By: Mike Sloan
Before finalizing any property acquisition, understanding the details within your telecom agreements is essential. At RealtyCom Partners, our due diligence process identifies contract provisions that can impact operations, resident experience, and future revenue potential. From bulk service terms to wiring ownership and contract conflicts, knowing what’s inside these agreements helps you make informed decisions and avoid costly surprises.
The foundation of RealtyCom Partners’ engagements with our clients is contractual due diligence. Our experienced team connects with providers to determine who is serving a given community. Once we have identified what infrastructure they are currently using, and what internet speeds they are offering, we are able to move on to the most important step, collecting and analyzing the existing agreements, a process that involves cataloging up to 100 individual terms and clauses.
During the Due Diligence phase of an acquisition, you may be provided with copies of these types of telecom agreements. At their core, these telecom agreements grant rights. These rights can include rights to access, rights to serve, rights to install or use infrastructure, and rights to market internet, video, voice, and other services. The following are just a few of the many contract terms that we categorize and analyze during our due diligence process:
Bulk Services – Bulk agreements require the property owner to pay a service provider for 100% of the units. Typically, these services are offered at a discounted rate and accounted for either as an included amenity, within the rent, or as a separate line-item charge on the resident’s bill. Being aware of a bulk agreement early on will allow for an accurate account of the cost and potential income in the proforma. Managed property-wide Wi-Fi is a very common type of bulk service. For these types of agreements, it’s critical to understand the type and quantity of active hardware, along with their in-service dates and end-of-support or end-of-life dates for future capital planning. It’s also helpful to understand service level agreements with regard to internet speeds, and while the circuit size should be evident in the agreement, getting a current snapshot of circuit utilization will assist in future planning.
Wiring Ownership and Use – Another type of additional right that may be granted within an agreement concerns a sometimes “hidden” asset, the ownership and/or exclusive right for a provider to utilize some, or all, of specific wiring within the walls of the property. Often referred to as the ‘home run wiring’, telecom agreements may grant a provider the exclusive right to use such wiring, whether it’s coaxial cable, twisted-pair copper, or fiber optic. If an underperforming service provider has been granted exclusive use of some portion of the home run wiring, you may be restricted in your ability to grant alternative providers access to your residents.
Bulk Prohibition – Another example is bulk prohibition clauses. Some telecom agreements contain provisions that prohibit purchasing services in bulk from other providers. Awareness of this provision allows you to avoid executing a new agreement that may conflict with existing terms.
Contractual Conflicts – Contractual conflicts are unfortunately not as rare an occurrence as one would suspect. Being aware of a conflict before acquiring the property provides time to determine the best step to resolving the conflict, even if it’s not easily cured before acquisition.
RealtyCom Partners are not attorneys, but we can help you understand the interactions between the various telecom agreements that may exist at your newly acquired property and what opportunities may exist to help increase ancillary income.
Understanding the details of your telecom agreements is key to protecting your investment and uncovering opportunities for additional revenue. RealtyCom Partners has the expertise to guide you through the due diligence process with clarity and confidence. Learn more about how our team supports owners and developers here.
