In this episode of The Apartments Operators Podcast Joseph Gozlan hosts Kevin Gardner. Kevin’s company, Multifamily Utility Solutions, provides a service many apartment operators haven’t heard about: negotiating access agreements with utility providers like internet and cable! Watch through to see how Kevin’s method can help increase your income through one-time payments and ongoing revenue share!
00:00:00 – 00:01:31
Introduction to Apartment Operators Podcast and guest Kevin Gardner
00:00:00 – 00:01:31
The Apartment Operators Podcast introduces Kevin Gardner, a special guest whose company supports multi-family operators with unique utility-related services. The host welcomes Kevin and invites him to briefly introduce himself and his background before diving into the discussion.
00:01:00 – 00:02:38
Kevin’s background and utility solutions for multi-family operators
00:01:02 – 00:02:38
The speaker shares their background working for Comcast, a major U.S. cable operator, where they gained experience negotiating with property owners for access rights. After leaving Comcast, they continued working in the same industry, leveraging their expertise to assist operators. The discussion then shifts to the importance of both increasing income and reducing expenses for operators, introducing the concept of utility solutions as a means to manage costs related to cable and internet contracts.
00:02:00 – 00:04:41
Types of cable and internet contracts in apartment properties
00:02:07 – 00:04:07
The discussion focuses on opportunities to increase revenue from cable and internet services in residential properties. There are two main property types: those where residents independently choose their service providers, and those with a master agreement restricting tenants to a single provider. Recommendations depend on the owner’s goals, whether they aim for long-term wealth creation or short-term property upgrades and sales. Understanding existing agreements and priorities is essential before making any decisions.
00:03:37 – 00:04:41
When residents independently pay for their own services, an access or right of entry agreement is needed to allow providers like AT&T or Comcast to use the property infrastructure. These agreements are crucial even in cities like Dallas, where non-exclusive permissions have been granted to multiple providers, ensuring legal access and service delivery on the property.
00:04:00 – 00:06:39
Access agreements and negotiating rights with service providers
00:04:09 – 00:06:39
The discussion explains that utility companies have the right to operate in public easements but need explicit agreements to access private property. Property owners or managers must grant permission through access agreements, which often require negotiation if no current or valid agreement exists. Such agreements allow utility providers like AT&T to service residents by permitting their technicians access and infrastructure installation. These permissions hold value, as without them, service and revenue generation are not possible. The conversation also touches on the types of compensation and agreements typically secured between property owners and utility companies.
00:06:00 – 00:08:37
Compensation types: signing bonus and revenue share explained
00:06:09 – 00:08:37
The segment explains two main types of compensation in access agreements for internet service providers in residential units. The first is a signing bonus or door fee, a lump sum paid within 90 days of agreement execution, often based on the number of units. The agreements typically last 10 years and involve granting certain exclusive rights, such as marketing support or exclusivity on wiring. The second type is a revenue share, which acts as a commission paid quarterly based on new customers referred through marketing efforts. This revenue share does not increase costs for residents, as providers cannot raise rates due to the agreement. The segment also mentions practical marketing materials, like pamphlets in welcome packets, to inform residents about the chosen service providers.
00:08:00 – 00:10:30
Marketing arrangements and exclusive marketing in apartments
00:08:05 – 00:09:37
The discussion covers exclusive marketing agreements with service providers like AT&T or Comcast, explaining that while you can grant exclusive marketing rights, you cannot make one provider the sole service provider in a building. These companies show strong interest in apartment complexes and often sponsor events to promote their presence. Property owners sometimes negotiate such agreements but cannot enforce exclusivity that restricts others from offering service.
00:09:06 – 00:10:30
Property owners have the right to prohibit satellite dishes on their buildings due to liability concerns, such as roof damage and leaks caused by installation. Although service providers may want to restrict satellite dishes contractually, such clauses can be considered anti-competitive and are generally not enforceable. Owners can make business decisions to protect their property, and many choose to disallow satellite dishes regardless of any agreements to avoid damage.
00:10:00 – 00:11:39
Satellite dish policies and property owner rights
00:10:03 – 00:11:39
The discussion focuses on rules regarding installations for residents, such as limiting outdoor items to avoid eyesores and prohibiting permanent attachments to buildings. It also covers the prohibition of exclusive service agreements, clarifying that exclusive contracts for service providers are not allowed. The conversation touches on the concept of a bulk agreement, where a property owner purchases a service in bulk to include it as an amenity or part of the rent.
00:11:00 – 00:13:56
Bulk agreements vs exclusive service agreements
00:11:06 – 00:12:37
The speaker explains how bulk agreements for cable and internet services work in apartment buildings. While not technically exclusive contracts, these agreements effectively prevent other providers from entering the market because one provider already serves the entire complex. This situation is favorable for cable and internet companies as it secures their position by default, even though it’s considered a bulk or master pay agreement rather than an exclusive one.
00:12:05 – 00:13:56
The benefits and drawbacks of bulk agreements are discussed. Apartment owners pay a lower price per unit for basic cable and internet services, while providers benefit from guaranteed sales to the entire complex, regardless of occupancy. Providers also gain from upselling additional services like DVR or premium packages. Residents are generally satisfied with this arrangement since owners charge them a higher rate than the bulk price, increasing net operating income. However, affordable cable or internet packages at around $60 are now rare in the market.
00:13:00 – 00:15:28
Pros and cons of bulk agreements for owners and residents
00:13:21 – 00:15:28
The discussion focuses on bundled internet and cable packages, which are generally cheaper than purchasing services separately, especially for streaming platforms like Netflix and Hulu that still require internet access. A basic internet package costs around $65-$70, making the bundle a good deal for most users. However, a downside arises if the property is not fully occupied, as the cost is based on total units regardless of occupancy, posing a financial challenge for properties with low occupancy. The cable and internet providers count all units as customers even if some are vacant, allowing them to maintain customer counts and pass savings from reduced connection and disconnection activities to the property owner.
00:15:00 – 00:17:45
Contract terms and owner’s goals impact agreement choices
00:15:00 – 00:16:44
The speaker discusses the challenges property owners face with cable or internet bulk agreements, highlighting that owners typically cannot exit these agreements before the term ends. However, switching from an access agreement to a bulk agreement is often allowed, even if the term is still active, since providers prefer bulk arrangements. This distinction can impact property sales if new buyers are unwilling to maintain existing agreements.
00:16:11 – 00:17:45
The conversation emphasizes the importance of understanding property owners’ goals when deciding on agreement types. Transitioning from non-bulk to bulk agreements usually takes about a year, often coinciding with lease renewals and involving a gradual fee increase. New property owners managing maintenance and renovations might be hesitant to engage in this process. The speaker’s role is to inform clients about the advantages and disadvantages of each option, enabling them to make well-informed decisions.
00:17:00 – 00:21:10
Other utilities: trash, electric, gas, and market considerations
00:17:13 – 00:18:51
The discussion focuses on helping with utilities management for larger properties, particularly regarding trash removal rates and services, which vary by market and property size. Electric and gas utilities are also considered, with emphasis on deregulated markets where competition affects rates. In deregulated states like Ohio, rates are competitive, whereas in regulated markets such as Tennessee, rates are fixed with no competition, limiting savings opportunities.
00:18:17 – 00:19:52
Electricity savings depend largely on property size and usage, with larger properties featuring common areas, laundry rooms, and amenities consuming more electricity, making them better candidates for cost reductions in deregulated markets. The company offers free assessments to evaluate potential savings or revenue generation opportunities by analyzing utility usage and market conditions.
00:19:21 – 00:21:10
Bill-paid properties benefit from reviewing electricity and gas options, though deregulation does not always guarantee choices, as seen in Lubbock, Texas, where only one provider exists despite state deregulation. Additionally, trash removal contracts often have long terms and clauses allowing rate changes at the provider’s discretion. Operators are advised to closely monitor these contracts to avoid unexpected cost increases.
00:20:00 – 00:22:33
Waste removal contracts and potential savings opportunities
00:20:33 – 00:22:33
The speaker discusses the risks of contracts with fluctuating charges such as fuel surcharges that can unpredictably affect net operating income (NOI). They share an example from waste management where renegotiating a contract led to cutting costs by half for the same service, significantly improving NOI. The explanation continues with a comparison to consumer pricing strategies, noting how new customers often receive promotional rates that are lower than those of long-term customers, illustrating why existing customers might pay more. This concept is applied to multi-family property service providers and the importance of regularly reviewing contracts, especially in deregulated markets, to ensure competitive rates.
00:22:00 – 00:23:40
Ongoing contract reviews and renegotiations by utility solutions
00:22:05 – 00:23:40
The speaker explains the importance of managing contract renewals proactively, using a database to track expiration dates and renegotiating terms rather than allowing automatic short-term renewals. They give an example of a 10-year agreement with Spectrum, which they renegotiate at the end of the term to secure another long-term deal and upfront payments. They emphasize being transparent and advise engaging their services early, even at the letter of intent stage, to avoid pitfalls and maximize contract value.
00:23:00 – 00:24:55
Engaging utility solutions early and commission-based service model
00:23:10 – 00:24:55
The speaker explains their process of assisting clients with due diligence and pro forma analysis for potential property purchases. They emphasize that their service is commission-based with no upfront fees or retainers, providing free assessments. Their compensation comes as a percentage of the savings or increased net operating income (NOI) they achieve for the client, aligning their goals with the client’s financial success. This model is compared to the tax protest process where consultants receive a portion of the tax savings they secure.
00:24:00 – 00:25:50
Contact info for Kevin Gardner and podcast closing remarks
00:24:16 – 00:25:53
Kevin shares his contact information and offers ongoing advice and education about multi-family utility solutions, encouraging listeners to reach out for personalized portfolio guidance. The host thanks Kevin and invites the audience to subscribe to the podcast on various platforms and leave reviews.
00:25:24 – 00:25:50
The podcast concludes with a reminder for listeners to subscribe on multiple platforms and directs them to the website for questions or feedback.
