Neha Palmer:

We are a PropCo OpCo structure. We think that that is a really great way to go. You hear a lot about energy transition and that being a big area to invest into. I think one thing that has been hard for some investors to get their arms around is how capital intense this is. That's something your real estate investors are probably well familiar with. They're looking to deploy capital, they're excited about it. On the technology side, that's something they're less familiar with. So by putting Opco and Propco out there, you're allowing the technology investors to engage on the Opco side and the people who want real assets To invest on the Propco side,

Nancy Lashine:

Hello, and thanks for tuning into Real Estate Capital, I'm your host, Nancy Lashine of Park Madison Partners. Park Madison is a capital solutions and advisory firm serving the global institutional real estate business. Capital is the lifeblood of the real estate industry, but the decisions on where and how it's allocated are driven by people and personalities, who are they? What motivates them? What have been their biggest successes and lessons learned throughout their careers? On this show, we introduce you to some of the real estate industry's most influential thought leaders and decision makers, and we talk about what is important to them, how they make critical decisions, who has influenced them and a lot more. Our guest on this episode is Neha Palmer, CEO of TeraWatt infrastructure.

TeraWatt is a developer of EV charging hubs for medium and heavy duty truck fleets like cell towers and data centers. They span real estate and infrastructure and these facilities are a newer property usage that's likely to experience enormous growth in the years ahead. We have a great discussion in this episode about Neha's journey from engineer to financier to data center infrastructure and now EV infrastructure. We discuss TeraWatt's approach to developing EV charging stations and the real estate utility and operating components of the business. And of course we'll touch on the investment opportunity for EV charging station infrastructure. Our conversation begins with Neha explaining the business case for more EV charging stations.

Neha Palmer:

So we were founded in early 2021 the heart of the pandemic, really to provide solutions for fleets that are looking to electrify. Our focus is on fleets, so we're looking at any fleet. We're agnostic. It could be light duty vehicles, passenger vehicles or heavy duty semi trucks, but we're looking to solve problems for lots of vehicles wanting to charge at one time. We provide these solutions in a variety of formats. You mentioned our charging hubs. That is probably the most infrastructure heavy piece of what we provide, so it's a full stock solution. We provide a location, we provide a large amount of power interconnect. We provide all the on-site infrastructure with Chargers, batteries, on-site generation.

And then one thing that's really distinction from maybe other types of asset classes is we operate it reliably. I come from the data center world. Reliable operations are a key component of that offering, and we think that's the case here as well. Fleets want to have certainty. It is a big change for them to move from traditional internal combustion engines to EVs, and so we're here to provide all of those solutions for them. Part of that reliability is making sure that there's good connectivity between what's happening with charging and what's happening with their vehicles. So software platforms to monitor what's going on at the charging site, for those trucks to understand what's going to happen when they come in, availability, all of that stuff is also part of our platform.

Nancy Lashine:

Wow, okay. Well there's a lot to unpack there. I really want to start with the name. What's the significance of the name TeraWatt?

Neha Palmer:

Yeah, so a terawatt is a measure of energy and it's a really big measure of energy. So if you think about the power in a hairdryer that's 1800 watts, okay. It's not that much power. A thousand watts is a kilowatt, a thousand kilowatts is a megawatt, a thousand megawatts is a gigawatt, and a thousand gigawatts is a terawatt. So it's a really large measure of energy that frankly I hadn't really engaged with until I started thinking about power systems in a really large manner. You might talk about the amount of power a country consumes in the manner of terawatts. So it was really ambitious from our perspective of what we're trying to undertake, which is build what we think is the backbone of the next set of transport that we're going to have here in this country. And so the terawatt scale is kind of what we wanted to tie with our ambition in our name.

Nancy Lashine:

I love that. That's terrific. Thanks for explaining it. So let's start with you a little bit about your background. As I was thinking about what you're doing today, if I had to write the biography for someone who would be qualified to do what you're doing in a startup, it's almost like you went the perfect path to get here. So you went from being trained as an engineer, then you went to the finance side, then you went to the utility side, and then you ultimately went to the data center world. Tell us a little bit about your path and I guess starting with somewhere, did you have an inkling that this is where you might end up or was it just a serendipitous?

Neha Palmer:

I mean, when I graduated from college, the data center world was just taking off and certainly no one had any conception of the scale of EVs that we have out there today, let alone thinking about semi-trucks that would be electrified. So I certainly didn't have the vision as I started off. But yeah, I love this job because it leverages everything that I've done in my career and all the training I've had in school. And I think that it really speaks to how complex what we're building is. You have to understand real estate, which is really understanding finance. How do you find the capital to build this? You have to understand engineering, we're building complex systems on these sites that are electrically heavy and dense and require a lot of engineering understanding. So I started off out of undergrad as an engineer working on the natural gas side, which at the time was the clean fuel that was out there.

I did that, trained natural gas for a while, so took a leap over the wall on the more commodities trading side. Loved that whole finance side. So I went back to school and got my MBA and worked as an investment banker, but my clients were even energy companies after I got out of school and started doing that and then as you mentioned, I did some time at the utility, which was really actually helpful. Utilities are a really important stakeholder in what we're building here at TeraWatt also for data centers. So having that experience was really, really valuable because we spent so much time working with utilities to build what we're building. And then for the decade before I started TeraWatt, I was at Google leading energy strategy for them, and that's really where I think I got the idea and maybe some of the courage to start TeraWatt.

When you think of data centers, it's really a real estate asset class. What you're doing is finding a great location for a customer need. You're bringing that power there, so working with that utility, when you're thinking about clean power. When we think about electrification, we often do it for environmental reasons. You want to make sure that that transition is as clean as possible. So working with renewable energy companies to bring clean power, you're thinking about doing this all in a cost-effective manner. And then you're also thinking about those really reliable operations. And so when people think of data centers as a real estate asset class, absolutely you're thinking about what rent you can extract over the long term, but there's a huge stack of complexity in building that, and I learned a lot in my almost 10 years at Google.

And one of the things that we did while I was there was really convert a lot of the data center companies to buying clean energy and I saw the impact that corporations could have on electrical grids because of that demand for clean energy from corporations the grid got cleaner over that timeframe. And so I started looking around and thinking about what's the next slug of emissions that we can hit and really quickly it hit upon transportation. It's 30% of our emissions here in the US and so I didn't know how I was going to engage. I knew I wanted to do something there. And I met my now co-founders who were at Keyframe Capital and they had been incubating this idea of these locations that would be really key for electric vehicle charging. And so they had started taking what they could.

At the time the semi trucks weren't there. There was still a lot of doubt as to when this transition would happen, but they started in 2018 and by buying properties in places that they thought would be important for EV charging. So I met up with them. They had been assembling that portfolio for some time, really collaborated on our thoughts of what this could look like and how it could operate as a business. And so we took it to market in early 2021. So really my experience in data centers and building that stack of infrastructure, realizing that's exactly what you need for EV charging is what really pushed me into starting the company and where we are today and how we're thinking about building this asset class.

Nancy Lashine:

So you came to TeraWatt by meeting the founders and then you guys all started the business together?

Neha Palmer:

Correct.

Nancy Lashine:

Okay. And it was just a couple of years ago.

Neha Palmer:

Yeah, it was late 2020 when we first connected. So it's been a new thing. I mean they've been at it from the property perspective though for several years longer. And so that was a real big help to have the vision that they had was really helpful to kick us off in the right direction.

Nancy Lashine:

So what's the business model for TeraWatt? Are you a real estate company, a power company, a software services company? All the above? How do you think about it?

Neha Palmer:

We think of ourselves as a solutions company. At the end of the day, we're here to serve our customers. So we want to make sure that they have the solutions at their fingertips that they need to confidently electrify. When we look at it from what does this look like from a capital, from a financing perspective, it does look a lot like a data center asset. This location is hypercritical. The value of finding the location that is in the right place for our customers operations is really key to the value that we're building here. So finding that site, we make major investments into the site as well, similar to data centers. Working with the utility to get that power interconnect is very expensive. The good news is once you've brought that power to the site, it persists with that site forever. So you've made that investment but it's sticking with that location and then you think of all of the improvements you'll make to the site.

So it can give this huge amount of power through chargers, also pretty capital intensive. So that full stack, you think about it it can start to look like what you see with data centers. A company could come and lease either a component of that site, the entire site and really start to create value from an investment perspective. From the customer view, they're like, you're just solving a problem. I might be on a industrial site where I might be in a lease and the landlord doesn't want to make that improvement for me, so I need to find somewhere close to my site where I can start to convert my fleet to EVs and have charging for them. I might be on a site that I own, but there's no space we're already busting at the seams with our warehouse and other uses for the site like trailer parking.

So we start to provide these solutions to customers that from their perspective are just bridging the gap for them to figure out how to electrify. We're also providing something in the form of capital. Oftentimes they're looking at electrification and realizing they have to put money into these new vehicles. If they also had to make major site improvements and put all the capital that's required to build charging into a site, that would be that transition even more difficult. So we're allowing them to convert would be CapEx for them into OpEx. And so from the customer side, we're a solution provider, from the investment side, we're a infrastructure real estate company that is putting together what we think is long-term durable value with building this stack that is frankly pretty hard to put together.

Nancy Lashine:

So let me ask you what may seem like an incredibly naive real estate person's perspective. When I think about, let's just use trucks for example, as one of your customers, so fleets of trucks, there's currently a whole universe of truck stops across the highway systems in America, and I'm sure there are contracts between the truck owners and those fleets and the owners of the truck stops. Plus there's all the ancillary services, restaurants, motels, all that other stuff that you do need. Why wouldn't you just make an arrangement with those truck stop owners to bring power to those sites and effectively overlay the electric grid on the existing highway's road system grid?

Neha Palmer:

Certainly that is a path and I think there will be lots of collaboration in the space. If you look at those companies, a lot of their revenue is generated with the ancillary services that you talk about. Bringing this infrastructure to life is really complex. I think that's one thing that's really important to note. It requires expertise in the power grid. Most of the players out there, they have a small amount of power coming to a site, but they did it when they built the site and they haven't thought about it since. This is an ongoing negotiation procurement process from the utility that requires core expertise in this area. And the other piece is that frankly, we've talked with many of them, they don't want to disrupt their core business. This is going to be a process that takes a decade or even longer to happen. And so thinking about cannibalizing their existing business, say they were going to convert diesel ports to EV ports can be a difficult thing for them to wrap their minds around.

So I certainly think there's definitely room for collaboration, but the complexity of what we're putting together, the new space it will require and the capital it will require as well. We're talking about significant dollars to build these sites, especially for truck stops. If you think of 20 vehicles charging at one time, that is the same amount of power that you require to charge almost 10 times as many passenger vehicles. So you're bringing huge amounts of power to the site, huge amounts of capital to do that. So I do think there is room for partnership, but it is definitely a very different type of asset and different type of return profile even. You're thinking about investing on something that's going to return over a much longer timeframe, and you have to think about the investments that way because they are so large up front.

Nancy Lashine:

It reminds me a little bit about Uber and the taxi medallion industry, and when Uber first started, the taxi medallion guys were going, "What me worry, who cares about those guys?" And ultimately there won't be much utility for the existing fleet of truck stops, but you're right, it's definitely going to take time and well a lot more infrastructure and capital investment than say Uber did. So yeah, very different in that respect. If I understand correctly, Google's data centers are the first data center business that uses fully renewable energy. Is renewable energy a key thing for you, a key requirement for you in finding these sites and building them out?

Neha Palmer:

Absolutely. Our customers are often corporations who have made commitments to decarbonize their supply chain, for example. And so if they're looking to electrify, they really want to make sure that the source of the power for those EVs is going to be clean as well. So we are certainly looking at how we bring a hundred percent clean power to our stations and even to customers if we're helping them. We can help customers put installations behind their fence if they have existing locations that they're also trying to electrify.

But how do we help them source the cleanest source of power possible? Because at the end of the day, that's really the driver for many of these changes is, "Hey, we want to decarbonize our entire supply chain." So we take that into account for sure. The good news is companies like Google have done a lot of hard work over the last decade in making sure that access to clean energy is much more ubiquitous. So we are much more able now than we would've been 10 years ago to go to our local utility and say, "Hey, we really want to work with you to find clean energy for our sites." And so that is a much more easy thing to do than it was maybe 10 years ago.

Nancy Lashine:

And if I understand something you just said, not only will you be buying power, but you may be generating power at some of these sites, whether solar panels or whatever.

Neha Palmer:

Absolutely.

Nancy Lashine:

And possibly storing power as well.

Neha Palmer:

Yeah, so we definitely know that that's a component of some sites To have an on-site battery, it provides two things. The cost of power is not the same at all times of the day, and so if there is a time of the day where power might be more expensive, we can fill that battery when it's cheaper and then draw the power down when it's more expensive. It also provides resilience. One of the biggest questions I hear is, "What happens if the power is out, I can't charge my vehicle?" For fleets that are really concerned about that. We can provide an element of resilience, reserving a component of that battery for that eventual power outage that might happen there.

And then as far as generation, that's another tool that we have. Some of our sites are quite large and can host significant amounts of solar power, and so that's another way for us to one, to ensure that there's clean energy, but also maybe take into our own hands and our feet a little bit when it comes to that power. So yeah, absolutely. It depends on the location. We have some sites that are in dense urban areas that maybe getting a battery on that site might be the most we can do from a size and fit capability. But for our sites that have much more land, we have lots of degrees of freedom with including things like solar on site.

Nancy Lashine:

So you've mentioned urban locations, you've mentioned sites with more land. How many sites do you operate now and how are you thinking about scaling this business?

Neha Palmer:

Yeah, so we right now have property assets across 18 states. We're actively building in four states, and so we have six sites that we either have in construction or will shortly be in construction, and we'll be live starting late this year and Q1, Q2 of next year. Just stepping back, really stepping back, we think of this as a transition that happens once every generation or once every a hundred years really. Two hundred years ago it was the railroads. A hundred years ago, it was a national highway network and now a whole new set of infrastructure has to be built on the backbone of the National Highway Network and those railroads.

But we're looking at something very, very large scale. So the ambition is that this is going to be ubiquitous, it's going to be everywhere. Anywhere that you see an industrial warehouse hub, those trucks will electrify and you will require some sort of charging in that location. So the reach is very, very wide, even wider than data centers. There's certainly data center hubs. You think of northern Virginia, you think of Columbus, Ohio has emerged, North Carolina. This will be anywhere that a truck travels, which is much more wide and far than where data centers are. So the ambition is to be building the backbone of this across the country and hopefully internationally as well.

Nancy Lashine:

What geographies are you starting in now and why did you choose them?

Neha Palmer:

So the hotbed of activity right now is California, and I think that's a par for the course as a native California, and we always like to take on the big experiment first, but you see a lot of policy drivers here in California. So they recently passed a rule called the Advanced Clean Fleet Rule here in California requiring fleets of trucks to start to electrify very quickly as soon as 1/1/24, so less than six months out. So we're seeing the policy push here in California, the compliance position that these companies with large fleets have to achieve, and it's also based on incentives.

The state has provided some significant incentives in the form of backstopping energy costs and things like that. So that's really helpful. We've announced we're building out the I-10 corridor starting in the port of Long Beach and moving east all the way to El Paso. So what we see is as people start to electrify in California, places like the Inland Empire, they start to want to go further afield. So they start talking about, "Hey, can I get from the IE to Phoenix, for example?" And so that's what we see is the push, and that's how we're developing. We already have sites along the I-10 corridor, but really the first sites that will go live will be in California and moving east over time.

After that, there's certainly a lot of push from many states to start to have similar policy requirements that California has. So we see the I-5 corridor going up and down, the West coast is really critical, and all the warehouse hubs that are tied to those corridors, but certainly the I-95 is another area that we know will have a significant amount of activity, along with ports. We see the ports being a huge driver just given their use case is really actually easy for EVs. They're making the same out and back routes on a regular basis, which makes some of the planning for charging also a little bit easier. So we see that as the initial adoption, but as I said, this is going to be ubiquitous. Anywhere there's a warehouse hub, you're going to see EV charging.

Nancy Lashine:

Right. Let's jump into the capital aspects of your business because many of our listeners are capital or investors, capital providers. How are you capitalizing TeraWatt for starters? Are you an OpCo, prop operating company and a property company, and how are you thinking about what your level of desired return is for we think about risk and return, how do you think about that in context of your capital base?

Neha Palmer:

No, it's a great question and I think it's something we were very thoughtful about when we were putting the idea for TeraWatt together. We are a PropCo OpCo structure. We think that that is a really great way to go. You hear a lot about energy transition and that being a big area to invest into. I think one thing that has been hard for some investors to get their arms around is how capital-intensive this is. That's something your real estate investors are probably well familiar with. They're looking to deploy capital, they're excited about it. On the technology side, that's something they're less familiar with. So by putting OpCo and PropCo out there, you're allowing the technology investors to engage on the OpCo side and the people who want real assets to invest on the PropCo side. We are capitalized right now. We have two equity investors, so our original investors, Keyframe and Cyrus Capital, and then a new investor that came in last year, Vision Ridge Partners who has a real deep experience with real assets but also technology.

They're the company that, for example, seeded EVgo, which is a big national network of charging stations for passenger vehicles. We raised a billion dollars last year for this infrastructure, which sounds like a really big number, but when you think about the scale of the ambition and what needs to be built to truly electrify all transport, it's a drop in the bucket. We know that this is going to be a really, really big asset class, so we are actively deploying that capital and using those equity dollars to do that. We think that there is a path here, though that's maybe more long term. Certainly we know that there's interest in this as an asset class. We see it from conversations we've had.

We've seen it from investments that more traditional real estate players are making into the space, and so we see a longer tail of this turning into maybe more of a core asset as we start to de-risk the asset class a little bit. We are still early days in how customers are contracting, how fast the uptake will happen, what the level of scarcity and demand will be in different markets. But as that starts to get fleshed out, which we believe is going to happen really quickly, we certainly see this rolling into a more traditional asset investor base that would be focused on real assets with real asset-like returns. Longer-term known contracts, things like that will help move us along that continuum. And then obviously leverage will be a component of this as it starts to be a more known type of asset class commodity is out there.

Nancy Lashine:

Well, a billion dollars for a startup tech company is still headline news. When you think about that, is that largely money that you're using in the property business to build out property?

Neha Palmer:

Yeah. We raised over $1.1 billion for the platform and a large amount of that's going to go into investing into these assets, whether it's the land, these interconnects that we talk about, the onsite infrastructure, that's a huge amount of capital. And when you think about where we're developing in places like the Inland Empire, those are expensive pieces of property that we're engaging with. So a billion dollars can go fast, and we are seeing a lot of demand too in those high property cost locations. So again, it is a lot of money, but we are investing into real durable assets, which is super exciting.

Nancy Lashine:

Well, that's like a billion here or a billion there, at some point you're talking about real money. So how are you building out the business? Do you start with a customer and figure out where they want to go and buy something with a letter of intent? In the real estate world, we would call that a build to suit, or do you go out on spec because you think if you build it they will come and you can see ahead of what the demand might look like? Or are you doing both? How are you thinking about all that?

Neha Palmer:

Yeah, it's a great question and it's such an interesting question because this is such a nascent industry. If you're building a warehouse, it's really easy to know who the top 10 customers are going to be and what they look like. And you might even have their built to suit specs in hand, When you see a piece of property, you can offer it to them. So we are starting, and I always joke that we're building an industry while we're building a company. So we are seeing a lot of demand for just solutions. They're just trying to figure out how they're going to make this transition. So a lot of customers start behind their fence, can you help me behind my fence where I already have my operations? We quickly find there's constraints there. We talked about the constraint on, "I don't even own the site and the landlord doesn't want me to mess with it."

Or "I have a three-year lease and I know I'm leaving, so I don't want to invest a large amount of money into infrastructure. I'm going to leave in three years, I just won't pencil." But we will oftentimes start with a customer site assessing it and maybe there's a small amount of charging we can help with them with behind their fence. Build to suit is also something that a lot of customers are excited about. If we have a location that is really close to or even adjacent to their existing site, they often view it as an extension of their site, but they don't have to invest into that piece of property. They don't have to invest into the complexity of putting that stack of infrastructure together. So built to suit is something that we certainly see a lot of engagement with. It feels safe to customers and they're really excited about having a say in what that looks like over time. As far as the build it and they'll come.

We certainly are thinking through that aspect of the business and there are some places that have such dense demand already that you could do that. A place would be like the Port of Long Beach where they have all of this compliance that they have to have with respect to electrifying their fleets and there is just such a density of trucks. And so that's a location where we might entertain something that's a little bit more, I would say on spec, but it already comes with a lot of customer input even on spec. I think that we think through the whole spectrum of what's out there, but everything at this point in time does have a lot of customer input because it has to because there is no blueprint out there for what this should look like. But certainly we see that as a portfolio approach. We want to just de-risk the portfolio. So having those built-to-suits really helps with those known contracts.

Nancy Lashine:

Do you think your customers will end up paying you rent for the site and then they'll pay the company for the power or will you package everything all together and take a spread in the cost or is that all TBD?

Neha Palmer:

I think that there's different customers that want to engage in different ways. There's certainly a really wide spectrum of customers and where they are in their electrification journey. I think the most interesting ones in the ones that are, "Hey, you take care of it all." Or the ones that have tried to do this themselves, they realize the cost, the complexity, the challenges, and so they are looking for something that's more one-stop shop. And so when we engage with those customers, they will tell us, "Give me the fixed amount I'm going to pay per month.

And obviously as I use electricity, that'll scale up and down, but I want to know what my costs are going to be." You often see other customers who might be dipping their toe in the electrification journey and they might say, "Hey, I just want to try this out more of a pilot. So I'm looking for something that's maybe more metric." So it depends on the customer. We think about this as what's the best thing for the site in terms of providing the lowest cost of capital, which eventually translates into what the customer's paying for this, we want to be able to provide them a cost-effective product. So I think of it as how do you get the most known amount of NOI off of a site? We do think in terms of NOI, so maybe that's one real estate lens that we do have, but the most stable certain NOI. And there's contractual ways to do that even for those customers that want to dip their toe.

Nancy Lashine:

So that's the revenue side. And what's the cost side of the equation when you evaluate a site? You're looking at obviously acquisition cost, but as a developer would look at a site, they would think about, "I can build it for X, I can lease it for Y." How do you think about this?

Neha Palmer:

Exactly that way. We absolutely think about what is the customers, they call it the total cost of operation for their fleet. So if they are converting to EVs and they want to make it at least a parity with diesel or better than diesel, hopefully, what is their cost equation and how do we provide a product that fits into that is something that we think about, but obviously we need to make the returns that our investors expect. And so we think about does this cost of property, what we expect it to cost from the power interconnect and then what the onsite infrastructure will cost? Does that whole stack measure up to provide a reasonable price to the customer, but also a reasonable return to our investors? So it is triangulating all of those things, which again, there's not a known published rate of what lease rates are for EV charging in the market quite yet today. So a little bit of this triangulation, and that's where that customer input at this stage is so critical.

Nancy Lashine:

As a developer of these sites, do you think you would be regulated at some point?

Neha Palmer:

I don't think so. We are providing a service to a customer that's again, maybe leading my data center background and experience. It's very similar. We're providing space and power, the location, that large amount of power, which is really a difficult commodity to achieve. I mean, it's not even a commodity, it's actually something special. That combination of space and power is even more special, and that's something that creates value. So I don't believe so. I think we are providing something that is really common out there.

Nancy Lashine:

And so for our investors who are listening who may be invest in data centers who are thinking about infrastructure, how should they think about investing in this, I don't know if you want to call it an asset class or in this opportunity? What rates of return do you think would be realistic over the next several years as this becomes more common?

Neha Palmer:

Yeah, I hope we hit the rates of return that you see for data centers. I mean, I think this is a long-term durable asset that we're building. This power piece I think is really important to touch on. That's why data centers are valuable because someone has put together that really critical location for whatever that use is for that data center with the amount of power and that investment it takes to get the power there and the time, the complexity. And we are building that exact same stack and that stack will be scarce and rare. We haven't talked about working with utility, but you alluded to it earlier.

That is a complex process and as more and more of these installations want to be built and will be built, that power will become scarce. It will become a longer timeline to bring that power to a site. That's something you see with data centers these days. You can see a 84-month timeline in some markets because the power is so constrained. And so we think that a similar trend will happen with these types of assets. And so the rates of return will reflect as the market grows, that scarcity and hopefully driving that NOI up over time because of that scarcity. So I would think of it as a really similar stack of infrastructure and a rarity of a stack of infrastructure like data centers.

Nancy Lashine:

Do you feel like you have first mover advantage at this point?

Neha Palmer:

Well, we certainly have been thinking about it this way for a long time. I think there's lots of companies out there that think about it from, "Hey, I'm a hardware provider. I provide chargers. I need to find a place to put my chargers." They don't really think about it from the real estate perspective. So there is a lot of cost in putting, again, I just said it, but the stack of infrastructure together. And I do think we're one of the first to think about it that way. And I do think that over time it'll become really apparent, the value of the right location, the power and where is relative to the customer. And so yeah, I do think we're seeing some first mover advantage from thinking about it that way.

Nancy Lashine:

Who else is thinking about this problem and who are they and how are they maybe approaching it differently?

Neha Palmer:

Yeah, I mean I think the customers are often thinking that they're going to solve it themselves, and so many of them do have the capability to buy a piece of property and turn it up. I think what they're finding is I worked inside of a big company building really big infrastructure, and it's a real, I won't say it's a crap shoot, but there is uncertainty on what's your final cost going to be. There's risk. And so when you engage with a company like TeraWatt, we're taking on that risk because hopefully we're expert in this and we understand that and you're getting a known cost at the end of the day. So I think there's the customer themselves, but quickly I think they'll realize that that's not scalable everywhere. I think that there's traditional real estate companies. You do see some of the industrial players coming out, Prologis has a charging a group, and so I think they're thinking through how they can do this as well.

I think the one thing that coming from data centers, the operational piece is really not trivial, and that's something that we're investing a lot of capital and resources into building out as well, and people, building out the team that can provide that. This isn't just a piece of property with a lot of power to it. There's a lot of complexity in making sure that you have high levels of uptime, that when the fleet rolls up that they will have certainty that they can charge, that there's no issue between the charger and their vehicle. And that is something that requires an operating company that is really vested in that customer experience. So I think, and I keep telling you who the competitor is and why they're not` going to succeed, but I think that they're also obviously very smart on this too, and they're thinking through some of these things, but I think there's a lot-

Nancy Lashine:

I would think there's plenty of room for more than one player.

Neha Palmer:

Yeah, a hundred percent. I think that this amount of infrastructure required will be huge and collaboration between players, frankly. We think that there's potential for significant collaboration with some of the real estate owners as they have these assets in the right locations, but may not have the team to develop them and may not want to make additional CapEx investments. We do have capital for that. So I think that there's a lot of people who touch one aspect of it. You see software companies who do charging software who are trying to put together this stack so they can sell more software. But I think that the way we're thinking about it is more holistic, which I think eventually the industry will realize. You have to be really thoughtful about every piece of the stack before you can provide a compelling solution to a customer that drives those high NOIs that people like to see out of data center companies, for example.

Nancy Lashine:

One other question, just thinking about what's going on in the real estate world. There's a lot of buzz today about industrial outdoor storage, which sounds a little bit like a truck parking lot, essentially just big parking lots off major highways. Would it make sense for you guys to partner with owners of those types of those types of facilities to kind of create stations or is it just episodic, you have to find the right site, the right power source?

Neha Palmer:

I mean, I think we need all of the right components, the right location, power to that location, et cetera. Those types of entities do have lots of properties, and so to the extent that they're in the right location, collaboration is something that we would definitely think about. And I think, again, it's a lot of investment. Not one company's going to be able to invest into this entire backbone of infrastructure we need to build. So collaborations like that can help scaling in a really nice way. So absolutely, they have put their operations in places that make sense for fleets because that's where trailers sit, that's where trucks are moving past. And so those types of locations could be really credible for developing charging.

Nancy Lashine:

So when you think about it from someone who understands the electric grid, are there sites that just will never work for charging hubs because they just don't have enough access to power or because bringing the power that will just be too expensive?

Neha Palmer:

Absolutely. There are certain parts of the grid that are so tapped out that you would say it's going to be a eight-year process to bring more capacity to that part of the grid. So you would not want to put a large installation there because you'll never get that power in the near term. So there are certainly places where you see the grid tapped out. I think you'll see it more and more. Besides EVs, there's electrification of everything. Machinery that was once diesel powered is now a battery backup, as diesel gens are now being replaced by batteries.

All of that requires power. And so I do think there will be places where it just won't work. The cool thing is that there's technology out there that's being developed. So you think about things like batteries, low emission gen sets, solar on site. The combination of those things can start to create micro grids that can maybe plug in a solution where there is scarce opportunity on the grid. We're starting to our toes in that, and I think that's another example of it is about the location, the real estate, but some of these technological solutions are also really critical to think about where we're going to build these.

Nancy Lashine:

Great, well, I'd love to take a few minutes and just do a lightning round of questions. If that's okay?

Neha Palmer:

Sounds great.

Nancy Lashine:

So quick answers. You identified in your career one energy problem that needed a really big solution, fleet vehicle electrification. What about other energy problems that are this big that will need to be solved with infrastructure?

Neha Palmer:

I think some of it's already happening, but at the grid level, how you start to time shift, you do have, I spent a lot of my career working on renewable energy that gets produced when the sun's shining and the wind is blowing. And so how do you start to time shift supply of energy and how do you start to time shift demand of energy? And so it's a real big matching type of problem. And there's a lot of companies out there that are trying to solve it, I think has to be solved at the grid level, at the local grid level, and even within your home, if you have a battery in your garage, you start to see tools there. I think that matching of time is going to be really important. So it's maybe more of a software technology solution, but that really enables a lot more to happen with the grid that we have today. So I think that's going to be an interesting problem.

Nancy Lashine:

Let's talk a little bit about you. What's the best investment you ever made?

Neha Palmer:

Gosh, I would say it's in my education. I went back to business school pretty late in my career. I'd been working for eight years and I'd had that engineering training, but I knew that to really leverage it the most. I needed to understand how things were financed, and so I went back and got my MBA and I think that was a really good investment. In retrospect.

Nancy Lashine:

Who's had the greatest influence on your career?

Neha Palmer:

Hands down my father.

Nancy Lashine:

What does he do?

Neha Palmer:

He is a civil engineer, so I also became a civil engineer. He was an entrepreneur, started his own business, and he fostered my love for the outdoors. We grew up skiing and hiking and spending time outside really because of him, which is one of the reasons why I think I'm so focused on things that will be impactful to the environment. I spend a lot of time outdoors and it's important to me, but mostly because of him.

Nancy Lashine:

If you could have dinner with anyone tomorrow, dead or alive, who would it be?

Neha Palmer:

There's so many choices.

Nancy Lashine:

You can have more than one.

Neha Palmer:

More than one. I think of Thomas Edison is someone who, and maybe that's cliche considering I'm in the energy space, but he really, if you read about him, was really an innovator and an inventor. And of course he invented something really important to the electric grid, but he just tried everything and just was so focused on bringing new things to life. And I would just love to pick his mind on, especially if he could live today and see what we have here, where do you see opportunities? And I would definitely-

Nancy Lashine:

Oh man, I want to be a fly on the wall at that dinner conversation. That would be really fun.

Neha Palmer:

Invest in whatever he said.

Nancy Lashine:

Maybe you should write that as a play in your spare time, which I'm sure there's not very much of. So for folks who are listening to this podcast, who would you like to hear from?

Neha Palmer:

I am really curious, and we're starting to have some of these conversations obviously, and I know that you have lots of experience here too, but how do we get down that continuum of capital? How do we get to someone's core fund and what does it take? I saw it with the data center space. I was maybe a little bit earlier in my career thinking through that or not so thinking about the investment, just thinking about how to put that together. But I do think this will be a very investable asset class, and so really making sure that we're thinking about, obviously the customers will influence this, but how do we set this up to be scalable in a really big way that you can have allocators invest into this so we can scale it honestly as fast as possible. I'm looking for that pathway. Anyone who is involved with allocating large amounts of capital and has thoughts on how to build these new asset classes, would love to hear.

Nancy Lashine:

Well, your phone might start ringing and I hope it does. Neha, you've been fantastic. It's so great to have you. Thank you very much for your time. I really appreciate it.

Neha Palmer:

Thanks for having me.

Nancy Lashine:

I hope you enjoyed this episode of Real Estate Capital. Before you go, I have a quick favor to ask. We put a lot of thought and effort into this show and making sure we bring you insights from real estate leaders that normally find in the mainstream media. So if you're enjoying the show, please remember to follow it on your favorite podcasting app so you never miss an episode. We'd also love for you to share it with others or give us a review on Apple Podcasts so others can find us. Thanks again for tuning in. For more information about our firm, please visit our website at parkmadisonpartners.com.