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Your Insider's Look: The Laundry RFP

Greetings Gentle Readers! Typically when a property owner or manager needs a laundry proposal for their multifamily asset they contact a laundry company and ask for a “proposal” without giving the operator specific, if any,  guidelines in which they are interested.   And, usually when asked by the laundry vendor what the property wants to see in a proposal, the response is all too often a vague and less than strategic response: “Just give me your best deal”.    That response, unfortunately, is a nonstarter for a laundry vendor and leaves way too many options for the laundry vendor who sadly doesn’t have any idea what the property’s “best deal” looks like.   Too often neither does the property and it can result in multiple proposals, revisions, lost time and energy and missed opportunities for both counter parties. Let me give you an analogy that might help make the point.   1.      If I were to go looking for a roofing contractor, I would know at least 3 things, conceivably more, that are critical to my decision process.  In no particular order those might be: reputation, timeline for job and price.  I might also know that I prefer composite to tile and that I want 8 nails not just 6...all those are preferences that begin to outline my request. And it provides the contractors bidding the job a solid understanding of what I want.   2.      What I’m saying is the property owner/manager who knows at least three things, hopefully more, is in a better position......
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An inside look at laundry revenue (commissions)

Greetings Gentle Readers! Today's topic is one that is of some concern to multifamily apartment owners currently in a laundry lease or thinking about signing a laundry lease. "Commissions" is a colloquial term used by laundry vendors and property owners alike but in reality "commissions" are legally "RENT" for the space the machines occupy. Typically the property will receive a percentage of the gross revenue (collections) that the machines generate from usage by the residents on the property and in some cases off property usage. How that percentage is computed can be confusing.  There are 3 very broad categories of RENT payments that are computed and made typically monthly. First let's look at what some variables the laundry vendor will input to calculate any type of RENT payment. Capital investment (buying the machines and providing technology payment systems if suitable)  Operating expenses (installing, servicing, collection, processing, insurance, vent cleaning, etc., etc) Term of the lease (Typically, 5, 7 or 10 years) Contingency Risk (Occupancy, market risks, competition from in unit hook up) Revenue (collections) from historical performance over the past 12 - 18 months Condition of the property (new construction or existing) Class of Property (A, B, C, D) In unit connections Vend prices Competing laundromats in the area # of Machines Vandalism risks Type of Machines (front load or top load) Quality of Machines (Factory New or from Inventory)   Once those variables are collected and input the commission or RENT payments can be determined by the laundry vendor's software program. ​And, as I......
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Important Paragraphs to Look For in a Laundry Room Lease

Greetings Gentle Readers!  Important Disclosure: I am not a real estate attorney and I only offer my anecdotal and work experience in the informational blogs I write.  Should any legal question arise from your readings please consult with your in house counsel or locate an attorney for a legal opinion.  I'm happy to give my opinion/response which is business based and not grounded in real estate law.  Here's a quick "laundry list" of lease paragraphs...this is not all inclusive as each lease may be modified and negotiated by both counter parties....but it should suffice to kick start a discussion.... Firstly, Keep in mind that the laundry vendors have written the leases they prefer to use and generally it's written to their benefit but if you read the leases carefully you'll find there are areas that are negotiable and non negotiable.   Not all laundry vendors use the same format, language and clauses so don't assume one lease is like another.   Preamble -  identifies Lessor (property) and Lessee (laundry vendor) - includes date of execution & lessor description and address,     A typical lease will include number of apt. units and identifies number of units with connections (if applicable)  - keep in mind that if you have in-unit connections for washes and dryers you present competition for the laundry room resulting in possibly reduced usage and reduced revenue.  Laundry vendors will want to know how many in unit connections are in play at lease execution.  That is a known risk.   Furthermore there will be......
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How to Deal with Automatic Renewals in Laundry Leases...

Greetings Gentle Readers,  Disclosure:  I am not an attorney and any advice given here is purely from an anecdotal and  personal experience basis and should not be construed as legal advice.  Before taking any action against a laundry company, including recommendations included herein, please consult with your counsel.    Today's post deals with a recurring problem with which many property managers and owners suffer...the sudden realization that your property has a lease with an "Automatic Renewal" clause that may have been overlooked or forgotten.   If you are in the late hours of a laundry lease and the non renewal notice period has expired there is not much one can do.  However, this suggested practice is, IMHO, good advice for any property manager at any given time...find and review your laundry lease. 1st Step:  Review your lease and focus on finding out if it contains an "automatic renewal" clause - if it does then ensure you understand the "non-renewal" notification requirements.  For example, one lease may stipulate the "non-renewal" notice can only be sent no sooner than 180 days prior to expiration and no later than 90 days prior to expiration...another lease may stipulate that the "non-renewal" notice can only be sent during the first month of the final year (which is not January BTW it's the first month of the anniversary of the expiration...i.e. June 18, 2021 expiration = July 2020 notice requirement). 2nd Step:  Once you determine the "non-renewal" notice send a registered, return receipt letter to the laundry company's......
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Laundry Room Deals: Bonus or Cash Flow?

As usual the answer is: “Depends”...    First off, “bonus” money in a laundry room lease is the most commonly used phrase and generally the most misunderstood.  The word “Bonus” implies “Free” but bonus money in a laundry lease is far from free. “Well, where does it come from?”  The upfront money a manager or owner takes out of a laundry deal comes from their share of the cash flow, pure and simple.   The laundry company, once it gets a “bogey” or target amount that is requested from the property, simply carves that out of the share of revenue the property would get otherwise.  Then, using a “Net Present Value” factor the laundry company can convert that cash flow to a one-time payment up front.  And, from an insider’s POV, the discount is deep.  Laundry companies are not in the lending business. One example: Let’s say your property has 40 machines in total installed in 4 laundry rooms and they are generating about $4,000 a month in gross collections from coin, credit/debit or Add Value Station.  And let’s further say your property is a solid B and the owner is not looking to flip the property over the next 7 years and furthermore there is no need for renovations…If that were the case, the focus should be on increasing cash flow by not taking any “bonus”.  Depending on the capital investment and labor considerations, including risk and contingency issues, your laundry company may offer you a 50% deal with $XX dollars versus a 58% deal with no money up fron......
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