate cash from day one.” – Scott Ringlein
Theo Hicks: Hi, Best Ever listeners, and welcome to another episode. I am your host, Theo Hicks, today, and I will be speaking with Scott Ringlein. Scott, how are you doing today?
Scott Ringlein: I’m doing super, thanks Theo.
Theo Hicks: Good, and thank you for joining us. I’m looking forward to our conversation. Before we begin, a little bit about Scott – he is the founder and CEO of the Energy Alliance Group of North America. He’s from Ann Arbor, Michigan. I made a joke about going to Ohio State, but he is a Spartan fan, so there’s no issues there…
He was raised as a farmer, educated as an engineer, and trained in the auto industry. He suddenly lost his job after 20 years of working as a chief engineer in the auto industry. He was the technical advisor to the U.S. Department of Energy from 2009 to 2013. He has developed and executed global strategic business plans to secure incremental business with sales revenues of 250 million plus. He has managed a 50+ member international design and development program team, and you can say hi to him at energyalliancegroup.org.
Scott, before we go any further, do you mind giving us a little bit more about your background and what you’re focused on today?
Scott Ringlein: Yeah. Like you referred to, I was in the automotive industry for almost 30 years, and then in 2008 with the collapse of the automotive industry, along with the financial market and everything else, I was one of literally thousands in the state of Michigan that their career in automotive abruptly ended, and I had to find a different path.
The first thing I did was I got an office at a local incubator in Ann Arbor, and hired an executive coach, kind of got a feel for “Okay, what are some of my skillset? How can I apply it to this new world out there?” I started my first company in 2009, called On Point Business Planning Solutions. I did strategic planning for startups.
One thing led to the other, I got asked to come and work for the Department of Energy in the Obama Administration on the American Recovery Act. I did that for a couple of years. That was my first introduction to the energy field, the efficiency. At the wrap of that in 2011 I started looking into the field and funding tools that were out there, and that was really the a-ha moment.
I started the Energy Alliance Group in 2012, and since then we focus on large-scale industrial-commercial energy efficiency conservation and renewable energy projects. And not only are we working in that field, but we also help clients bring in the funding to do it, identify the technology solution, and then get into the incentives and tax credits that are out there that make it all happen.
Theo Hicks: Okay, thank you for sharing. Let’s start with where you are now with the Energy Alliance Group. You mentioned that you work with these large industrial and commercial people. Is it the owners of the actual properties you’re working with?
Scott Ringlein: Yeah.
Theo Hicks: Okay. So some people listening to the show do own commercial real estate, industrial real estate, other people own smaller portfolios, single-family homes… So I want to know if you could let us know some of the opportunities there are at these commercial sites, at these industrial sites for energy conservation, and then the cost savings that are associated with that. Once you say that, we can figure out how this can apply to us as real estate investors. So what are some of the things that you identify when you’re working with a client?
Scott Ringlein: First of all, in regards to the real estate side of things, a lot of our clients are commercial building owners, but they’re also multifamily. So we do a lot of multifamily. We don’t do a lot of just single-family home; they’re gonna be a multifamily home or apartment complexes.
But first and foremost, investing in efficiency conservation and renewable energy solutions definitely help the bottom line. They can generate cash from day one. So the first question that most will have is “Hey, how can that be?” It’s all about the financial side of the transaction. So while you have to have a technical solution, typically that’s the first approach. “Oh, I should do lighting, I should do this.” Well, that’s all good, but you really need to look at the transactional side with the funding mechanism, whether it’s gonna be cash or some type of investment dollars or whatever. But that’s really what drives what can be done, and then how do you achieve cashflow-positive from day one.
The thing that most people don’t realize is there is a vast amount of money out there for doing these specific things, and there’s moneys out there that you can get 25-year term, fixed rate, non-recourse funding to do it. So when you’re looking at roofs, and windows, and insulation, and HVAC systems which are capital-intensive, don’t have a big return, you have to use these types of funding mechanisms along with what we call the cherry-picking, where you have a high return, like lighting and controls… Mix them together and now you can do a whole building, rather than just individual pieces of it to improve its efficiency, make it a better building, make sure that it’s financially healthy for the owner, but then provide a much better place for the tenants… And that’s really important also.
Theo Hicks: Okay, so you talked about there’s the larger projects you can do, and then the smaller, higher return solutions. Could you just maybe list off some of those higher return solutions?
Scott Ringlein: Yeah. Certainly controls and lighting are the first things that people should be looking at. And you can’t do one without the other. Old lighting technology and putting them on controls just doesn’t work. You can’t dim a lot of the old technology out there, so you’ve gotta do both at the same time. But then you’re managing when it’s on, how long it’s on, and then also you’re installing a lighting system that’s gonna operate 50% to 70% less.
Then from there you’re gonna get into your HVAC, hot water generation – those are more capital-intensive, but you’re also going to see a better return on investment. The more capital-intensive are when you’re getting into roof replacements, window replacements, insulation, doors, stuff like that. Typically, you’re not gonna get very good terms from a financial standpoint, and you’re just not gonna see these big, huge reductions in your utility cost. They have to be matched together with something that’s going to bring a pretty big return, with something that really doesn’t get a good return, but they go hand in hand. Why would you replace an HVAC system on a commercial building if you have windows that are either single-pane, or maybe they’re dual-pane, but they’re leaking. That’s just not a really good investment, because any of the efficiencies in reduction and utilities you’re gonna get – it’s still going basically out the window.
Theo Hicks: Okay, thanks for sharing that. I’ll make a statement first – I know on Joe’s deals they do green energy programs. They’ll get a consultant to come in who will look at every single opportunity that there is for conserving energy. Some of them have ROIs of like 30 days, other ones have ROIs of 100 years… So this sounds familiar.
Let’s talk about how to get the money. I’m assuming for things like control and lighting – those are things that a multifamily investor can budget for and pay for out of pocket or raising money… But you did mention that people will get financing for the more capital-intensive projects, like roof replacements, insulation doors… So are there specific companies that provide financing for these types of programs?
Scott Ringlein: Yeah.
Theo Hicks: So how do I find these people?
Scott Ringlein: Probably the biggest program that’s going on right now across the U.S. is the PACE program. That’ an acronym for Property Assessed Clean Energy. It started in California back in ’09. It’s now in about probably 35 to 40 states. Basically, it’s no different than the property tax assessment structure that’s used for improving roads, or building libraries or sidewalks. Whoever benefits from it is the one that takes on the assessment.
So in the case of a building, you own it, you raise your hand and you say “Hey, I wanna use this program and take on a property tax assessment that’s going to improve my building in these three categories: efficiency, conservation and renewable energy measures.” The amount you can get is based on the value of the property, and then do you have any debt against it – so there’s restrictions on loan-to-value and stuff like that. But typically, you can get 20% to 30% of the value of the building to do these improvements.
Because it’s a property tax assessment, one, on your balance sheet it’s an expense, it’s not a debt. And two, because it’s property tax assessment, it’s secured by the property itself, not the owner. So it’s non-recourse. And say you’re gonna sell that assessment – you can get up to a 25, some places 30-year period; it transfers with the property.
To give an example – you go in and you buy a commercial building that’s tenant-based, and it needs a lot of stuff. So you’re buying it cheaper, because it needs a lot of improvements. You can use the PACE program to make the improvements without any out-of-pocket cash. It’s paid through the property tax system; it’s set up so that the reduction in maintenance and utilities – that savings is gonna be greater than the cost over the assessment period. It’s not secured by the owner, so it’s not gonna show up as a debt, or affect their credit rating… And then if you sell it in five years, it just transfers with the property along with the improvements.
So in that case, your investment is the building, you’re using other people’s money to improve it, now you can get better tenants, you can draw higher lease rates, and you’re not bogged down by “If I sell, I have to come up with this money to pay off this assessment.” It just transfers with the property. So the only thing you’re focused is on your initial investment.
Right now that’s one of our go-to programs that we’re utilizing for a lot of the projects that we do. It can be used for new construction in some states, you can use it for multifamily, you can use it for non-profits… Every state is gonna be different, but certainly it’s something that everyone should be looking at.
And then for the listeners — you asked, “Okay, where do I find out about this?” So there’s a non-profit based in DC, and it’s called PACE Nation. If you go to PaceNation.org, you can click on your state and you can find out whether or not the state has it… Because it’s a state law, first of all. But then it has to be approved by the tax collector, because property taxes are collected locally, so they have to create these PACE districts.
All that information is out there, lots of resources out there about how it works, the benefits of it, lots of white papers… And then, for the non-believers, lots of case studies of projects that are being done or have been done. And then you can talk to people like ourselves, that can at least guide you through this process to kind of get you started.
We work anywhere in the U.S, but we wanna hook you up with somebody that’s gonna be local, and they’re really gonna know the ins and outs of the program in whatever location they are. And this is a program that’s not only being used by the U.S. It’s now in Canada, it’s in Europe, and other countries are looking at it to improve buildings, which are finally being considered infrastructure, like roads are.
Theo Hicks: Okay, thank you for sharing all that. So your company would be someone that would be a consultant of sorts, that would work with PACE on my behalf as an owner of a commercial building, correct?
Scott Ringlein: Yeah, we would come in and basically — we’re gonna come in, we’re gonna work on the financials first… You need a budget, you need to understand how much is available. Then we do the assessment of the building and identify, as you mentioned before with Joe – we’re gonna identify everything that qualifies under the program. Then we’re gonna take that and narrow it down to what you need versus what you want. Everybody wants all the fancy stuff, but there’s certain things that you need. Get that down to that, and now we have a scope of work. We would manage everything after that – identifying the technology, bringing in the companies to get it done, handle any of the incentives that you would qualify for, whether they’re local utilities or maybe state or federal tax credits, and do the entire thing for the client.
Theo Hicks: And then when I’m working with a program like PACE, for example, I’m assuming that once I close — is the money access through a draw program?
Scott Ringlein: Yeah.
Theo Hicks: Okay, so for that draw program they wanna make sure that the dollars are being used specifically for the energy conservation solutions, and not anything else.
Scott Ringlein: That’s correct, yeah. There’s a checks and a balance that’s in there. Also, some states — we’re based in Michigan, and any project greater than $250,000 there’s also an annual audit and verification, to make sure that “Hey, the program’s working. You’re following the maintenance requirements”, and stuff like that. It’s a pretty well thought out program. And again, it’s giving access to funding that typically you just can’t get, especially the terms that you’re able to get through the program.
Every program has its nuances, but for the most part at a high level that’s really what it is. You’re able to use your property value and the property tax assessment system that’s literally been around since the 1700’s to actually improve your building.
Theo Hicks: Perfect. Alright, so I wanna get your best ever advice, but I want you to gear it towards someone who is wanting to get started in this. So what’s your best ever advice for the first thing someone should do that wants to get started with taking advantage of these cost savings that come with these types of programs?
Scott Ringlein: Get educated. Listen to these shows, go out to places like PACE Nation, learn about it, and then don’t be afraid to call others for help. That’s what we do for a living. You do what you do for a living. Don’t try and do something that you don’t have a lot of experience in. Because what we see is that they try, they fail, and then they just go back to what they were doing, which is really costing them money.
Something I wanna point out – this is the best advice ever, honestly, Theo. The moneys that you’re going to spend – you’re already spending it. Today you’re spending though on utilities and maintenance. All we’re doing is say — if you’re spending $100 a month on utilities and maintenance, we’re gonna take 90 cents of that, improve your building, and then we’re gonna put 10 cents of it into your pocket every month. That’s how it works. So you’re already spending the money.
Theo Hicks: Perfect. Alrighty, Scott, are you ready for the Best Ever Lightning Round?
Scott Ringlein: You bet. Bring it on.
Theo Hicks: Alright. First, a quick word from our sponsor.
Theo Hicks: Alright, Scott, what is the Best Ever book you’ve recently read?
Scott Ringlein: Credit Secrets.
Theo Hicks: If your business were to collapse today, what would you do next?
Scott Ringlein: Go find a job… [laughs]
Theo Hicks: Can you tell us about one of the projects you’ve worked on that resulted in the greatest cost savings?
Scott Ringlein: Actually, it’s the one we’re working on right now. It’s a million square foot facility. We are replacing 3,600 light fixtures, exterior and interior, installing controls. Their return on investment in year one is nearly 70%.
Theo Hicks: What is the best ever way you like to give back?
Scott Ringlein: Through charity. I’m a big fan of doing good and doing well. A couple of years ago I actually got a trademark for a charity program called Kilowatts for a Cause, where through a solar installation – the profits of the operation of it actually go to a charity that’s selected over a 20 to 25-year period.
Theo Hicks: And then lastly, what is the best ever place to reach you?
Scott Ringlein: The Energy Alliance Group, that’s our company name. The website is energyalliancegroup.org.
Theo Hicks: Alright, Scott, thank you for joining us today. I know a lot of the Best Ever listeners are gonna benefit from learning about these programs, and I’m sure they’re gonna enjoy the cost savings as well. Just to quickly summarize what we’ve talked about… You’ve talked about the energy conservation programs that relate to real estate, and that you want to focus on what you can do on the transactional side. What you can do right away, so that you can start generating cash or cost savings from day one, which involves understanding how you’re going to fund these projects. And then the fact that what most people don’t realize is that there’s actually a lot of money out there that you can get, so that you don’t have to get it through your traditional lender, or going out of pocket. There’s 20-year fixed-rate non-recourse loans.
We talked about the PACE program that’s available in most of the states, and that works like a property tax assessment. We talked about the amount of money you can get, up to 20%-30% of the property value. It’s considered an expense, and not debt, and it’s secured by the property and not the owner, and then it also transfers with the property. So the benefits are different from a traditional loan.
You walked us through an example of how it would actually work, and if people want to learn more about this PACE program, there’s a program called PACEnation.org.
You walked us through some of the solutions – you said controls and lighting, you talked about HVAC and hot water, roof replacement, insulation indoors, and how a lot of these things are tied together. You don’t wanna replace your HVAC if you’ve got really bad windows. You don’t wanna replace your controls if you’ve got really old lights…
We talked about your company and how you essentially go in there, determine everything that can be done, and then based on that what you need to do, create a scope of work, and then you manage the process from there, finding contractors, things like that.
And then lastly, we went over your best ever advice for people who are interested in reducing their energy costs. It was to get educated, so go to a place like PACE Nation to learn about the program, don’t be afraid to call others like you for help. It’s probably not the best to do this on your own, because it’s a pretty unique and specialized type of solution.
Then something you mentioned that I really liked is that you’re already spending the money on your utilities and maintenance, so why not spend less money on a loan of sorts that will make improvements to the property that reduces your utilities and maintenance costs.
Scott, thanks again for joining us today. Best Ever listeners, as always, thank you for listening. Have a best ever day, we’ll talk to you tomorrow.
Scott Ringlein: Thanks, Theo. I surely appreciate it.
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