Opportunity
Decarbonizing commercial real estate
Governments around the globe, driven by their carbon emission reduction commitments, are regulating more and more industries. Commercial buildings, which 26% of global energy-related emissions, are now being tightly regulated. To address this issue, LEXI is developing a revolutionary platform, the LEXI SmartBMS, to easily retrofit older buildings for decarbonization.
The UBS Sustainability & Impact Institute’s “Retrofit Revolution” report states that 90% of all commercial buildings will need some form of retrofit to meet new climate mandates for reducing energy consumption and decarbonization. This includes almost all buildings built before 2010. It should come as no surprise that the older the building, the more energy it consumes and, simultaneously, the harder it is to retrofit. In most cases, to retrofit these buildings, a wired building management system (BMS) is largely out of the question due to the cost of running wires in older buildings as well as the fact that most older buildings contain asbestos, which means you can’t drill into the walls or ceiling.
Introducing LEXI SmartBMS
The LEXI SmartBMS is a wireless BMS which utilizes a variety of standards based wireless protocols (as opposed to the typical walled garden approach currently used in commercial wired BMS systems) tightly coupled with our IoT Cloud, to deliver an exceptionally cost effective platform.
Over the past 7.5 years, LEXI has built a truly unique Universal IoT Gateway which handles more wireless protocols than any other gateway available today (6 protocols plus cellular). The company has also developed its own bespoke IoT Cloud, which enables the company to develop functionality not found on AWS, Google Cloud or Azure IoT Cloud.
Additionally, LEXI is working closely with its partner NXP Semiconductor and its customers Rheem and Crane to develop advanced smart building devices such as a combo IoT Gateway/Smart Thermostat, an UltraWide Band Radar Occupancy Sensor, and a LoRaWAN Power Meter. LEXI is rolling out advanced AI energy management algorithms and integrating third party carbon credit trading to deliver a best in class suite of building automation functionality unmatched in the industry today.
Problem
Government climate mandates are an existential threat to commercial real estate owners
EU and US decarbonization mandates, such as Local Law 97 in New York City and CRREM (Carbon Risk Real Estate Monitor) in Europe, are creating an existential threat for many Commercial Real Estate owners, forcing them to retrofit or demolish a large percentage of the buildings in their portfolios.
EU Climate Mandate Building "Decarbonization Pathway"
Under EU CRREM, if a building is not at or below the green line (shown above), what is called the CRREM-Pathway, by 2027, the building is officially deemed a “Stranded Asset,” which means that no EU bank can finance a sale of the building, the resale value of the building may drop by 85%, and rents will also decline. In addition, building owners will need to buy carbon credits to offset excess emissions. The official EU estimates are that 42.5% of all commercial buildings will become stranded by 2050.
However, industry building energy audit data is more consistent with the UBS report that 90% of all buildings will need to be retrofitted. In a recent "CRREM Stranded Asset Risk Analysis" performed on a single portfolio from a Commercial Real Estate Asset Manager with 12 buildings in Europe (shown below), half of the buildings are stranded by 2030 and by 2052, 100% are stranded! This portfolio analysis is actually typical across the commercial building market and clearly demonstrates the huge existential threat that these climate mandates, left unaddressed, represent to nearly ALL Commercial Real Estate Asset Managers in Europe and increasingly in the United States.
EU crrem stranded building analysis
Solution
LEXI SmartBMS
We believe that LEXI is extremely well suited to address this issue with our cost-effective, wireless LEXI SmartBMS. Built over 7 years and now in its 4th generation, our extensive tech stack, which includes the Universal IoT Gateway, IoT cloud, mobile apps, wireless modules, and smart devices, is currently being deployed by industry-leading, billion-dollar-revenue companies. And we expect this number to continue growing.
Industry support
In October 2023, LEXI convened the first meeting of the SmartBMS Work Group, an industry trade group that we founded to fully develop the specifications of our SmartBMS. The work group meets monthly and has grown from an initial membership of 5 companies to a current membership of 10 companies. Members of the SmartBMS Work Group include two of the world’s largest Real Estate Asset Managers, with over $1 trillion in assets under management. Other members include LEXI customers Crane and Rheem as well as NXP Semiconductor and PriceWaterhouseCoopers (PwC), one of the big four consultancy firms with a significant Real Estate Facilities Management practice.
This group has identified several Key Features of the SmartBMS:
By leveraging real-time data insights, advanced automation, and predictive analytics, our platform empowers companies to optimize energy usage, enhance building performance, and reduce carbon emissions.
With LEXI, commercial real estate companies can confidently navigate the path to decarbonization, and mitigate risks, all while creating a more sustainable future.
Traction
Extending our Enterprise IoT customer traction into the coming wave of mandated building retrofits
LEXI customers such as Crane and Rheem already rely on us to be their Enterprise IoT platform to power their connected products strategy. We are currently completing a year’s worth of hardware and software development at the direction (and payment) of these customers to roll out their next generation connected equipment.
Brazilian Telco, EasyIT, another LEXI customer, began marketing its EasySmart consumer smart home offering in June 2024 and forecasts nearly 150,000 subscribers within the next twelve months.
For LEXI SmartBMS, our customers CIRQ+, Crane, Rheem, Patrizia, Neil Davies Architects, and Brookfield are all evaluating commercial building candidates for pilot deployments in the US (Texas, Florida, and NY), the United Kingdom, and Germany. Building audits to narrow the final selection have already started and will continue through September. The first pilot deployment is planned in New York City in October of this year with another 3-4 buildings starting in December 2024 through February 2025.
We have spent 7.5 years building the LEXI Platform in order to be able to bring all the components necessary for the SmartBMS to market. Our customers are demonstrating their enthusiasm for our SmartBMS by quickly identifying a significant number of pilot building candidates in just the past 30 days. As a result, we believe LEXI stands poised to seize a meaningful portion of this staggeringly big market opportunity. A market driven by governments the world over trying to address one of the greatest challenges mankind has ever seen.
Business model
Platform-as-a-Service (PaaS)
LEXI is selling the SmartBMS as a PaaS/monthly recurring revenue model. The monthly cost of the platform is based on the percent of energy savings we achieve with escalating revenues as energy savings we deliver increases.
This model has significant advantages:
- It moves the costs of implementation to the OpEx (Operating Expense) budget instead of the CapEx (Capital Expense) budget
- It enables the Real Estate Asset Owner to easily shift the cost to their tenants.
- Utilizing a performance-based pricing model makes it nearly frictionless for the Real Estate Asset Owner to move forward with a LEXI deployment.
Go-to-Market Strategy
LEXI leverages multiple methods to reach customers: direct sales, direct marketing, and channel sales through key partners such as PwC. Currently 3 of our 4 largest customers have originated through PwC introductions.
Market
A once in a lifetime challenge, a once in a lifetime opportunity
Decarbonization is happening all around us and at an accelerating pace. Buildings contribute nearly 1/3 of all carbon emissions making them the single largest source of carbon in the atmosphere - triple the carbon output of all cars. The UBS Bank “Retrofit Revolution” Report states that 3% of all commercial buildings will need to be retrofitted every year for the next 30 years at a cost $500B per year.
Building owners desparately need a cost effective solution to address the problem. As Alex Woolfson, Head of ESG Europe at Brookfield (the 2nd largest global Real Estate Asset Manager) said, “I don’t want to spend $30M to retrofit a building worth $40M.” A wireless BMS is by far the most cost-effective way to address this issue. The fact that Brookfield is working with LEXI to bring our SmartBMS to market tells you that they think we just may have the solution.
Leadership
LEXI leaders
Why invest
Join LEXI in the smart building revolution
LEXI has raised $5.5 million to date. With existing bookings of $375,000 for 2024, 4 patents, and a strong pipeline of customers, we believe LEXI is poised for continued growth.
The Climate Mandate Compliance Building Retrofit market is undergoing a green revolution, and we believe LEXI is at the forefront. Our innovative platform empowers businesses to decarbonize existing buildings, a massive trillion-dollar market driven by government climate mandates. With impressive traction, including partnerships with industry giants, we believe LEXI is on the fast track to help build a more cost-effective and sustainable future.
Invest in Building Decarbonization. Invest in LEXI.