Nico Johnson  00:00

In the middle of COVID, 2020 lockdown, no flights, no in-person meetings. You raised $50 million of equity from 40-ish investors without meeting a single one of them in person.

Laura Pagliarulo  00:15

Yeah, we raised all that capital without one in-person meeting. It was all about your Wi-Fi quality.

Nico Johnson  00:22

Hey there, Solar Warriors! Welcome in, and thank you for giving us the only non-renewable resource you've got. Of course, that is your time. I appreciate you allowing me to earn your attention today. My guest, Laura Pagliarulo, joined us back three years ago, December of 2023, to explain something most developers just simply weren't yet treating as a part of their capital strategy-that is how to stop thinking about the land underneath your project simply as capex-and instead turn that real estate into growth capital. A lot has changed since then, so in this episode of Where Are They Now, so to speak, I am bringing Laura, the CEO of a company called SolaREIT™ that she co-founded, back on the show today. That company says that it has financed real estate under more than $7 billion worth of clean energy projects, and more than 75% of those transactions are coming from repeat customers. So I didn't want Laura to come back and explain the model. I will link below in the description to that episode back in December of 2023. But I really want to know what six years of transactions have taught Laura about how the best developers manage capital when capital gets scarce. What SolaREIT™ as a business can now recognize in projects that maybe wasn't visible when the company started, and what Laura herself has had to learn as the business has expanded from solar into storage and other types of grid-supported real estate. That's a lot to unpack. We're going to give it our best shot today. Let's get into it, Laura. It's so good to have you back on SunCast.

Laura Pagliarulo  02:03

It's great to be here, Nico. Thank you.

Nico Johnson  02:06

I'm curious if we handed that Laura, who I interviewed three years ago, a transcript from today's conversation. What do you think she'd begin to understand about this business that maybe she simply couldn't understand back then? The

Laura Pagliarulo  02:17

piece that's so evident now is that you know your your team really becomes your company. So, 2023 was a long time ago. We've more than doubled our company size. That's you know one piece. You know the you know you've heard the quote that the sum is much greater than the parts. You know that's very very true for you know the company we have today. We have fantastic retention at SolaREIT™, and I think part of that is because we're really focused on hiring the right people. So you probably you know it's you know A players behave like A players even before they react. You know they're like you know focused on you know, getting things right. Other things I would say are avoid the shiny objects. You know, we are successful because we've almost been myopically focused on working with solar and battery developers.

Nico Johnson  03:15

Yeah. The

Laura Pagliarulo  03:15

other piece that I learned even more so is you treat your investors' money like your own, you know. You're you really don't want to get over your skis and make smart decisions, and you know allows you to, you know. I mean, it's just responsible for do shared management. So, is

Nico Johnson  03:32

there anything you learned or integrated or was maybe presented to you through coaching or or friends around managing people, thinking about the team, and scaling up that you feel like was a salient contributor to your ability to sort of hold on to the reins as the company scaled as fast as it did.

Laura Pagliarulo  03:52

Yeah, that's great. So since you know, since day one, since inception, I would say that the only reason, or one of the only reasons, why we've been able to scale is that we've been super focused on efficiency. So anytime there's friction in the business, we really dive more deeply. And you know, I think a lot of companies have made the mistake of just hiring another person to solve something. We really dig into okay, how can we make the process more efficient in order to be more effective, because scale really means speed and efficiency, especially being a female leader, striking that right balance between vulnerability and being firm, which I think you know the culture is such a reflection of myself and Laura Bruce Klein, who's the CFO to Lauras. I know, as we're affectionately known as the lores. That's funny, but really, I mean, the one thing we've always emphasized is that we're a very flexible culture. The majority of our staff, you know, who are older have families that or other obligations outside of work, and as long as you're getting all your work done. You know, we we like to be a very flexible culture. So, and I say that because it's huge. There's no points for working hard but not getting results. It's you know the score takes care of itself. I don't know if you read that book, but it's I think it's it's very true. So

Nico Johnson  05:17

I love that. Well, I'm glad that you brought up the score because for me, I really want to know kind of what is the scoreboard for SolaREIT™ over these over these last three years. How would you say the scale of SolaREIT™ has been made visible? What's the project value, finance, capital available, etc. Since we last talked?

Laura Pagliarulo  05:37

Yeah, I mean it's actually incredible that, and I rarely do this pause and look back and think how much we've achieved in three years. The team has definitely, you know, grown significantly, and you know, we we hire people who are from the industry just because this is one of the you know differentiators for us that helps us understand what developers want and what they need, and can we be a solution?

Nico Johnson  05:59

It's a different kind of developer. You have to understand it,

Laura Pagliarulo  06:01

and deals, and you know how we finance things, and you know we're in 20 states right now. The amount of deals we've done has grown significantly. We've always been operational and across the U.S. but really seeing that expansion and that map grow that we flash up every QBR. Our project size has actually grown significantly. So, I think when we spoke in 2023, it was right after we had closed the facility with AB Carval, who have been great great partners for us to work with. Actually, so with that, we had you know about a billion dollars to deploy. We deployed quite a bit. Our deal size at that point was probably you know when we launched the business in our first fund, we were very intentional about doing small deals, just because we knew we were going to make mistakes. We wanted to make mistakes on a smaller size, smaller scale. Now I'd say you know we're you know we're taking down deals that are 5060, $70 million, which is really, you know, which is a massive change since since we last spoke, and I think you know the the key to all this is we have really great capital partners, you know, from Carval to Sun Life and our debt partners, so a lot of successes to celebrate. Yeah,

Nico Johnson  07:19

can I ask you to highlight some of like the top line numbers, I mentioned more than 7 billion in the intro. How how accurate am I?

Laura Pagliarulo  07:26

Yeah, we're about almost at 8 billion now. So we financed the real estate on you know under just about $8 billion in projects, which is pretty yeah significant. And really, what's yeah what's satisfying is you mentioned the repeat partners when you kicked off the the interview. You know it's a point of pride. You know it doesn't mean we're not working with new partners every day, but what what it does mean is that once a developer does one deal with SolaREIT™, they've sort of seen how easy it is and how valuable it is, and then it's just rinse and repeat. So it's amazing that yeah

Nico Johnson  08:04

that that hypothesis it has become not only not only have you proven the hypothesis, but you've proven that it's sticky, which increases asset value. That's amazing.

Laura Pagliarulo  08:12

Totally, yeah. I mean, it's very it's really satisfying, and just seeing the evolution of honestly, when we started this business six years ago, there was really only one one other person doing it in the space, and now we have there's a number of competitors, which actually I quite I quite like, of course, because the level of education in the market has grown in terms of like the value of of this offering, which is yeah. If you were

Nico Johnson  08:37

still the only ones, your marketing budget would have to be much larger.

Laura Pagliarulo  08:39

I know it's true.

Nico Johnson  08:42

Well, for somebody that's discovering this model of what you do today, give me the simplest version. How does a developer turn land or a lease that they already control into growth capital?

Laura Pagliarulo  08:51

Yeah, I'm so glad you asked that. It's something we think about a lot at SolaREIT™. So historically, you know, you know, it's very simple. You get site control, you send a lease, and then that lease goes into a file folder. But you know, at the business, it's you know what we like to talk about is that you know land strategy is capital strategy. So project finance very defined tax equity, sponsor equity, construction finance. The idea is that you're leveraging the real estate under your solar and battery portfolios to turn that into very flexible capital to use for things like interconnection deposits, or you know safe harboring, or you know the whole myriad of ways that we see developers leverage real estate, you know, to support their pipeline.

Nico Johnson  09:36

Something I've been thinking about as I mull over what is the underlying value? If I'm if I'm on the other side of the table, is it might not be. I mean, I think every developer has a different answer for this. But what are some uses of funds that you've seen result from this sort of growth capitalist freeing up of equity that goes back to develop to the developer?

Laura Pagliarulo  10:00

We see a lot of different uses for the capital that we provide, and yeah. And what's really satisfying, you know, the reason why I got into this space, you know, 20 something years ago was just I'm a huge believer in renewable energy, you know. So it's very satisfying to see our capital being used to advance projects. So one example would be a developer, a battery developer, we work with, timed the easement purchase exactly when construction finance was closing, and then use the purchase that we, you know, use for the easement to make safe harbor payments. Another example is, you know, a developer we worked with who quietly had been acquiring purchase options, you know, over the years and buying them for a much, you know, a very market attractive market cost, and then selling those to SolaREIT™ for much more than they paid for, and using those proceeds to make another investment in real estate via a 1031 Exchange, yeah. I mean, so

Nico Johnson  11:03

smart.

Laura Pagliarulo  11:04

It's very smart. So the the beauty of where I sit is like because we get to work with so many different developers across the country, and we're not competing with anyone. You get to sort of get visibility into everyone's different strategy for real estate, and the smart developers are leveraging the real estate in ways that are beneficial to their business, especially when cash is tight right now. I mean, gone are the days of low interest rates, and you know we have the ITC cliff, all these things looming. So developers need cash more than ever.

Nico Johnson  11:39

You know, I'm really interested in the repeat business and what it tells us. You know, after a developer does that first transaction, what changes in the way they think about land and their capital strategy? I'm curious in examples of how, particularly if they've learned to proactively incorporate that land financing into their portfolio planning.

Laura Pagliarulo  11:58

Absolutely, our repeat partners once they do a transaction with us, and they realize that they don't need a dedicated real estate person to do a deal with us because we're basically just leveraging diligence that already you know has been done. You know, confirmatory diligence. The developer partners that we work with on a repeat basis, which are names that you're very familiar with,

Nico Johnson  12:18

yeah,

Laura Pagliarulo  12:19

are looking at they're looking at ways to close in a portfolio, and then leverage the proceeds from SolaREIT™ to make PPA deposits. You know to fund different aspects of the business. So we have typically conversations with developers six months to a year to 18 months in advance of when they expect to close their next portfolio. So once it gets embedded, and once you know, it's almost like you need to try and do it once, and then you see because all the other capital sources I mentioned are not flexible. Your construction financing is used for a very certain aspect of the business. Sponsor equity, obviously, that's very clear. Dev capital, very clear. Funding from real estate is very flexible, and you can use it, you know, to fund whatever wherever your needs are.

Nico Johnson  13:13

I'm curious how you think about the underlying staff requirements on like a per deal basis. Like, how

Laura Pagliarulo  13:20

does

Nico Johnson  13:20

how does that model scale? Is it highly efficient?

Laura Pagliarulo  13:24

Actually, that's something that we've learned and tested and refined over time. So we have a we have a very defined playbook, if you will, in terms of if we want to take down another $50 million in deals in a quarter, what's the analyst support we need? What's the BD resources we need? Who do we need on diligence? So, it's actually the playbook is now so you know so defined that we we know exactly if we need to grow the team.

Nico Johnson  13:57

Is that based on like millions of dollars tranches, or how do you think is what's the metric that is the growth metric?

Laura Pagliarulo  14:03

The metric really is capital deployed. Really, so that's what you know. We obviously look at megawatts and we look at acres, but it's really capital deployed and the number of deals. So, well,

Nico Johnson  14:13

that's hang on, I'm confused. So, capital deployed is a it means that you purchase

Laura Pagliarulo  14:18

price,

Nico Johnson  14:19

right? Okay, the purchase price, but okay. Purchase price of the asset being evaluated. It'd be like the capital to be deployed. Correct. Because when you say capital deployed, I'm thinking like, oh, actually, like once dollars go out, then you know how much to scale up. But you're doing a whole bunch of evaluation and BD and filtering. Yeah. That for me would represent like if you have a big influx of of like top of funnel activity. Anyway, I'm maybe going too deep and giggy here, but no, no, no, no. I'm just trying to discern.

Laura Pagliarulo  14:47

So I'll put it this way: we offer three products at SolaREIT™. We either buy the fee simple land under solar and battery projects, or we buy an easement, which is basically a lease purchase, or we do a. A solar battery land loan, and when we set goals for the year and then distill those down into the quarter, you know, Rockefeller habits is something that you know is integrated into the business. We basically staff the business. We set a goal. We have yet to not reach our goals, and we know the staffing required to hit those goals. So, if I know it takes, you know, X amount of diligence time, pricing, analyst time, BD, BD lead, BD support, I'm staffing accordingly to hit those goals for the year. So that's what I mean in terms of like, you know, a very well defined playbook to hit those numbers.

Nico Johnson  15:41

I'm gonna kind of flash back here for a little bit on again, sort of the business that you've built. For those who are familiar with backstory, this idea was sort of brought to you by a peer, Galtam. He brought you this idea. You were coming out of Community Solar. Your reaction was basically real estate. It's kind of boring. What do you think you missed about in in sort of the mundane nature of real estate that you appreciate differently today?

Laura Pagliarulo  16:09

I don't necessarily think it's real estate per se. I think it's more how valuable the solution is to the developer world, and obviously the market has changed and continues to change. And anyone who's in the renewable solar industry knows this.

Nico Johnson  16:29

Yeah,

Laura Pagliarulo  16:29

but you know, coming from community solar, where it sort of felt like whack and mole, you know, every market, you know, and this is still true, has its own regulations and permitting requirements, and just it's very different based on state and then also locality. The real estate, this notion of you know the basis for SolaREIT™ sounded boring, you know, very simple. But in reality, while we offer three products to batteries and to solar, there are so many different flavors that each deal is entirely different in terms of how it's used, or the partner we're working with, or how we structure certain things. And I think the most satisfying component of this is, you know, just seeing, you know, supporting renewables. I mean, bringing more renewables to the grid, and now batteries is just, you know, it's critical now. I think more than ever. So,

Nico Johnson  17:23

I think pattern matching is one of these most important underlying skills that you have to develop in your career. Let alone as a as an owner and entrepreneur. I think every role gives us another layer, another tool in that toolkit. You at Washington Gas learned how power markets work and how risk models work. Sun Edison, you were helping make solar community solar financeable when that model was really unfamiliar for the marketplace. When you look at SolaREIT™ today, what principles or tools from the toolkit of your previous roles show up most clearly in the way you've built this company?

Laura Pagliarulo  18:00

You know, it's very interesting to think about all the learning over these past, from my past life, and this is what I always appreciate about Unico is that you go, you know, on a personal level.

Nico Johnson  18:11

Yeah. Thank you.

Laura Pagliarulo  18:13

At Washington Gas, it was really power markets. It was transmission capacity, ancillary services, which has been, you know, critical in terms of understanding the battery story in markets such as Texas, and how the fundamentals play out, and you know how we select partners that we want to work with. So, just to be clear, we we're pretty selective in who we end up working with. Really, we want to work with good developers who really do know what they're doing. At Sun Edison, because it was community solar, and at that point it was so nascent, it was the ability to explain a new and potentially complex idea to parties who are entirely unfamiliar. So, and that's become less. That's become easier over time. Just because I mentioned there's more, you know, competitors in the space, and you know, really rising tides lift all boats. It's very valuable to have competitors educating, you know, the rating agencies, financing partners, but that was critical. It still is critical in terms of because we still find a number of investors who are not familiar with how our model works.

Nico Johnson  19:36

Right.

Laura Pagliarulo  19:37

So that's something that you know is very useful in this role?

Nico Johnson  19:43

Yeah, and I asked that question. Thank you for the kind words. I asked that question because I really want folks to think deeply about their transferable skills. A lot of folks are trying to get into this industry because they see there's an opportunity, they see there's profitability, etc. and they don't. See necessarily themselves described in a job description at a company that's trying to hire for X, Y, Z. Yet, you know, coming from healthcare or sales broadly or finance in pharmaceuticals or marketing in in big tech, there are tangible transferable skills. And I just want folks to think about. I think everyone should do should do that self evaluation that that personal inventory. You know, I'd say you know once once every two to three years minimum, definitely once every five years. Like really think reflect on what is the pattern matching in my own life. Would I become exceptionally good at seeing that I couldn't see before because I've just done it so many times.

Laura Pagliarulo  20:42

Yeah, I think one of the things that comes to mind is I feel like every day I'm playing multi-dimensional chess.

Nico Johnson  20:47

Yeah, and

Laura Pagliarulo  20:48

I'm thinking, you know, I don't know if this is always a benefit, but it's sort of you know thinking multiple steps ahead of what could go wrong, what are the opportunities, and planning for those. You know, really having those discussions, and I have the benefit now of you know I surround myself with people who are incredibly talented, who cover my blind spots. You know, it's like you know, for example, if I flag you know interest rate risk or just various things, you know, I I like that feedback, and I solicit that feedback. So certainly, you know, you have to be willing to take constructive criticism, which is something that I actively solicit in my role because it's not given to me unless I specifically ask for it. The perception of risk that's across all industries that you just mentioned, and how to communicate it, how to solve for it, is is pretty crucial.

Nico Johnson  21:48

Had a chance to catch up with you, obviously, in prep for this interview. And one of the things that I somehow missed-that is an incredibly interesting element of the founding story-was in the first time around was how in the middle of COVID 2020 lockdown, no flights, no in person meetings. You raised $50 million of equity from 40 ish investors without meeting a single one of them in person. Can you help unpack? You know a small version, perhaps, of how that came together.

Laura Pagliarulo  22:26

Yeah, when I look back at that, and when I hear you articulate that, it's still-I don't know if it can be replicated today.

Nico Johnson  22:35

Yeah,

Laura Pagliarulo  22:35

but I think the when we, especially connecting it to your previous question about transferable skills, relationships are key. No one wants to give you money unless you have a proven track record in whatever you're raising money for, and are you know a trustworthy partner. You know, in no way would I say we would have been able to raise that amount of capital for our first fund without pre-existing relationships. That said, I would say probably half our investors, you know, there was tremendous amounts of education around what we're trying to achieve, and you know, some folks might know real estate, but they weren't as familiar with renewables. So the relationships are important. The ability, well, honestly, Nico, at this point, it was you know we've delivered on everything that we promised our fund one investors. So just to be clear, that fund one is you know long sunset, and we get regular requests from investors to say, hey, can I invest in the new version of SolaREIT™? And unfortunately, that you know that's not a possibility.

Nico Johnson  23:43

Yeah,

Laura Pagliarulo  23:44

but delivering, you know, really getting clear on what the deliverables are in terms of returns and performance. But yeah, we raised all that capital without one in-person meeting. It was, it was all about your Wi-Fi quality, and and yeah, lots of and you picked that quality. Well, correct, yeah, and then also who the people were. I mean, yeah,

Nico Johnson  24:09

whether it's as much about who they are as who introduced them to you as well, right?

Laura Pagliarulo  24:12

Yeah, yes, definitely. I'd say both of those things are critical. But who the team is and and their background and why they're a good fit for what we're doing. I mean, I'll tell you this: I know that a lot of the majority of businesses fail, and failure was absolutely not an option for us. And certainly, my work-life balance has improved since then. But in the beginning, I'd say about a year into it, was sort of like, "What have I done? Yeah, it's like I've had twins, you know.

Nico Johnson  24:38

True. You know, one thing that catches my attention as well, because I think the reason I bring it up is because I do think I've I've reflected on like, is it salient? Are there are there things people can take away from this, or is it just an interesting story? I think it's an interesting founder story for sure. But you do something, you. Did something then that I see very few people doing today, and it has caught my attention. I've seen a few companies going out for rounds of investment who do this. You would sometimes have several prospective investors on the same Zoom call. I'd love for you to talk about the nature of that, like how having other investors in the room changes the dynamic of the pitch and even the fervor of the raise,

Laura Pagliarulo  25:24

yeah, that was an interesting component. It was all on Zoom again, but it was sort of like if you were a potential investor and you knew other potential investors, bringing everyone to the table. It was helpful for us in terms of efficiency, but I actually think the dynamic of having multiple people asking questions at the same time to others because this these investor pools everyone is so different. I mean, you have people who are in you know real estate, those who are familiar with renewables, those are where accountants. You know, I mean, just the full gamut. But having a room where everyone's asking questions is just supporting everyone's understanding of what's being offered, right? And that was actually a unintended consequence of of that of that process because the one on one meetings, you know, it wasn't even intentional, Nico, at the time. It was just an outcome that that played out

Nico Johnson  26:25

well. I think that a lot of folks are pitching virtually today, and I think it's something that could be replicated. I've seen a few companies do it really well, and yeah, I think it's going to become much more popular. To be honest, something that is hard to replicate. I don't want to pretend that any listener can just sort of hear your story and go, "Oh, well, yeah. I mean, you you like the sheer close rate of who of how many investors you pitched versus how many said yes is insane. There is a specific advantage of your founding team that I think people who are trying to create something and build a founding team could try to emulate, but can you talk a bit about the folks that you were surrounded with as the founding team and how that gave you sort of a a front of the line advantage?

Laura Pagliarulo  27:13

So the people who run the business, you know, Laura and I are the ones who are running the day to day, but the founders include included three other individuals who have very different networks,

Nico Johnson  27:27

very

Laura Pagliarulo  27:27

different skill sets, and success rates. So, a fun, you know, to be honest, some of them are older than us, which means they translates directly into they've had more experience and more time, and

Nico Johnson  27:38

yeah,

Laura Pagliarulo  27:39

you know, serial entrepreneurs, right? So, and they've and they've proven

Nico Johnson  27:42

themselves track record. Yeah,

Laura Pagliarulo  27:44

exactly. And you have to understand that you know, while while I had a lot of success with the companies that was with, sort of as a you know an intrapreneur as an operator. Yeah. Well, no, I mean, like I hadn't had a P and L, but within an existing business, right?

Nico Johnson  27:58

Right.

Laura Pagliarulo  28:00

I never had taken that entrepreneurial leap, even though I'd always wanted to do it. So having a diversity in terms of the founding team and the different types of possible investors they could bring to the market was very valuable. Yeah, absolutely. We couldn't have gotten it done unless we had everyone around the table.

Nico Johnson  28:18

I wonder what did the business have to demonstrate to earn access to the next levels of capital.

Laura Pagliarulo  28:24

I love these questions that you ask, Nico. So that first fund with the 40 investors that you mentioned, we were able to raise $100 million securitization, also on Zoom with TIA Kraft Naveen, so that first fund was $150 million, and the first thing was you know effective deployment of that fund. So that was our proof of concept essentially for the business, and it's a lot easier to raise institutional capital or private equity cash. When you've proven that you can be successful in terms of signing deals, diligencing them, closing, and then showing the returns that you committed to for the regional investors, and then really that playbook I mentioned, all the learnings we gleaned from Fund One, were critical in raising the 250 million in equity from AB Carval. So a really, you know, it's it's a defined number of seats for this volume, the ability to stay very focused, and you know, I could tell you that's actually something that anyone who's looking to start something, a business on their own, you know, there are a million different investments that SolaREIT™ was presented with throughout all these years. I mean, and they make sense. I mean, all of them are, you know, we could do wind, we could do renewable chart. No, you know, electric vehicle charging for municipalities. We could do so many different things, but our success has really been staying focused.

Nico Johnson  30:08

Yeah,

Laura Pagliarulo  30:08

and really going deep into the things that we do really well. Right.

Nico Johnson  30:13

Yeah, you mentioned Rockefeller Habits earlier. We've talked a lot about scaling up, burn harness, traction, EOS. Is there a framework that you use inside the business to to institutionalize these practices?

Laura Pagliarulo  30:28

Yeah, definitely EOS. So that

Nico Johnson  30:30

yeah

Laura Pagliarulo  30:30

traction was was critical, and we still focus the business in that way. You know, and

Nico Johnson  30:35

you have a an implementer working with you, or did you guys just sort of button down and read the book and get

Laura Pagliarulo  30:40

it done. I I did yeah all that. So I read the book. I put together the whole framework. Yeah, I'm really one of the things that I'm, you know, I think is critical to every individual success. And it's been so, you know, satisfying to hire younger folks and watch them grow. But everyone has KPIs with very specific, measurable results,

Nico Johnson  31:01

right?

Laura Pagliarulo  31:02

So it's not like sign this number of deals or close these. It's like very specific with 90% accuracy. You know, get purchase and sale agreements out with you know 95% accuracy, and these are measurables, right? So that was a big component of that, and then really having taking these massive, you know, these big goals that we had for the year, and then really drilling down to what are the quarterly targets we need to hit in order to reach that goal at the end of the year, whether it's you know reach out to five new debt partners, you know, or expand our revolver, whatever that might be, that's been you know, we you focus, you focus on on on certain things, and that's what you are able to achieve, and just not focusing on everything.

Nico Johnson  31:52

I'm curious what these six years have taught you about how the best developers that you've observed or worked with manage capital when it gets scarce,

Laura Pagliarulo  32:02

I would say that the best developers thinking about our portfolio of partners, the best developers we work with have incredible foresight, and that comes with experience in the space as well. And sort of, you know, we've gone right now. You've got OBB, you got safe harboring, you got Fioc,

Nico Johnson  32:23

yeah,

Laura Pagliarulo  32:24

and it's been you know the market's been turbulent before. None of this is unfamiliar, and the best developers, of course, have resilience and have you know taken their successes and failures from previous companies and implemented it, you know, into you know what's that translation to current day? 100% But the ability to plan for the needs of the business and understand the limitations of capital providers, and and you know the worst case, of course, and we're seeing this now, unfortunately, is you know you you get over your skis you you bite off too much and you can't actualize on your portfolio and I think we're we are seeing a lot of that in the market right now and to me that's that's poor capital planning like there's no credit for your big visionary goals you know, you have to really like take down small chunks at a time, and and and I think one of the things I see it's you're always planning for the worst case scenario, and until you have financing that's secured, you don't have financing until the deal's inked, it's not done, and this is honestly how you know a lot of developers start to work with us. It's you know we offer non-dilutive you know it's non-dilutive capital. You don't have to sell off equity of the business, but having them you know and part of this is the process, like having our partners understand what we can and can't do, like what our boundaries are, where we can stretch, where we can't stretch, but really that foresight is is really really important. So, and I've seen both sides of the spectrum.

Nico Johnson  34:09

Yeah, I think it's really interesting. As capital gets scarce, you see the talented developers start the choices they've made, what to protect, what to stop doing, where do they preserve optionality, even, and where's their

Laura Pagliarulo  34:21

experience? I mean, yeah, you know, it's it's sort of like okay, we're really good at this. We we know how to develop projects in North Carolina. We have relationships at Duke. We know how this process works, and really leaning into that as opposed to wow, batteries are really exploding in Texas. We should go there. Like, don't do that. So, and I think we're seeing some of that right now. With you know, and it's part of our assessment. You know, a lot of solar developers who think it's very easy to do batteries, and it's it's an entirely different skill set.

Nico Johnson  34:55

I wonder, along that line, are there things that through kind of rejected. Transactions or failure cases that are areas where, as a team, you see things and projects that you wouldn't have seen five years ago.

Laura Pagliarulo  35:09

We see a lot of desperate developers, the folks that I mentioned who are just looking for all options for cash because their business is in a difficult position, so those are hard conversations. But you know, our the reason why SolaREIT™ has been successful, and what's critical to me is, you know, I I love my team, and I want to part of what I do, and the reason why I'm so focused on risk is that you know I have a responsibility to keep everyone employed, and you know so we're very cautious and cognizant about a developer, and and when we know there's like desperation, it's one thing if they have a solid project, you know where construction finance is closed, and you know, you know, other people have invested cash versus. Hey, you're asking us to come in, and we're going to be the largest investor in this deal as a real estate partner. No, we're not going to do that. So,

Nico Johnson  36:14

I'm curious what separates developers that can still get projects financed today and keep pipelines moving from those that are getting stuck, like you're talking about.

Laura Pagliarulo  36:22

When I think about the developers that are successful in this particular market right now, at this point in time, when it's quite challenging, yeah,

Laura Pagliarulo  36:30

it really are those that have a lot of experience and resilience in this space overall, and it doesn't have to be everyone on the team, but those who have, you know, who have established relationships with finance shops, those who have realistic expectations in terms of ITC percentages. We're seeing a lot of a lot of smart strategies come up in the market, which has been great. But it's people who really truly understand how to finance deals, and what's reasonable and what's not, and then also, you know, really in tune to their financing parties, and like, are they at maximum capacity? Like, diversification is critical. Yeah, and then really digging into, and this is one of the things we see on the real estate component: is you know, if people don't leverage the real estate, they're leaving money on the table. That's hard stuff. Yeah. So you know, it's just it's a it's a miss.

Nico Johnson  37:34

Yeah. So it's solar and batteries taught you the value of the real estate and the asset. You've moved more heavily into battery storage in the last few years. Logically, like most following the developers, in many ways, you need far less acreage on those projects. But the locations can be extraordinarily valuable. I'm curious what Bez taught you about what actually makes energy real estate valuable. Is there anything like is there any nuance there compared with solar,

Laura Pagliarulo  38:02

definitely. So in the battery market, and I think especially with the growing data center market, you know the prices of real estate are really in certain areas changing.

Nico Johnson  38:17

Yeah. So

Laura Pagliarulo  38:18

you know particular parcels of land out west in Arizona or Texas might have gone for, I don't know, $15,000 an acre, and now they're trading at you know $250,000 an acre. So like

Nico Johnson  38:30

home buy home building prices. That's crazy.

Laura Pagliarulo  38:33

It's extraordinary. But we could get on a different tangent about data centers. So with batteries, especially in yeah, actually, well, across the board, but especially in urban locations, those, you know, it could be a situation if you have a small solar project. Okay, the land you're going to take down for 150,000, $200,000, but the equivalent for batteries right now is a lot more than that. So, having a real estate provider, someone who can execute on the real estate component of the project is is essential for some of, especially the pure play battery developers. Also, you know, the revenue from a project, you know, on a square footage basis is tremendously different from a battery versus a solar project.

Nico Johnson  39:18

Right,

Laura Pagliarulo  39:18

and we price our deals based on the lease rates, not on the appraised value rates. So we're able to deploy a lot of capital for a very small footprint for battery deals. But some of the things that are critical to this are things like, you know, do you have interconnection on site? Because our you know our theory is and always has been that once a piece of land has been developed into a battery project or a solar project, and there's interconnection. It's never going to revert back to. It's going to be an energy

Nico Johnson  39:48

project. That's right.

Laura Pagliarulo  39:49

Or it's going to be an energy generation asset or an energy user. You know, one or the other.

Nico Johnson  39:55

Yeah.

Laura Pagliarulo  39:56

So yeah, real estate for battery projects. Is is quite a bit more expensive.

Nico Johnson  40:03

Well, along those lines, I'm curious what pattern you were seeing in solar and storage that convinced you the real estate problem extended beyond the infrastructure itself to substation and transmission. The

Laura Pagliarulo  40:14

substation play we've been we have a couple substation deals, and it's really unique in that we do those with a handful of developers, so you have like obviously the utility substation is owned by the utility. The project substation is the real estate that we can transact on, and anything we transact on has to have a lease, right? So with a substation deal, in some ways you're at the very top of the capital stack because you need the substation to have the project, but we're not going to transact on a substation until the project has broken ground. If that makes sense, because you know, I don't know if that's clear, but I'd say we do. The transmission substation component of our business is much smaller than the battery component of our business, which is, I'd say about 50% of our portfolio right now, and everything from you know very large utility battery projects with the likes of I'm trying to think of who's public, like ES Volta, who is a fantastic group. You know, they cut their teeth early on in batteries. So, and Nine Dot, which is an urban New York City developer

Nico Johnson  41:22

David Arm really

Laura Pagliarulo  41:23

partnering yeah exactly so moving into the battery space it was it was just it's the same model but some meaningful differences

Nico Johnson  41:35

Laura as the company's grown I've I'd love to hear what you've had to actively stop doing so that you could focus on the job of being the CEO and the things that only you can do. How have you grown in that way?

Laura Pagliarulo  41:50

That is something I personally think about all the time. You know, it's this interesting friction because, as a founder, I don't want to be totally removed. Yeah. At the same time, I've been very mindful and intentional about trying to. So, for example, I track when I'm being brought into the weeds in something,

Nico Johnson  42:16

and then how do you track?

Laura Pagliarulo  42:19

I just do it by time. You know, it's like if I'm getting brought into the weeds to, you know, weigh in on something or reach out to a partner about something. My next question is, okay, so that was necessary to get this deal done, and what's the process, LLM, Or human resource I need to improve this over time, and sometimes you know there's always things that I have to fly in for, like conversation with CEOs and things like that. But in other times, you know, for example, one of the things we're doing is we have you know occasionally deals that are non-conforming, like you know how do we handle a brownfield easement purchase, a lease purchase on a brownfield, and or a property we're buying that has a house on, and we don't own land under houses, so creating a you know training our LLM to basically, you know, provide value to the legal team on this is how we've handled it before, and here's what's commercially reasonable, rather than having that knowledge just be in my head. So that's something we're doing right now. Just things like that. So I I am very mindful of of what I'm getting down, you know, when I have to fly in and and listen, I mean, my time is best spent right now strategizing for the business, raising equity, raising debt, you know, but it's still my baby.

Nico Johnson  44:00

I want to pull a thread here on sort of your personal, your own personal operating system. Is what's on your nightstand? What are you reading right now, or what are you returning to? Sort of influencing how you think.

Laura Pagliarulo  44:11

Well, right now, interesting, Nico. I am. I just finished a book, and now I'm reading. I'm catching up on all of the fiction pieces in the New Yorker.

Nico Johnson  44:22

Oh wow! So I was kind,

Laura Pagliarulo  44:23

yeah. So that's what I'm currently reading. I think my standard readings are, you know, I'm always, I'm always reading things. You know, there's a million business books out there. I read those that are recommended to me, highly recommended to me. But I tend to read more honestly, like spiritual books,

Nico Johnson  44:41

yeah, things

Laura Pagliarulo  44:42

that orient me, and yeah,

Nico Johnson  44:45

fantastic. So I want one spiritual book and one business book that you have gifted or that you've read more than once.

Laura Pagliarulo  44:51

Well, I mean, I already mentioned the score takes care of itself.

Nico Johnson  44:54

Yeah,

Laura Pagliarulo  44:55

and then I mean, honestly, when it comes to the BDE team, you know. It's always Jack Daley, you know. You know the sales playbook. I also like the Challenger sale.

Nico Johnson  45:08

Challenger, yeah, I learned about that.

Laura Pagliarulo  45:09

Yep, that's a good one. Yeah, and then the score

Nico Johnson  45:13

takes care of itself. By the way, is Bill Walsh, Bill Walsh, the coach? By folks are looking for that.

Laura Pagliarulo  45:18

Other other books that I read, I've been gifting people. I was gifted the I think it's called the Five Minute Gratitude Journal, which is something that I've gifted just because there's so much data behind that. So you know, when it comes to like my friends who are also executives, starting your day with you know three things you're thankable for, three things that will make your day great, you know, what's your affirmation? That totally changes the. Listen, one of the things for today was like having a grounded podcast, you know, be prepared and like I love

Nico Johnson  45:52

it.

Laura Pagliarulo  45:52

No, but seriously, you know. By the way, that that

Nico Johnson  45:55

book, that book is the result of the authors reading Tim Ferriss's Four Hour Work Week and coming up with a book, a business that could be their muse. Yeah, for years I did the the five minute journal. What are you grateful for? What would make today great? What are your daily affirmations, highlights of the day, and what did I learn today? And I, so Laura, we integrated this into with our kids at dinner.

Laura Pagliarulo  46:18

I love that. That's great. Yeah,

Nico Johnson  46:19

Yeah,

Laura Pagliarulo  46:22

but for me, and it's interesting because the person who gifted it to me was Chris Wedding, who runs a group called Entrepreneurs. Yes, he's fantastic. So, and his note in there was, "Yes, I'm giving you a gratitude journal, and I'm expecting a big eye roll, which I did. I was like, "Oh, come on! But then all the data behind it about increased happiness, improved sleep, I find it very valuable. And then as far as like spiritual books go, I read you know anything by Pema Shodra. I love. I mean, just you know, it's like, but but I think the key things for an executive, and I'm very Type A, you know, heavy drive. Want to get things

Nico Johnson  47:04

done. Yeah, is

Laura Pagliarulo  47:04

that you know you can you do all the legwork, you do your best, but you actually don't control the outcome of things. Yeah, and really, and really getting comfortable with that, you know, accepting that is a is critical. So, I

Nico Johnson  47:21

had not heard of Pema, and I had a guest on who recommended "Comfortable with Uncertainty.

Laura Pagliarulo  47:27

That's a good one.

Nico Johnson  47:28

And yeah, I've gone. Yeah, I've been reading her

Laura Pagliarulo  47:31

for 20 years. Yeah,

Nico Johnson  47:33

the places that scare you, possibly one of my favorite. Yes,

Laura Pagliarulo  47:35

that's a good, and that's where you go. I mean, that's sort of like the places that make you most uncomfortable, and

Nico Johnson  47:41

yeah, but

Laura Pagliarulo  47:42

that's also really important to. So for me, you know, making sure right now that none of my decisions are based on fear, and that my side of the street is clean at all times. So my

Nico Johnson  47:54

side of the street

Laura Pagliarulo  47:56

is clean. Yeah, I mean that's how

Nico Johnson  47:58

awesome.

Laura Pagliarulo  47:58

But it's sort of like you know when I fear comes up in a lot of different ways, whether it's anxiety or the desire to control or wanting to be perfect at something, and then for me, the only way I get past that is to unpack it. You know, so unpacking it even down to a very granular level is then how I, you know, move on. And I'll I'll give you example of this. I'm not totally sure if I went on podcast, but when I think about the worst case scenario for soul worried,

Nico Johnson  48:32

yeah, which

Laura Pagliarulo  48:33

is okay. Market, we go into a recession. No one, no one's able to raise any money. We are not able to secure more capital for the business. Okay, worst case scenario for me is I have plenty of cash being kicked off for rent of my operating portfolio that will pay for my employees to stay and pay for all of our debt requirements. So, and I, you know, I learned this from another mentor of mine. It creates your the ability to hold your breath underwater. You know, so holding your breath underwater, you know, how long can we do that for? And that's that's that's rather than having it be a fear based approach of we need to do this or this when the outcome is not in my control. It's like okay, what's the fear? The fear is something's not successful. Okay, what does that look like? And and and familiarizing myself with that. So, and the other thing, the other the other piece of literature I'd recommend to everyone is, I don't know if you've read Rumi's The Guest House poem. Oh my gosh, it's such a great poem. It's basically welcoming in every emotion you have and making friends with it, as opposed to stuffing it down. So I'm looking

Nico Johnson  49:52

for I'm looking for a book here. I want to show you. Have you read Hafiz?

Laura Pagliarulo  49:56

Oh yeah,

Nico Johnson  49:57

The Gift.

Laura Pagliarulo  49:58

I read that ages ago. I'm gonna reread that.

Nico Johnson  50:01

So good, the great Sufi master Hafiz. This was gifted to me by my dear friend Andy on my 45th birthday. Yes, I'm older than 45.

Laura Pagliarulo  50:12

So am I.

Nico Johnson  50:13

Yeah, Laura, I'm gonna do a quick charge. It's five questions. I just want your sort of gut reaction answer. Not looking for long windedness. Underrated. What's the most underrated asset on a developer's balance sheet?

Laura Pagliarulo  50:29

Real estate. Overrated. No, no

Nico Johnson  50:32

doubt. Yeah. What's one financial metric or financing assumption developers pay too much attention to?

Laura Pagliarulo  50:39

PPA rates. PPA rates. It's like the energy rates are what they are. I mean, they're you know, and you certainly can't control those. So

Nico Johnson  50:46

I love it. All right, what's something that you've changed your mind about recently?

Laura Pagliarulo  50:51

Just because you can do a deal doesn't mean you should.

Nico Johnson  50:54

Yeah, it's amazing how desperation can, in the early days of building a business, this sense of loss of opportunity loss or the pending opportunity loss can drive you to do deals that, in in reflection, weren't really great deals.

Laura Pagliarulo  51:09

And even and even completely not attaching to any deal is what I try and tell the team. You know, don't don't be wed to anything.

Nico Johnson  51:17

What's something you are deliberately delegating sooner today than you would have three years ago,

Laura Pagliarulo  51:22

delegating AI integration to those who are more passionate about it. So delegating that in terms of improving operational efficiency.

Nico Johnson  51:37

Yeah,

Laura Pagliarulo  51:38

yeah.

Nico Johnson  51:39

Finish the sentence. I'm often the only one in the room who.

Laura Pagliarulo  51:43

I'm often the only one in the room who will be the one to spearhead new initiatives. And now, given the other priorities for the business, things like AI integration for operational efficiency is very clearly delegated to a small team with success. So

Nico Johnson  52:04

yeah, what's the fastest no that you make today that would have taken you weeks to make five years ago? Oh,

Laura Pagliarulo  52:10

I say no a lot, Nico. Just select or select it in terms of who we work with, whether it's a financing partner or a developer, and anything that feels wrong is wrong, unless unless there's like hard evidence, and my team presents me with a, you know, the only time I've ever gotten in trouble in life is when I go against my intuitive instinct.

Nico Johnson  52:33

Well, thank you for saying yes to another interview here on SunCast.

Laura Pagliarulo  52:38

It's been fun, Laura.

Nico Johnson  52:39

As we close, you've spent six years building a business around finding value in an asset that developers were already sitting on. What has that taught you more broadly about how to tell the difference between a constraint that you have to accept and a resource that you just haven't learned how to use yet?

Laura Pagliarulo  52:53

I think how I look at this is, I shared with you sort of my initial opinion around this business idea, which I was like, eh, worrying. But I think I love it when people present to me new ideas of business models and processes that I haven't considered. So

Nico Johnson  53:15

I'm very

Laura Pagliarulo  53:16

open to that, whereas I may not have been before. There's a lot of learning that comes with six years of running a business,

Nico Johnson  53:25

Laura. Over the last hour, I have been able to learn, see, pattern match myself the the ways in which the last six years have helped inform not just the growth, your personal growth, but growth of, in many ways, a new form of capital that developers can access. I'm so excited to be able to reintroduce you to the SunCast audience that, in the last three years, has grown manyfold. Look forward to folks reaching out and trying to connect with you if they are so inclined. How do you like to be found? What's the easiest way for folks to to get to know you. Always

Laura Pagliarulo  54:01

email laura@SolaREIT.com. Yeah,

Nico Johnson  54:04

and that's SolaREIT r e i t.com. We'll link to all that down in the show notes. Laura, so good to see you. I can't wait to see you in person in a few weeks. Thank you for joining me here on SunCast, and I am so eager to see how this business continues to serve the developers.

Laura Pagliarulo  54:21

Thanks, Nico. Been fun.

Nico Johnson  54:23

All right, Solar Warrior. Well, here's a question that I'm carrying away from this conversation. Many of you are listening, and you're sitting in an operating role exactly the kind of environment that Laura and her team serve, and that she's just described. Capital is ever more expensive. Timelines are less forgiving. You have more things competing for the same dollars, and you are constantly deciding what do you fund now, what can wait, what can you absolutely not afford to get wrong. Lar's business happens to sit at the intersection of energy and real estate, and she's elegantly created products that help to unlock that. But I think that the useful question for the rest of us is a little bit broader: What resources are we. Already looking at inside of our own business that we're still treating as a cost or a constraint. I also want you to hold on to what she said about pattern recognition. You know, Laura looks at projects differently today because she's seen hundreds of them. That's one of the advantages that we're all trying to build as operators: the ability to recognize earlier what deserves more attention? What deserves the capital that is scarce, and what deserves a very fast no? I'll make sure that you get the links in the show notes to find Laura and SolaREIT™ and all the resources that we discussed, including the books that she recommended, many of which I've read and also recommend. If you listen this far, I just want to say genuinely from the bottom of my heart, thank you for investing your only non-revable resource, your time. I hope that we have earned your attention. I hope that you'll click the bell and subscribe, and that you'll come back for more of conversations just like this. You're in luck if that's true, and you just discovered this because there's more than 950 episodes like this of leaders on the front lines of the energy transition to help you build on your vision and help us all transition to a cleaner energy economy. One of the simplest ways that you can show me that this has been valuable is by liking, subscribing, sharing with your community of smart folks that are trying to help us in this journey. Of course, thanks to our partners and our sponsors, they help keep the lights on, make this content free for you. You've heard from them or about them at some point throughout this episode. I hope you'll give them a look as well. You can do that at SunCast media forward slash sponsors. Remember, you are what you listen to. Thanks again for showing up, Solo Warrior. It's half the battle.

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