Haystack or a needle?

Very few events have such far reaching impact as the annual Energy Summit. A wide selection of multifamily’s literal power brokers assemble in Washington, D.C. to analyze and discuss the future of utility management and all it encompasses inside the business of apartments. One discussion led by NWP Services Corporation CEO Ron Reed asked owners and operators which they prefer when dealing with the utility data on their properties: a haystack (big data) or a needle (the answers they need to solve issues that arise). Reed’s business model for data delivery, especially in today’s fluid environment, is delivering the needle, for quick-turn decisions.


The event was opened by Reed, who also announced that his company and host of the event, NWP, had been acquired by Dallas, Texas-based, RealPage just days before. He  described the transaction as the “fastest deal ever made” because of the synergies, and that the two companies were so compatible. “I am excited to lead such a talented team, while integrating the best of each platform,” said Reed. “We will focus on accelerating our shared vision of creating the industry’s leading resident billing, energy management and back-office services platform.”

Steve Winn, CEO of RealPage, also present at the summit concurred, adding that the customer-centric culture of the two companies was extremely compatible.

Keynote speaker, Lily Donge of the Rocky Mountain Institute, discussed the energy transformation occurring across our country, and what it means for energy and utilities into the near and distant future. Donge’s presentation was interactive allowing attendees to weigh in on topics throughout her presentation providing a fascinating, real-time perspective of the owners and operators in the room. A few of their responses:

Can we decouple growth and energy in the United States in the next 5 years?

  • Yes: 71%
  • No: 29%

Can we decouple growth and energy in developing countries in the next 5 years?

  • Yes: 56%
  • No: 44%

Where are we going to see the most bang for the buck in energy efficiency in the next 5 years? (The answer came in the form of word cloud, below.)

Where are we going to see the most advancement in mobility in the next 5 years?

  • IT of everything: 24%
  • Cities will dominate: 44%
  • Change my car: 44%
  • Drive my car for me: 22%
The attendees weigh in

With its full line up of speakers, the Energy Summit featured presentations from nearly every national regulatory agency connected to utilities including the Environmental Protection Agency (EPA), Fannie Mae’s Multifamily Green Initiative, and the Department of Energy (DOE).

So what was the take away from those owners and operators at the Summit? MHP asked what changes or threats with regard to utility management and billing they see in the days ahead, and what action they think necessary to mitigate risk. Here’s what our thought leaders had to say:

Mark Copeland, Asset Manager, MWC Consulting

The biggest change I see coming to multifamily utility billing is more regulation around RUBS (Ratio Utility Billing Systems) billing. Also, while not so much in Texas, there is a move in most states to install meters to benchmark, and eventually garner conservation in resident consumption. With RUBs billing, there is harder baseline to show reduction of water usage to our residents.

Going forward, the biggest concern we face as owners and operators is the volatility of the energy markets with the price of water as the number one threat. While prices are low now, and look to stay low in the coming year, this will be harder to predict and budget in the future. Water will continue to lead to increases across all utilities, with no end in sight to the regulation and rise in storm water fees.

I’m also keeping an eye on today’s hyper multifamily market. The ever increasing rents will add pressure to an already-lacking inventory of affordable housing. HUD and local governments will continue to push regulation to the private sector for solutions, and if they don’t get it voluntarily, they will certainly force affordable housing quotas on new development.

Elaine Doughty, Utilities Manager, Morgan Properties

I don’t see a large change ahead from an owner perspective. Owners are going to continue to pass along cost to the end user in an effort to bring focus on usage, with the intended result of conservation. Any significant shifts in this would come from legislation changes within municipalities.

The largest concern that I currently have is for the utility companies to keep up with the maintenance of the equipment capturing our usage. Our portfolio is older construction in long-developed regions. We work very hard to maintain balanced billing to our communities. We carefully monitor our usage per asset and have to work very closely with utility companies and their budgets to be sure that the equipment is maintained.

From the utilities perspective, we would want to be sure that our residents have a very clear understanding of what they are paying for. In order to make this a reality, we need to have a very clear utility addendum and be sure that our site staff is well-versed in their building systems, bill-back programs and resident conservation efforts.

Gabrielle Gonzalez, Vice President, Property & Asset Management, J.C. Hart Company, Inc.

There’s ever increasing emphasis from federal and state governing bodies on the preservation of natural resources. As such it will be critical that apartment developers and managers employ adequate forethought in order to remain poised to tackle future energy related regulatory requirements.

While net zero building design is becoming standard in some coastal markets, most Midwestern markets have not yet legislated this conservation design. The progressive multifamily developer will take the lead from these energy conscious markets and consider an adaptive design for their buildings. Doing so will enable owners and managers to employ alternative energy sources down the road without cost prohibitive constraints.

Lori Hanson, CAPS, CAM, Manager, Operations, Greystar Advantage Solutions

I see opportunities for us to be more efficient as an industry. New technologies and reporting features are making it easier to monitor our utility management programs more closely and get more accurate data. This will allow for more efficient and streamlined operations. I also anticipate more levels of leadership within the organization involved in utility management and sustainability efforts. I believe these areas will become a focus for everyone in the organization, and no longer be left to be managed exclusively by a designated “utility” person within the organization.

Some of the new technologies that exist may be seen as too expensive to implement by some multifamily operators and owners, which I see as the biggest threat.

The one thing multifamily owners and operators must do in the year ahead to mitigate risk is educate employees at all levels of the organization.

David Jaffee, Senior Manager, Operations, Pangea Properties

The biggest changes I see coming to multifamily utilities and billing are smarter communication devices (smart meters, nests, alert systems, etc.) to notify landlords of issues before they receive a bill.

Regulatory changes, specifically those outlawing RUBS, are the biggest threat we face. And while mitigating risk definitely depends on the type of property and construction stage, proper winterization is the biggest risk we’ve faced.

Mary Nitschke, Director of Ancillary Services, Prometheus Real Estate Group

I see an increase in striving for efficiency. The outdated method of utilities seemed to be “just pass it on the resident.” Now, we are shifting toward really managing our spend, reducing our costs and taking that gain on our rents. In the next 5 years, I see serious discussion on Net Zero MUDs (Municipal Utility District) and how we are going to retrofit to Net Zero on existing construction.

The biggest threat is that the costs of utilities will hit a point where we will not be able to achieve the rents we need to achieve because cost of living. Utility costs, specifically, will drive our customers out of our communities. When utilities get so high that our leasing is impacted, that will be the true nightmare.

The one thing I think multifamily owners and operators must do in the year ahead with regard to mitigating risk on their properties is not assume that maintenance means efficiency. I believe all our buildings run the same risk of leaks.

How often are systems being inspected? If a resident complains about something like “my water isn’t hot enough,” are we just turning up the thermostat on the boiler, or looking for a “why” is the resident’s water not hot? When plugging in our golf carts, are we considering TOU (time of use) rates? If we need an extra trash pickup, is it because we have lots of trash, or do we need more recycling or, perhaps, composting? Don’t assume the path of least resistance is the correct solution. Dig deeper until you are sure that the solution to the complaint is the solution to the problem.

Vicki Parrish, Director, Advantage Solutions – Energy, Greystar Advantage Solutions

Over the next year, we will see continued expansion of utility billing for multifamily communities. New and more extensive fees will become the responsibility of the residents as ownerships have no choice but to shift some of the burden for these expenses to residents in order to promote conservation and expense management. Within five years, utility billing companies will need to be the primary conduit for energy benchmarking programs and expense management reporting for ownerships and government agencies as costs escalate and conservation programs become more necessary.

One of largest threats to owners and operators is unfounded accusations of fraudulent or illegal billing practices for communities which can lead to very costly litigation.  As the industry is becoming more and more regulated, owners must use and depend on reputable firms with solid practices to avoid such pitfalls.

Owners and operators need to implement well thought out plans to manage all aspects of lease documentation, site staff education, and coordination with their utility billing providers so that all aspects of the resident billing are legal, well documented and explained correctly to residents and potential residents.

Todd Richman, Senior VP. Financial Planning & Business Development, Morgan Properties

I think we will continue to see greater analytics allowing utility managers to make better decisions in the years ahead.

The biggest threat facing owners and operator are the new laws preventing or changing how multifamily owners and operators bill utilities back to residents.

Mitigating risk will involve reviewing consumption data to determine where there are cost saving opportunities especially with rising prices for water and sewer.

Tom Spangler, President & Owner, TomCin Ventures, LLC

Companies will need to establish meaningful sustainability programs. Foreign investors are insisting on these, as they are common outside the United States. Also, since buildings account for almost 40 percent of total U.S. energy use, most cities in the U.S. will in the years ahead require public reporting of utility costs for commercial buildings with multifamily soon after.

Utility costs are the third largest operating cost behind payroll and taxes/insurance, and they may move into second place soon in some locations. Water and sewer costs have increased over 6 percent annually the last five years nationwide, and even more in coastal areas, cities, and areas experiencing drought. This trend will continue without regard to the direction of rents.

Owners and operators must develop expertise in driving down utility costs. It must become an integral part of property management for every professional real estate company.

Wes Winterstein, Vice President, Utilities Management, Bell Partners

At this point in time, it seems that the adoption of remote monitoring/control of individual apartment unit utility consumption has the potential to make progress in the coming year that would then set the stage, if the technology works as advertised, for significant expansion of remote utility monitoring and even remote payments in the next five years.

Currently it appears to me as though significant artificial increases in utility expenses threaten the multifamily industry along with potential legislation requiring owners/operators to invest in conservation measures that ultimately inure to the benefit of the residents while not adding quantifiable value to the assets. There is also the threat that owner/operators will be limited from passing resident (consumer) expenses along to them, which again will inure to the benefit of the residents, while devaluing the asset.  Both of these threats would most likely be the result of uninformed policy makers aiming to make good decisions.

In an effort to mitigate risk on the utilities front, I would recommend that multifamily owners/operators engage resident utility billing and invoice processing companies with a robust legal team in order to remain apprised of the utility related regulations and legislative issues unique to our industry.