Multifamily Housing Market

FEATURE

A combination of innovation, accommodation and determination is helping natural gas utilities achieve success in the challenging multifamily housing market. BY CAROLYN KIMMEL

MARKETING TO MULTIFAMILY

huck Fraser still remembers when the topic of getting natural gas into the growing multifamily market first came up in a meeting with fellow representatives from other natural gas companies. “The question was asked, ‘How many of you want to get into Cthe multifamily housing market?’ Many hands went up. Then we were asked, ‘How many of you are having success?’ Many hands went down and just a few stayed up. Next question, ‘Are you doing incentives?’ and the same hands stayed up. That pretty much told me, you need to give the developer a reason to change,” said Fraser, an account manager with Atmos Energy. The company’s MidTex Division took those words to heart, and after decades of seeing multifamily markets in their service area go almost completely electric, the tide is turning. Atmos Energy is in the midst of closing on six multifamily housing projects, with one 200-unit project for adults over age 55 completed in Burleson, Texas. By changing their approach, offering incentives and educating everyone involved in the construction project—from architect to developer—that natural gas is a beneficial option, utilities are finding firm footing in the growing multifamily housing market. It’s challenging terrain, however, and natural gas utilities seeking success have to offer up innovation, accommodation and determination. “There’s really nothing magic about it—it takes going to the designers, developers and engineers and talking about the benefits of using natural gas again and again,” said Carl Garofalo, manager, energy solutions, Southern Co. Gas, parent company of Atlanta Gas Light, which is also enjoying success in the multifamily market. It’s an essential path to be on, given the booming multifamily construction market nationwide.

30 AMERICAN GAS DECEMBER 2016 / JANUARY 2017 PHOTOS COURTESY OF CENTERPOINT ENERGY, CARL GAROFALO AND ATMOS ENERGY DECEMBER 2016 / JANUARY 2017 AMERICAN GAS 31 Alta Midtown is one of Atlanta Gas Light’s crown jewels in its recent efforts to expand its reach into the multifamily housing arena.

PHOTO COURTESY OF CARL GAROFALO

A recently released study commis- will be installed and puts in all the piping sioned by the American Gas Foundation, and meters. Expanding Natural Gas Service to “It does cost the developer to pipe from Multifamily Buildings, cites a Federal the meter to the apartment, and it might Reserve Bank of Kansas City report that cost more for the gas water heater and for shows that in the past decade, multifamily the gas cooktop, both of which we require construction has risen from less than 25 in our projects. Our study showed that a percent to one-third or more of newly built developer would pay about $500 more per residential dwelling units. unit,” Fraser said. “The company’s decision A key finding of the study states that to fund the main on the property and if natural gas technologies were applied acquire the easement could be a way the across all or at least part of the nation’s developer offsets some of the additional multifamily building stock, unit occupants upfront cost of using gas.” could realize $2.2 billion in reduced Across the board, the fact that virtually annual energy bills, or about six percent of all the units in a complex will produce total energy expenditure for multifamily margin in year one makes this investment units in the United States. On top of comparable to a subdivision, Fraser said. that, carbon dioxide emissions would be Considering the growing trend toward reduced by an impressive 20 million tons or multifamily housing construction, these more nationwide. apartments might take the place of what With results like that, experts predict used to be single-family homes, and Fraser that multifamily construction will hold added, “If we don’t go after them, our new onto its high share of new construction customer additions could start to decrease.” over the next two decades, creating Similarly, Atlanta Gas Light started enormous opportunity for natural gas. recognizing the multifamily housing trend in 2012, but its efforts were not reaping PHOTOS COURTESY OF CENTERPOINT ENERGY A NEW APPROACH success, so it overhauled its program in CenterPoint Energy focuses on educating trade allies on how to sell the value of natural gas to end-use customers. When Atmos began refocusing its efforts 2014, Garofalo said. on the multifamily market, it re-thought “We had a one-size-fits-all mentality its approach of requiring all on-site piping where we went after everybody the same be furnished by the developer. Now, at way. We were talking to the developer or the beginning of each project, Atmos the engineer, and we didn’t address each purchases the easement where its gas mains project as a whole. We needed to talk to

32 AMERICAN GAS DECEMBER 2016 / JANUARY 2017 all the decision-makers to get feedback expanding natural gas service in America’s innovations in technology, program design and tailor our proposal just for them,” multifamily markets. and marketing that have enabled some gas he explained. “Architects are more artists The project took into account the utilities to gain market share in their multi- than structural designers, and they may growing importance of the multifamily family markets. not realize the technical or economic housing market nationwide; the continuing The biggest challenge, Garofalo said, is values of natural gas. An architect may challenges faced by natural gas utilities the myth that natural gas costs too much. pick a gas range for its aesthetic value; in their efforts to expand service to new “You have certain firms whose specs in an engineer may pick a tankless water and existing multifamily buildings; the multifamily housing are total electric. heater or gas heater for its value in the technical, economic and environmental They have floor plans that they carry way of cost saving.” benefits of using natural gas; and recent from project to project with universal By packaging options together, the company could raise awareness of the total natural gas package available. The 369-unit Alta Midtown—one of the crown jewels of Atlanta Gas Light’s recent efforts to expand its reach into the multifamily housing arena—is proof that PROTECT LIVES the company’s strategy is working. Outdoor amenities include a brick pizza oven, fire pit and grilling area, and inside, each unit & PROPERTY. features natural gas heat, water heater, range and clothes dryer. “Increasingly, renting is the prefer- AND MORE. ence for millennials, empty nesters and WE DO THAT. urbanites,” Garofalo said. “Everyone wants to live, work and play in the same With the highest level of accuracy in utility community. That creates density and more locating, we’re shattering industry standards multifamily development.” for damage-to-locate ratios. But there’s more Overall, since 2014, Atlanta Gas Light to us. Our family of companies provides: has secured contracts to serve approxi- mately 40 new developments with more • Telecom, Electric & Gas Construction than 6,500 individual units and about $1 • Wireless Network & Tower Construction million in annual revenue. This year, the • Professional Services & Site Development utility expects to add natural gas appliances • Underground Utility Locating to another 2,000 multifamily units in the midtown Atlanta area. When you work with us, you will know Predictions are that metro Atlanta will you’ve hired the right people for the job, add more than 20,000 multifamily units no matter what the job. between 2014 and 2018; this represents ® a potential revenue growth between $2 We’ve Got This. million and $3 million per year for Atlanta Gas Light, Garofalo said. The company is also expanding into subsidized, low-income multifamily projects. It just completed a 240-unit building in Augusta, Georgia, that will have natural gas heat and water heaters. Ready to dig in? The company is also ramping up its efforts Call us at 800-757-6842. to protect its existing stock of aging SNCOMM.COM multifamily units, combating conversion incentives being offered by electric utilities.

KNOCKING DOWN BARRIERS AGF’s multifamily study grew out of a Our Subsidiary project designed to identify the barriers, Partners benefits and solutions associated with

DECEMBER 2016 / JANUARY 2017 AMERICAN GAS 33 layouts that remain similar and are for fellow natural gas companies wishing to START HERE FOR SUCCESS copied and pasted from project to project,” break into the niche: he said. “We had to get inertia moving The American Gas Foundation report, in our direction, and once we did, we DO YOUR HOMEWORK. At Atmos Energy, Expanding Natural Gas Service to had success after success.” a task force was established to assess the Multifamily Buildings, offers case studies and highlights methods for utilities seeking Education of trade allies, including potential, define the product and develop to find success in the multifamily sector. builders, architects and engineers, on how a sales plan. The task force began by These include having: to sell the value of natural gas to their end- commissioning a local engineering firm use customers is key to success, according with multifamily construction experience INTERDISCIPLINARY STAFF such to Rafi Sohail, director of regional sales to study comparative costs of gas versus as a team of people with a mix of sales, technical and management skills to and tech support for CenterPoint Energy, electric service for multiple end uses. support outreach, engagement, technical which has also enjoyed success in the To counter the tendency by contrac- assistance and project management multifamily market. tors to overestimate the cost of natural gas support. This is crucial to gaining access “Natural gas is cost effective and services, Atlanta Gas Light organized a and building relationships. environmentally friendly. It allows team of “pro-gas” contractors who would AN EXPERT ON CODES AND developers to differentiate their property bid projects. These contractors put together STANDARDS on staff who can work in a crowded market to attract more a sample bid letter that the utility used to with state and local code officials customers with higher-end amenities show developers truer cost estimates for and processes to develop initial code such as gas cooking and fireplaces,” he gas service. provisions and favorable interpretations said. “As customers see the long-term By forming its Houston-area, multi- for specific projects or applications throughout the process. value, the decision becomes easier to family program called Natural Gas go with natural gas even if the first cost Advantage, CenterPoint Energy has been EASILY ACCESSIBLE TECHNICAL of installing natural gas equipment in able to capture 30 to 40 percent of the RESOURCES under one roof, such as the unit is higher.” multifamily new construction market each development of a library of key data, The AGF study discovered that gas year in the Houston area, compared to including construction cost and operating cost data for gas versus other energy utilities have been innovative in service nearly zero percent when the utility started technologies, documentation of case areas around the country in fostering the program over a decade ago. “The studies of successful gas installations, incentives, technology solutions and Houston market’s multifamily program and contact information for contractors, data documentation efforts that support focuses on trade allies such as builders/ equipment distributors and other marketing efforts. An understanding of developers and architects and engineers, as trade allies. the wide range of building types—and they are the decision-makers and primary resulting unique needs—that make up the influencers in determining what type of multifamily housing market is crucial to energy source to install in these projects. success, the study pointed out. Working with trade allies has allowed us to The utilities that have harnessed success serve more end-use customers,” Sohail said. in the multifamily market have definite tips CenterPoint also identified another trend within the multifamily sector—the shift of utility bill payment responsibility to an individual owner or tenant instead of a centralized association. “We responded by creating a comprehensive program that provides natural gas service to an individual customer with a meter for each apartment unit,” Sohail said.

GET IN EARLY. One key to success is to get in the game early. “You can’t wait until you see them break ground. Develop relationships with the engineering groups; use a database like BuildCentral to get leads,” Fraser said. It takes time to build relationships with trade allies before you can influence their decisions, so be sure to factor in that time, Sohail agreed. Atmos Energy found that a new approach convinced developers to try natural gas. One example is Mariposa Apartment Homes Atlanta Gas Light offers Lunch & in Burleson, Texas, a 180-unit multifamily housing community for active adults age 55 and over. Learn events, where the utility caters lunch

PHOTO COURTESY ENERGY OFPHOTO ATMOS at a firm and presents information on the

34 AMERICAN GAS DECEMBER 2016 / JANUARY 2017 environmental and economic benefits of natural gas, along with YouTube videos benefits, but their business decisions natural gas, how to address design issues, and an interactive website that provides are first-cost driven, and so the company proper equipment room placement and further information to users. The company found that “it’s all about making new natural gas technology. also produced two-minute video segments gas competitive on a first-cost basis,” “We’ve gotten great feedback on these plugging natural gas that developers could said Sohail. lunches, and the relationship-building has use at their leasing offices. This means coordinated customer been invaluable,” Garofalo said. “These were consumer-aimed efforts, service, engineering and meter setting but we think the majority of people coupled with incentives to help builders STRATEGIZE. Atlanta Gas Light also already recognize the value of natural and developers to install natural gas appli- developed a strategic plan that revolves gas. However, it’s not their biggest factor ances in multifamily projects. “Although around promoting various combinations when buying—it’s location and amenities. incentives do not usually pay for the entire of benefits to developers and tenants. But if these are equal and there are two difference, the combination of education These include tapping into the growing properties, one with electric and one with on the value of natural gas, along with interest in green certifications, capitalizing natural gas, people will choose the building the incentives, helps promote the program,” on the amenity value of gas cooktops with natural gas,” Garofalo said. Sohail said. and fireplaces, and emphasizing cost Plus, use of natural gas in multifamily advantages and natural gas’ safety COVER ALL THE BASES. Early on, buildings has another benefit—it provides and reliability. CenterPoint Energy defined a key issue a sneak preview to those who might be A little innovation goes a long way for the multifamily market: The benefits in a position to choose their preference in piquing interest, Atlanta Gas Light of gas service appeal to many builders in the future. found. The utility developed a cable TV and developers, but the reality is that “We want future homebuyers to be show called High Rise Living that subtly most of those benefits flow to tenants. familiar with the benefits of natural gas,” showcased multifamily housing with Yes, developers are happy to market those Fraser said. “This is a great way to do that.” u

WHAT’S OLD IS NEW AGAIN

In a departure from the new construction barriers by using a multifaceted approach temperature in my apartment was to open a route that many natural gas utilities take into of providing comprehensive oversight from window. Now with the new heating controls the multifamily housing sector, PSE&G has project inception to conclusion, including and new boiler, I don’t need to do that,’” committed to retrofitting existing buildings. the review of program applications and Fredericks said. energy audit results, project engineering and “Our strategy was to help buildings that site inspections. The average project size is about $1 million currently have a difficult time with the system and may involve a little more than two years they are maintaining—that may have been in “The greatest benefit has been the of working with the building owner, she said. service for 50 years and will not go another construction cost being lent upfront to the five or 10 years,” said Rachael Fredericks, customer, which is important because a lot Some 10,000 residents in multifamily manager, residential multifamily energy of building owners are maxed out in what buildings have benefitted from the retrofit efficiency program, PSE&G. “The benefit they can borrow, and then letting them repay upgrades. The program has achieved some is certainly to the building owner from a their portion of the program costs directly impressive results—more than two million maintenance perspective, but the comfort on their PSE&G bill at zero percent interest,” therms of natural gas saved, which is enough impacts to the residents—many of whom are Fredericks said. This allows the building to supply about 2,000 homes for a year, low-income and low-income seniors—are owners to begin reaping the benefits of the company says. PSE&G also estimates terrific.” energy efficiency measures immediately upon that the completed energy efficiency work at installation, before repayments even begin. multifamily buildings will prevent more than That priority is part of the ethos of the utility, 53 million metric tons of carbon dioxide, Fredericks said. “PSE&G’s energy efficiency The company has so far invested nearly $43 42 metric tons of nitrous oxide and nine programs have been targeted toward million in the program, an investment they metric tons of sulfur dioxide from being markets that are traditionally underserved expect will earn a good rate of return over emitted annually. by programs available from the state. These time—if not all in dollars, then in carbon target markets typically have difficulty reduction in the environment and goodwill “It’s more work to play in the retrofit market, accessing the capital and technical expertise from their customers. but the results can be really dramatic from needed because their focus is on the day-to- a gas-saving and cost-saving perspective,” day operations.” “We talk with our customers all the time, Fredericks said, noting that there is much many of whom have multiple sites in our more work to be done in the multifamily PSE&G’s Multifamily Housing Program territory, and we hear from residents who say, sector and the company wants to keep its was designed to address these common ‘It used to be the only way I could control the momentum going. —C.K.

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