Solving the Multi-Family Developer’s Communications Technology Dilemma

It was 20 years ago. And this is what I announced my company had decided….

We’re going to own everything within the complex.

Voice, data, even the cable television infrastructure, we’re going to control it.

We’ll deliver the service.

It was just short of a disaster.

Oh, we had it right about the growing importance of communications technology. But we didn’t exactly have the strategy right.

Nor had we chosen the right partners to help us pull it off. Back then, query if the right partners existed.

20 Years Ago

In the mid-1990s, I helped to found an Atlanta, GA-based company called Place Properties. Our specialty was developing privately-owned housing apartment complexes for college students. Brand new projects, one bathroom per bedroom. Over the first three years of our existence, we built fourteen of them.

At the turn of the 21st century, Place Properties was among the pioneers developing this kind of housing. Today, student housing is its own multi-family category. It has become an extremely popular and lucrative one.

We were also pioneers when it came to delivering technology to our customers: voice, cable television, and data. We knew we were dealing with a technologically hungry market that was only going to get hungrier. We started investing in making our new apartment complexes future-proof.

I was responsible for overseeing the endeavor. It wasn’t fatal. But it was close…

For telephone service, jacks were connected out of sequence at three properties simultaneously due to a spreadsheet error (something we discovered just after move-in).

In Clemson, SC, on the first day of move-in, the $50,000 cable television headend arrived in a heap in the back of the delivery truck (the frame had failed in shipping). NO TV for almost a week.

In Statesboro, GA, lighting from back-to-back electrical storms wiped out half of the line cards in our new Hitachi phone switch ($400,000 behemoth), thanks to lightening protection that did not perform as advertised. The incident caused nearly $40,000 worth of damage. We soon learned such incidents were not rare.

At our property in Macon, GA, the internet service hiccupped each time the wind blew, literally. The wireless bridge system we installed to connect to the backbone wasn’t exactly as robust as it was cracked up to be, nor was the wireless building-to-building system a company had sold us.

I could go on. Our technical partners were calling me practically hourly with issues. Technology was becoming our business but our business was supposed to be housing. Customers were not happy.

Communications Technology

In the end, of course, Place Properties survived. We learned from the experience and were eventually vindicated. It’s clear today that our thinking then was on track: without question, the market has become hungrier for its technology. And not just the student market. We see it in every market.

Office, retail, hospitality, multi-family residential, single-family residential… you name it. Anywhere human beings are present, access to communications technology is critical. It is as critical as electricity. It also needs to be as reliable as electricity.

This, of course, is not a revelation.

In fact, most of us don’t even think about it.

We just want our technology to work.

We don’t particularly care about the how.

For real estate developers, though, the situation is a bit different.

As they consider the value of their assets out into the future, they must know what’s happening with communications technology; or have access to a responsible, reliable and expert technology resource that understands. Why? So that they can be confident the technology in their buildings will be sufficient… today and into the future.

If the communications technology isn’t sufficient for the tenants, they will vote with their feet, just as they would have 50 years ago in a building where the electricity didn’t work.

But here’s the rub, and what makes getting this right particularly challenging for developers: above all else, developers must ensure all costs are justifiable in terms of the IRR on their assets. Plain and simple. That’s why I’m sharing this: to provide some insight into how developers of real estate can cost-effectively and responsibly address their technological needs.

The Multi-Family Residential Story

My day-to-day job isn’t developing real estate any longer. After nearly 15 years in the business, I am now working in the communications technology industry for a company with a growing national footprint: Progressive Communications.

Working at Progressive allows me to see what’s happening on the front lines of communications technology and consider the impact through my eyes as a former developer. My job is to find new ways to grow our business using the knowledge and experience we already have. In both the office and the regular adult multi-family real estate verticals, I am already seeing innovative, cost-effective ways we can make a valuable difference. Here’s something I wrote not too long ago to a significant multi-family developer with whom I’ve had conversations about this challenge…

Dear [name withheld],

Given that we’re bumping up against the July 4th holiday, I suspect you’ve had a busy week. And the likelihood is the end of next week will be just as busy. So it makes complete sense for me to be sending you this epic missive now. It really doesn’t. But I decided to do so because it is fresh on my mind and it articulates (finally) what has been rattling around in my head when it comes to network connectivity and how to address it in the context of the multi-family vertical. And, who knows… you may actually have some time over the next few days to digest it and see if there is anything here that resonates when it comes to what you are doing.

As some background, I wrote this after I finished putting together a proposal for our company to provide its Managed Wi-Fi Service for over 2,000 units of student housing, well over 6,000 students. And students, as I’m sure you are aware, are among the most intense users of Wi-Fi.

Putting the proposal together provided me with some insight into some real, current numbers and a better way to look at how and why a multi-family owner should be concerned with providing reliable, robust Wi-Fi as a differentiating amenity and including its cost, utility-like, with rent (easy to model and budget for in practice because the cost is fixed, unlike, say, water).

This is not BS, spotty, ho-hum Wi-Fi. This is commercial grade equipment (top shelf, Cisco stuff) passing bandwidth that is easily capable of carrying Netflix, Hulu and the like to dozens of devices throughout a housing complex simultaneously (remember, I’m talking about the same solution here that’s capable of handling massive numbers of student users simultaneously). And this, again, would be community-wide for all residents (as opposed to just those who might choose to pay for it).

Why does this matter? Why not leave this to people just getting their own service? Two years ago, no problem. Today? Problem. And the problem has to do with how many people are now using off-the-shelf or incumbent-provided Wi-Fi routers and the interference they create for one another.

Commercial grade Wi-Fi systems like what we install are smart. They are designed to manage traffic and mitigate against traditional sources of interference far better than cheaper stand-alone devices.

In fact, cheaper stand-alone routers (Linksys, Motorola, Netgear, TP-LINK, whatever… even the “best” stuff you can get as a retail buyer) actually interfere with each other… badly. And they do this particularly well when they are in the next room, across the hall, upstairs, or downstairs, making them rather terribly suited for multi-family use.

So, the case where the person living in multi-family housing is unhappy with their Wi-Fi is likely to become more prevalent. And when someone’s unhappy with something that is important when it comes to where they live, they’ll move if they have the option. And people living in multi-family properties routinely have that option.

In other words, it won’t be long before multi-family projects choosing to leave providing digital access to the incumbents are going to start finding themselves at a disadvantage to those who have hired an expert third party to provide commercial-grade service property-wide as an amenity, covering its cost as a utility included with rent.

Get a reputation for having a killer, modern, reliable, professionally managed network that requires no effort for access on behalf of the user, and you’ll stay full. If I’m a developer these days and I can afford to do that, then that’s exactly what I’m doing.

Keep in mind, too, that residents aren’t the only users needing network access in a large apartment complex. Management also needs it. The management office (phones and computers) could be set up to run on the same commercial-grade network for no additional ongoing monthly cost. In other words, take the line item for ongoing telephone and internet expense for the management office out of the budget. Also do away with the “I can’t close the month because my internet is down” calls back to the home office. (Speaking of… we also offer a cloud-based work-space solution for offices that mitigate the need for any on-site back-ups of management information and eliminate virus and “my hard drive crashed” headaches. It’s also designed to put everything in the cloud, securely, so it can be accessed by anyone who is authorized.)

And then there is the fact that, with the Wi-Fi umbrella being community wide, maintenance and management would have no trouble using any tablet-based software and transmitting information to the cloud from the units, hallways, wherever. Any community that’s planning on going cellular LTE for this as a workaround can remove that not-so-insignificant cost from the budget as well.

Finally, there is one other reason having reliable Wi-Fi available in a community is going to become increasingly more valuable: Wi-Fi is rapidly becoming the answer for mitigating against bad cellular coverage for phone calls and text messages. And, for technical reasons with which I won’t burden you here, cellular coverage inside buildings in urban areas is actually going to start getting worse, not better.

So, what’s the cost of this new utility?

For the owner, here’s the numerical ballpark: While the final number is site-specific, we can completely cover the typical apartment complex with a commercial grade, extremely reliable Wi-Fi umbrella for something generally in the neighborhood of only a few percent above what’s already being charged for rent per unit per month on a 5-year agreement (assuming necessary cabling installed). And, to be clear, this contemplates delivering the kind of user experience the likes of which satisfies college students.

We pay for the cost of the electronic equipment (its hardware and installation). We also perform any necessary ongoing maintenance or hardware device replacement, and manage and monitor the network for performance and security through our network operations center 24x7x365. We also cover the installation and ongoing cost and management of the properly sized data circuit for the service.

Our service is turn-key for the owner. One point of contact for anything to do with the network.

The only up-front cost for the owner would consist of having the proper cabling run to the appropriate locations during construction, much of which I suspect is, in some form or fashion, already being contemplated in a budget. (We have a construction services division that provides this sort of design engineering and cabling labor and, when we have the ongoing management of the network business, we can often spread that cost over time, adding it to the monthly service cost. Our construction services division will also bid on projects regardless of whether our managed services division is involved with the ongoing network management and operation later.)

Well, that’s the nuts and bolts of what I wanted to share with you that hit me today. I hope you found skimming it at least somewhat beneficial.

Like I said, if I’m a multi-family developer these days (especially at the high end) and I can afford to do it… this is exactly what I’m doing. And I’m leaving my competition scratching its head and playing catch-up.

— Braden

This is what I heard back:

Braden,

Thank you for sending over. Yes, I totally agree that having bad internet service (and bad cell service) in an apartment community can be a deal killer (especially when tenants start to complain about that in reviews). I have printed off your email and will present it to [my team for discussion].

Sincerely,

[name withheld]

I’m also hearing from clients about issues surfacing at tenant renewal in office buildings. If someone’s cell phone isn’t ringing in their office, they’re inclined to want to move to another one where it will… likely in another landlord’s building.

In retail and hospitality, although for slightly different reasons, network connectivity is also critical.

For real estate developers across the board, networking is now as important as electricity. Getting it right is, too. The prudent developer knows this and is starting to ensure it has a responsible, reliable and experienced advisor on the team, preferably one who understands the real estate business and can help it make the right decisions for its investors for years to come.

Want to Learn More? Let Me Know

If you want to learn more about this, please let me know. I’m confident Progressive Communications can help and I’d be happy to discuss some practical and cost-effective approaches your organization might take when it comes to addressing communications technology. (For more, please visit www.pcians.com or call 800-982-8315.)