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Canada’s for Apartment Owners, Managers and Association Executives Canada’s #1,Voice most read publication forManagers Apartment Owners, Managers and Association Executives Canada’s Voice for widely Apartment Owners, and Association Executives

Vol.6 No.3 August 2013 rentalhousingbusiness.ca

RENTAL HOUSING HOUSING BUSINESS BUSINESS RENTAL

RENTAL HOUSING BUSINESS

KILLAM PROPERTIES INC.

+

IPOANS

Investment Property Owners Association of Nova Scotia

Factors Affecting ROI on Real Estate Investment The Cockroach Explosion CFAA’s National Outlook CHARITY BEGINS AT HOME!

CH AR I T Y B E G I N S AT HO M E : A rt City in St. Ja m es Town

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TABLE OF CONTENTS

Robert Richardson, left, of Killam Properties Inc. (page 10) Rose Marie Howell, centre, and Jeremy Jackson, right, of IPOANS (page 30) O’Shanter Development Company – pg 12

10 28

KILLAM PROPERTIeS Inc. Killam Properties Inc. owns, manages and develops multi-family residential properties and manufactured home communities. The company has established a strong presence in Atlantic Canada’s rental housing market, and has entered the Ontario market.

INVESTMENT PROPERTY OWNERS ASSOCIATION OF NOVA SCOTIA IPOANS represents the interests of private residential property owners in Nova Scotia. The association has grown by focusing on lobbying the Nova Scotia provincial government for legislative equity, and educating its members on all aspects of the business and apartment industry.

26

the cockroach explosion

32

FACTORS AFFECTING ROI ON REAL ESTATE INVESTMENT

Over the last several years, bed bugs have taken centre stage in the world of pesky insect invaders. However, cockroaches are returning as a problem and are a very difficult pest to control and require a great deal of effort from the pest control technician and the individual with the infestation.

Apartment buildings continue to represent one of the most consistently stable real estate investment sectors in Canada. However, the income returns may sometimes not be as high as the returns on other, more volatile asset classes, although they do provide a steady and predictable income stream.

After page 24 CHARITY BEGINS AT HOME!

SPECIAL FEATURE: Art city IN st. james town

ART CITY I N

S T .

J A M E S

T O W N

Art City in St. James Town is a not-for-profit organization that is committed to providing free, accessible, multidisciplinary art programs to children and youth in the community. The organization uses artistic expression to facilitate development and engage the youngest members of its neighbourhood with the city’s arts community.

CFAA’s

al Nationok Outlo dition RHB E


T

his issue of RHB Magazine provides a look at the rental housing industry in Nova Scotia and Atlantic Canada. In an article starting on page 10, read about Killam Properties. Killam owns manages, and develops multi-family residential communities in Atlantic Canada. The company has established a leading presence in Atlantic Canada’s rental housing market and is now branching out to Ontario and Alberta. An article starting at page 28 features a profile on the Investment Property Owners Association of Nova Scotia. The Nova Scotia association has seen growth, thanks to increased focus on lobbying at the provincial level for legislative equity and increasing member education about the rental housing industry.

In National Outlook, at page 1 following page 24, read why you should join CFAA as a direct member. Other articles of interest are the report on the 2013 Rental Housing Conference, and “Creating Wealth Through Renting or Owning.” We hope you enjoy this issue of RHB Magazine, including National Outlook.

John Dickie John Dickie, CFAA President

In a story starting at page 26, learn about “The Cockroach Explosion.” In recent years, these pesky insects have taken a back seat in the headlines to bed bugs. However, cockroaches are coming back. This issue also has a special feature entitled, “Art City in St. James Town.” Read about how this not-for-profit organization, supported by landlords, is engaging children and youth in the community through free, accessible, multi-disciplinary art programs.

CFAA Member Associations Eastern Ontario Landlord Organization (EOLO) www.eolo.ca P: 613-235-9792

London Property Management Association (LPMA) www.lpma.ca P: 519-672-6999

Saskatchewan Rental Housing Industry Association (SRHIA) www.srhia.ca P: 306-653-7149

Federation of Rental-housing Providers of Ontario (FRPO) www.frpo.org P: 416-385-1100, 1-877-688-1960

Manufactured Home Park Owners Alliance of British Columbia (MHPOA) www.mhpo.com P: 1-877-222-4560

Waterloo Regional Apartment Management Association (WRAMA) www.wrama.com P: 519-748-0703

Greater Toronto Apartment Association (GTAA) www.gtaaonline.com P: 416-385-3435

New Brunswick Apartment Owners Association (NBAOA) www.nbaoa.myidealhome.com P: 506-640-1460

Hamilton & District Apartment Association (HDAA) www.hamiltonapartmentassociation.ca P: 289-440-3185

Professional Property Managers’ Association (of Manitoba) (PPMA) www.ppmamanitoba.com P: 204-957-1224

Investment Property Owners Association of Nova Scotia (IPOANS) www.ipoans.ns.ca P: 902-425-3572

Rental Housing Council of BC -formed from the merger of the British Columbia Apartment Owners and Managers Association and the Rental Owners and Managers Society of BC

Kingston Rental Property Owners Association (KRPOA) www.kingstonrentals.com P: 613-572-7276

Vancouver Office (formerly BCAOMA) www.bcaoma.com P: 604.733.9440, 1-877-700-9440 Victoria Office (formerly ROMS BC) www.romsbc.com P: 250-382-6324, 1-888-330-6707

The Canadian Federation of Apartment Associations represents the owners and managers of close to one million residential rental suites in Canada, through 13 apartment associations and direct landlord memberships across Canada. CFAA is the sole national organization representing the interests of Canada’s $480 billion rental housing industry. For more information about CFAA itself, see www.cfaa-fcapi.org or telephone 613-235-0101


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Editor’s Note

N

othing says that summer in Toronto is nearly over more than the opening of the Canadian National Exhibition (other than silly backto-school advertisements featuring overly excited mothers shopping for their children). It feels like the summer has flown by, partially due to the wild weather swings and cancelled weekend trips to the cottage. But I still get to enjoy my annual trip to the Ex, and make it a tradition for my daughter... until she decides that it’s not cool enough for her.

This issue of Rental Housing Business magazine takes us to the Maritimes, with a feature on Killam Properties. This real estate operating company is one of the largest owners of rental properties in Nova Scotia and Atlantic Canada. It has used manufactured home communities to grow its portfolio and enter new markets throughout other parts of Canada. Killam is also a leader in affordable housing, and has expanded into development of new rental properties. We also have a profile of the Investment Property Owners Association of Nova Scotia (IPOANS), which represents the interests of private residential property owners in Nova Scotia. IPOANS lobbies the Nova Scotia government to make the Residential Tenancies Act more equitable for landlords, and also provides education programs to raise its members’ professionalism. This September, IPOANS will host a symposium on affordable “workforce” rental housing in Halifax, which will bring key stakeholders together to discuss the challenges facing seniors, students, the working class and other members of this demographic. The “Charity Begins at Home” section features Art City in St. James Town, a notfor-profit organization in Toronto that is committed to providing free, accessible, multidisciplinary art programs to children and youth in the community. The organization uses artistic expression to facilitate development and engage members of the neighbourhood with the city’s arts community. If you would like more information about the charity, or would like to promote your organization’s involvement in a charity, then drop me a line at david@rentalhousingbusiness.ca. We hope that you enjoy the rest of the informative articles and content in this month’s issue of RHB, as well as CFAA’s newsletter, National Outlook.

Vol. 6 No. 3 CO-FOUNDER, DIRECTOR

Juan Malvestitti juan@rentalhousingbusiness.ca

CO-FOUNDER, PUBLISHER

Marc L. Côté marc@rentalhousingbusiness.ca

EDITORIAL

David Gargaro david@rentalhousingbusiness.ca

CONTRIBUTING EDITOR

John Dickie, President CFAA jdickie@rentalhousingbusiness.ca

DESIGN

Thomas Calvert

PHOTOGRAPHY Fraser Ross

OFFICE MANAGER Kayla Clark

SUBSCRIPTIONS Canada: One year $27.00 Elsewhere: $39.00 Single copy sales: Canada $9.00 Elsewhere: $12.00 Opinions expressed in articles are those of the authors and do not necessarily reflect the views and opinions of the CFAA Board or management. CFAA and RHB Inc. accept no liability for information contained herein.  All rights reserved.  Contents may not be reproduced without written permission from the publisher.

P.O. Box 696 Maple, ON, L6A 1S7 416.236.7473 www.rentalhousingbusiness.ca

Enjoy the rest of your summer!

David Gargaro All contents copyright © RHB Inc.

To view the online edition of RHB, please go to www.rentalhousingbusiness.ca

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Killam Pro

From left to right: James Bugden, Project Manager; Jeremy Jackson, Vice President, Sales and Marketing Ruth Buckle, Vice President, Property Management;


perties INC. S

ince the early 2000s, Killam Properties Inc. has developed a reputation as an owner, manager and developer of multi-family residential properties and manufactured home communities. By following a dedicated strategy of purchasing well-located properties, the company has been able to establish a strong presence in Atlantic Canada’s rental housing market, and has entered the Ontario market. Killam’s focus on building a healthy portfolio of rental properties has also made it an attractive option for savvy real estate investors. The company’s commitment to provide affordable housing also demonstrates its dedication to giving back to the community.


[ Killam Properties ]

Pursuing a path of steady growth Killam Properties was the brainchild of Phillip Fraser, who witnessed a consolidation of Alberta multi-family real estate while working in Calgary. He recruited five other founding Directors with experience in different aspects of owning and/or investing in multi-residential properties in various Canadian markets. In 2000, the founders made a consolidation play with an initial public offering of two million common shares in the corporation’s capital, and listed the shares for trading on the TSX Venture Exchange. This established the firm as a capital pool company. Killam Properties made its qualifying acquisition in February 2002, which involved purchasing two new multi-family properties in Moncton and one in Halifax with a combined 147 units. The Moncton owner was interested in investing in the firm, so he accepted his portion of the purchase price for his buildings in shares. Killam Properties bought four more apartment buildings in Moncton and Halifax that year, giving them a total of 331 units. “These purchases helped to establish our foundation in Atlantic Canada,” said Robert Richardson, Executive Vice President and CFO.

“Killam is now one of the largest owners of rental properties in the four provinces. We own 14 percent of Atlantic Canada’s rental housing marketplace, and 12 percent of Halifax’s rental market, which makes us the dominant landlord in the region.” Killam Properties expanded into Newfoundland in 2003 and Prince Edward Island in 2004. While the company has increased its holdings in the region (86 percent of its operating revenue comes from Atlantic Canada), it has also geographically diversified its portfolio by entering other Canadian markets. Killam expanded into Ontario in 2004, Saskatchewan in 2005, Alberta in 2006, and British Columbia in 2007. In 2010, Killam Properties began construction of its first apartment development in Charlottetown, PEI. The following year, the company broke ground on four new apartment buildings in Halifax, Fredericton, St. John’s and Charlottetown. The firm’s strategy of purchasing existing multi-residential properties and manufactured home communities, and pursuing new development, has helped to grow its portfolio to more than $1.5 billion in real estate holdings.

“These purchases helped establish our foundation in Atlantic Canada. Killam is now one of the largest owners of rental properties in the four provinces.” – Robert Richardson, Executive Vice President and CFO

12 august 2013


Rental Housing Business 13


[ Killam Properties ]

– James Bugden, Project Manager

“Our growth plan involves adding from $100 million to $125 million in existing property to our portfolio on an annual basis, while development will make up about five percent of our balance sheet,” said Robert. “Going forward, we plan to remain strong in Atlantic Canada. We want to be more geographically diverse, so we will continue to purchase properties in several Ontario nodes, as well as explore opportunities in the Alberta market, focusing on Calgary and Edmonton.” REOCs as an investment alternative Killam Properties operates as a real estate operating company (REOC), and is listed on the Toronto Stock Exchange (TSX:KMP). It pays a monthly dividend similar to a real estate investment trust (REIT). The REOC operates in the same space as a REIT, in that it allows people to invest in real estate. The company pays out monthly dividends to investors and offers a dividend reinvestment plan (DRIP). REOCs also have more flexibility with respect to the types of allowable real estate investments. People often view REOCs as defensive investments. Real estate (particularly rental housing) consists of assets that tend to increase in value, so they function as a hedge against inflation. Killam Properties provides a steady income stream with regularly paid dividends, which attracts conservative investors. By focusing on relatively younger rental properties (26 percent of its properties were built after 2001),

14 august 2013

the company has been able to maintain its property values and keep maintenance costs down, which affects the REOC’s overall value. “Over the long term, it is more expensive to maintain older properties, which affects returns,” said Robert. “The rental market is strong, and demand should increase for rental properties. As the population ages, people tend to move into multi-family rental housing and away from single homes, as they are more interested in a carefree lifestyle.” Investing in the right rental properties Since its inception, Killam Properties has focused on buying multifamily residential properties to build its investment portfolio. Rental properties in Nova Scotia, New Brunswick and Newfoundland are not subject to rent control. Atlantic Canada is a robust rental market with a lot of newer developments. The company has been able to focus its purchases on newer buildings, which require less maintenance and offer newer features and amenities. While location is very important for any real estate purchase, Killam Properties also follows the rule that bigger is better for apartment buildings. Larger rental properties tend to offer more amenities, which attracts better quality tenants who are willing to pay more for these features. They are also relatively easier to manage (as compared to several smaller buildings). “We’ll also invest in well-located older buildings, since location is very important to tenants,” said Robert. “Of course, we have to consider


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[ Killam Properties ]

the condition of the building, as there are varying and significant costs associated with updating older buildings. However, location can offset building condition in certain markets.” Killam Properties has found that other markets have different rental housing issues than Atlantic Canada. For example, Ontario’s multi-family residential properties are relatively older, and often have significant amounts of deferred maintenance, which is not always reflected in cap rates. Rent control has made it less attractive for developers to build new rental properties instead of condos. Investors purchase a significant percentage of new condo units, which they then place into rental pools or rent privately.

“We’re taking the expertise we’ve developed into different markets, which helps to make all of our property managers that much better,” said Robert. “We prefer to manage properties ourselves so that we can be closer to our assets. Being hands on in our management approach enables us to develop more intimate knowledge of our investments, and better understand our tenants’ needs.” Using MHCs to enter new markets Killam Properties has employed the strategy of purchasing manufactured home communities (MHCs) to enter new geographic markets. For

“We prefer to manage properties ourselves so that we can be closer to our assets. Being hands on in our management approach enables us to develop more intimate knowledge of our investments and better understand our tenants’ needs.” – Robert Richardson, Executive Vice President and CFO

Since rental properties built after 1991 are not subject to rent control, Killam Properties has decided to key on newer buildings. The company is focusing on new product first in certain Ontario markets, such as Cambridge, Mississauga, London and Ottawa, and then considering well-located older buildings that offer turnaround opportunities. It has also purchased land in Cambridge, with plans to develop new rental property next year. Killam Properties also built its management team from scratch, so that the company could manage its own properties (except in Newfoundland, where it uses a third-party property manager). Most senior managers have been with the company from its early years, and have bought into the company’s long-term vision. Killam’s head office is located in Halifax, and it has regional offices in key cities throughout Atlantic Canada, as well as Ottawa (with an office for its manufactured home communities in Trenton).

16 august 2013

example, in 2003, the company purchased an MHC in the Niagara region to enter the southern Ontario market, which led to additional purchases throughout Ontario in 2005. It has also purchased MHCs in Atlantic Canada to expand its regional real estate holdings. At present, the firm owns 44 MHCs, and has more than 7,500 total units in its portfolio. “MHCs provide a foothold for entry into new markets for long-term growth,” said Robert. “They enable us to enhance our knowledge about a particular real estate market, and allow us to establish a management base that we can leverage for future apartment purchases.” Besides providing a foothold into new geographic markets, MHCs possess a number of traits that make them high quality investments. Purchasing an MHC involves buying the land, not the homes that sit on the land. There is no need to provide heating, so property owners are not exposed to rising energy costs. Owners also do not incur expenses related to upkeep, such as paint or carpeting. When the


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[ Killam Properties ]

– Ruth Buckle, Vice President, Property Management tenant sells the home, rent continues unabated with the arrival of new owners. “MHCs offer excellent opportunities to build a position and consolidate investment, as they provide higher cap rates than apartments and a secure cash flow,” said Robert. “It’s a very strong financial model. Our properties average up to 98 percent occupancy, as it is much less expensive than renting an apartment. Our tenant base also has great pride of ownership, and it shows throughout our portfolio.” Leading the way in affordable housing Killam Properties is actively involved in providing affordable housing to people in need in New Brunswick, PEI and Nova Scotia. In 2008, the company partnered with Halifax’s Capital District Health Authority’s New Beginnings Mental Health department to create the Independent Supported Housing program. Under the pilot program, Killam provided 10 deeply subsidized units to New Beginnings client-tenants, who receive support services from New Beginnings. The 250 Homes Committee, which is affiliated with the Capital District Health Authority, had the goal of finding housing for people currently living in institutions who were ready to integrate into the

18 august 2013

community. Killam Properties offered to rent vacant units at a rate equal to the individual’s housing allowance. While the committee was responsible for the initial screening process and providing client support, the firm’s staff and property managers treated these individuals just like other tenants. “In addition to the most important aspects – giving back to the community and supporting our charitable giving focus – it has allowed us to fill vacancies and increase brand awareness,” said Ruth Buckle, Vice President, Property Management. “The tenants have the opportunity to live independently in a supported environment, and enjoy a safe, clean building in a good neighbourhood, all of which has proven to be beneficial to their overall health.” Due to its success, the Independent Supported Housing program has continued to grow over the past four years. Killam Properties now provides 46 subsidized units to New Beginnings client-tenants. The company has also taken its supported housing model to three other housing agencies (Shelter Nova Scotia, Phoenix House and VETS), providing these partners with 23 additional supported housing units. In 2010, Killam won a CMHC National Award for the Independent Supported Housing program.


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[ Killam Properties ]

Killam Properties, in association with the Investment Property Owners Association of Nova Scotia (IPOANS), has worked to promote the Independent Supported Housing program and the efforts of various housing agencies to other rental property owners. Thanks to the leadership of Killam’s Vice President Jeremy Jackson, who is also President of IPOANS, 14 other landlords are now involved in the program and provide rental units to clients of the aforementioned agencies. “In 2011, we presented the independent supported housing model to senior officials at the Nova Scotia’s Community Services department,” said Jeremy Jackson, Vice President, Sales and Marketing. “Four months later, the government rolled out its Supported Housing Program. To date, this program has placed 249 client-tenants in seven housing agencies, which means that they are using available rental stock. This clearly demonstrates that independent supported housing works.” Killam Properties continues to be actively involved in supporting the affordable housing sector. Since 2010, Jeremy has been a speaker at numerous affordable housing conferences across the country, with the goal of encouraging other landlords to get involved in the supported housing program. New opportunities in development In 2011, Killam Properties took its first step in becoming a developer with the completion of Charlotte Court, a three-storey rental property with 49 units. Located in Charlottetown, the project resulted from winning a tender from PEI’s Provincial Government for redevelopment of an aging facility on the property. Units are subsidized and leased by PEI’s Department of Community Services and Seniors, which matched the program that was provided to tenants at the existing facility. This project laid the foundation for future developments of multifamily residential buildings. Killam Properties first looked to build on surplus land that was adjacent to its existing properties, which is less expensive and more efficient than tearing down an old building or buying new land. One of the goals was to develop new buildings with amenities that complemented the existing adjacent property. For example, S2 is a 63-unit building located in Bedford, Nova Scotia that includes a 3,000 square foot gym, yoga room, changing rooms and theatre, and it is next to an existing Killam building.

– Jeremy Jackson, Vice President, Sales and Marketing

20 august 2013

“The Plaza at Forest Hills in Fredericton is similar to S2, in that its amenities complement those in the existing building,” said James Bugden, Project Manager. “This 101-unit building has a 4,500 square foot gym, yoga and spin room, changing rooms, underground parking, and many other features that are available for use by tenants in the neighbouring building. Plaza’s tenants can also use the other building’s amenities, which include a pool.” Killam Properties also invested in land for development that was well situated in city centres. The company purchased the land for Bennett House in St. John’s, Newfoundland from Canada Lands Corporation, and


[ Killam Properties ]

was awarded the tender to redevelop Brighton House in Charlottetown (as with Charlotte Court). Both properties are very well located and were essentially fully rented upon completion. Killam Properties has focused on making its new buildings more energy efficient, which will help to reduce long-term operating costs. It has applied for LEED certification in two buildings (Plaza and S2). The company equipped the buildings and units with environmentally friendly and energy-saving features, such as grey water recycling, solar panels, radiant heating, LED lighting, electricity monitoring, green plugs (i.e., master switches) and low-flow faucets. “Many units are equipped with green switches, which enables the tenant to turn off everything on that circuit upon leaving the unit,” said James. “Several buildings have low-E argon glass windows, which keep interiors insulated from outside temperatures. We’ve also provided electronic car charger stations in our new buildings.” Taking marketing to the next level Innovative marketing is central to Killam Properties’ goal to promote its new developments and fill vacancies, and it has garnered a lot of attention

around the industry. It is very active in various forms of social media, and was the first property owner in Canada to use EBay to creatively rent out its apartments. The company has created a number of comedic videos to promote its properties to students (check out “Landlord Lou” and “Lost Plunger” on YouTube). Killam also ran a Free Rent Sweepstakes promotion, where one person would win free rent for a year. Killam Properties is using its innovative marketing strategies to launch an at-home care program that targets seniors. The company plans to work with at-home care providers and home care nurses, who will help seniors to stay in their homes longer. Tenants can purchase daily or weekly plans that provide light levels of assisted living, which includes in-home support, prepared meals and access to scheduled shuttle service. “The at-home care pilot program is designed for people who don’t need full assisted living,” said Jeremy. “They can choose a daily plan or a weekly plan, depending on their needs and budget, which will help them to be more independent and comfortable. It’s much less expensive to live at home and get some light care than it is to move into an assisted living facility.” RHB

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Rental Housing Business 21


IN THE KNOW Online Marketing Unplugged Four-fold Tech-Savvy Strategy Keys to Successfully Utilize Online Marketing to its Fullest! Untangling the ‘Web’

According to a study by researchers at Ottawa’s Carleton University, first impressions count, making the overall look and aesthetic appeal of a website’s design among the most important factors in its success. A cost-effective way to drive traffic to a site and boost company rankings, is pay per click. Offered through various sources like Google AdWords, they help leverage traffic and focus SEO. Search engines only charges when users click on an ad. Analytics, generated as part of the service, can quickly determine which keywords are effective. The company sets the amount it is willing to pay for a particular set of keywords and once reached, the company can tweak the strategy or continue as is.

Add ‘REEL’ value with Video Marketing Typically, young people have shorter attention spans than older adults, and prefer information visually. As a result companies looking to kick start marketing efforts need to explore online video to complement online strategies. The world’s second largest search engine, YouTube, should accompany Facebook and Twitter in a company’s marketing arsenal.

There’s more to making and marketing a video than throwing some content on a screen. Good video has relevant titles, industry-specific keywords, an effective description and five to 10 targeted tags. A higher quality and engaging video drives more traffic to your site and is steadily recognized as a leader in the technological movement. Social Media Marketing For those who haven’t joined the social media revolution, it’s not too late, but it is important to move fast, since this is one of the primary vehicles for reaching qualified renters.

In April 2010, the Nielsen Company reported that 70% of people value online consumer opinions and online social network users are three times more likely to trust their peers’ opinions

over advertising when making a decision that involves money. Therefore, the greater a company’s online presence, the greater chance of referrals via online social networking channels. Always engage friends and followers in a way that’s relevant with targeted content and transparency.

A New Dimension in Floor Plans - 3-D With all the available technology, landlords have to engage renters in an effective, user-friendly way. One way is to create “true to life” alternatives to typical floor plans. This cutting-edge tool shows an apartment and all of its finishes in 3-D. Technological Investment Pays off Engaging renters using available technology will pay off once executed with consistency and focus. The key is to listen carefully to renters and the competition. Once you determine where the players are gathering, make a plan, execute and monitor it, and then watch the leads roll in. Protect your brand, address comments showcasing your company’s approach to customer service and find out what others are saying by using monitoring tools, such as Google Alerts, SocialMention, RSS Feeds, Trendrr, monitorThis, Facebook Insights, SocialOomph, HootSuite, YouTube Insights and Comment Alerts. Chaim Rivlin is President & CEO of RentSeeker.ca, a Toronto Based, Canada Wide ILS and Online Marketing Company for the Apartment Industry.

MAC AWARDS The MAC Awards Gala is the most important annual event for members and is well attended by over 800 rental housing providers ranging from small owners to third party management and holding companies. Moreover, as a result of working together productively over the years on policy issues, high ranking provincial housing officials and politicians also attend. The 12th Annual Achievement awards recognize excellence in the rental housing industry and the advancement of high standards that the Federation of Rental-housing Providers of Ontario aim to Continued on page 24

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CHARITY BEGINS AT HOME!

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Art City in St. James Town Art City in St. James Town is a not-for-profit organization that is committed to providing free, accessible, multidisciplinary art programs to children and youth in the community. Founded in 2000, Art City uses artistic expression to facilitate development and engage the youngest members of its neighbourhood with the city’s arts community. Besides providing children with a positive refuge, the organization helps to build skill sets that focus on creativity and communication, which results in lifelong benefits.

The St. James Town area St. James Town is located in downtown Toronto, within the area bounded by Sherbourne Street, Bloor Street East, Parliament Street and Wellesley Street East. It was designed in the 1960s as a “city within a city,” with the goal of attracting young urbanites and professionals to the area. St. James Town includes 18 closely located apartment buildings on about 32 acres, which leaves relatively little recreational and green space. More than 19,000 people live in the area, making it one of the most densely populated neighbourhoods in Canada. According to the 2006 Census, St. James Town is one of the poorest neighbourhoods in Toronto, as 35.8 percent

of households have incomes below $20,000. More than 96 percent of residents are renters, and more than two thirds of the population consists of recent immigrants, which makes it a very culturally diverse area. However, the community was not designed to accommodate this demographic, as it lacks the amenities that families need to thrive. “For these reasons, residents of St. James Town face daunting social issues, have difficulty engaging with the wider Toronto community, and are at higher risk of negative social outcomes,” said Gillian Foster, Artistic Director, Art City of St. James Town. “For the young people growing up in the area, it is sometimes difficult to avoid these negative outcomes, making the need for the safe environment we provide all the more pressing.”

Goals and services Art City’s mission is to provide art-based learning experiences for young people, regardless of their skill and experience, to create opportunities for and facilitate community engagement. With the help of professional artists and members of the community, the organization offers a safe, non-discriminatory environment for young people, promotes the development of problem-solving and

Charity begins at home! 3


Charity Begins at Home!

interpersonal skills, instills confidence in one’s abilities, and teaches respect and tolerance of others. Art City offers arts programming throughout the year – after school, on weekends and during school holidays. The organization’s after-school program operates eight months of the year and has the highest number of attendees. Children can register for up to three days of programming each week. The after-school program includes a range of activities for different ages of children, including drawing, painting, sculpting, mixed media, printmaking and fashion. Art City also offers a six-week, age-specific summer program. The end of each week includes a family-oriented art show, and a field trip based on program theme. “Art City focuses on children who are not interested in athletics and lack opportunities to explore the city and outside their immediate community,” said Adam Krehm, Principal, O’Shanter Development Company (and member of the Art City Board of Directors). “Besides getting involved in the arts, the children learn social skills by working in groups, develop problem-solving abilities and build confidence in themselves.” In spring 2011, Art City conducted a large program evaluation to get feedback from parents and the community, which helped to identify program gaps and additional services needed. According to the survey, more than 75 percent of parents wanted an after-school and weekend program, while 60 percent wanted help with homework. More than 70 percent of respondents were interested in participating in an after-school pickup service for their children.

4 august 2013

“This feedback was the basis for a number of changes to Art City’s hours and services,” said Gillian. “Most importantly, it signaled a shift in Art City’s registration process from drop-in workshops to pre-registered weekly classes. In September 2011, we changed our program hours and services to address these issues.” The after-school program has seen the largest growth in attendance and number of new participants. In 2011, more than 2,700 children attended the after-school program, which represents a 32 percent increase in attendance from 2010. The increase came from the requested addition of services, which included the pickup service, homework help and more field trips.

Fundraising challenges and efforts As with most charities, Art City depends on funding to provide its services to members of its community. The amount of financial support from public agencies has declined since the organization’s inception, so it has to make up the difference from corporate and private donors. Soliciting new donations is a constant endeavour, since many corporate donors prefer to support different charitable organizations every year rather than focus on one. They also don’t want a particular charity to become dependent upon their financial support. “Our biggest challenge is ensuring that we have adequate funds to sustain the various programs, which is why raising funds is our primary concern,” said Alia Toor, Chair, Board of Directors, Art City of St. James Town. “We receive government and corporate grants and sponsorship, as


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Charity Begins at Home!

well as individual donations. We rely on donations from community organizations such as Second Harvest so that children receive a healthy snack.” As the organization’s chief ambassador and governing body, the Board of Directors is responsible for Art City’s overall strategic vision. One of its most important duties is fundraising, which it achieves through organization of events and dinners, raising awareness of the charity, and attaining corporate sponsorship. Each member of the Board donates about 15 hours of their time each month to various activities, such as writing grants, providing administrative and accounting functions, liaising with the landlord to maintain the property, and a range of other services as needed. Art City hosts two major fundraising dinners each year in the spring and fall. In addition to selling tickets to the event, the organization raises funds by selling raffle tickets for donated prizes and auctioning off student-created art. Art City also raises funds through events organized by its supporters. Examples include an annual summer barbecue hosted by O’Shanter Development Company at one of its apartment complexes, an art show and auction put on by local tattoo artists, a summer golf tournament, and a “Movies in the Park” event. “We have a regular list of donors who generally support us by buying tickets to dinners, and community supporters who participate in local events,” said Gillian. “We have a section on our website for donor information, and we’re set up on Canadahelps.ca to receive donations. We’re also in the process of creating a sponsorship package.” A number of corporate and community partners have contributed more than funds to Art City. Medallion Properties (the organization’s landlord) has provided studio space at a heavily subsidized rental rate since Art City’s inception. Rainbow Mechanical gifted and installed a new HVAC system in the Art City building. Rogers has supported the organization’s efforts for many years, while other corporations have donated resources and time. Several organizations have also been supportive of Art City’s mandate to expand its students’ exposure to art-based learning experiences. The Art Gallery of Ontario (AGO) provides four family memberships that Art City shares with different families. Kids Up Front Canada helps Art City

6 august 2013

to secure tickets to arts, cultural,, sports and recreational institutions, such as the Royal Ontario Museum (ROM), the Toronto Zoo, the National Ballet, Ontario Science Centre and the Toronto Blue Jays. “Many of our students do not have the economic means, access or opportunity to afford these trips,” said Alia. “Through partnerships, we ensure that our students have access to the city’s cultural institutions. We also have a few volunteers who work directly with the students and provide support to the artistic director.”

Successes and achievements While many of Art City’s programs are filled to capacity, they measure their success through the overall impact the organization has on the community. Many parents have commented on how much their children look forward to coming to Art City and participating in various classes and events. They have also noticed that their children’s confidence levels have increased and they are performing better at school. One youth who was involved in the early days of the Art City program returned as a volunteer and student advisor, and is also preparing to graduate from Ryerson University. Art City’s programs engage students in Toronto’s arts community and provide an outlet for creative expression. The organization has been able to involve families in its efforts, and has enabled parents and community members to network, share and collaborate in events. One parent shared their thoughts after a field trip to Evergreen Brickworks with the following email. “As a family, you opened our eyes to community involvement as we volunteer our spare time to join your group during field trips. Coming to Canada in 2005 up until now, we never felt we belong to any community … but it has entirely changed when you welcomed my daughter Elisha to your summer program last year.” Art City’s students have been responsible for creating two mural projects in the city: one at the corner of Sherbourne and Wellesley, and the other at Queen and Woodbine in the Beaches. The mural projects were commissioned by the developer to beautify the area during construction, and Kilmer Brownfield Management sponsored the creation of the murals (through donation of funds and materials).


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Rental Housing Business 29


Charity Begins at Home!

The murals have had a profound impact on the students involved in the projects. The following story comes from Shirin, age 9, who attends Art City’s after-school and summer programs. She is one of 35 children who worked to complete the mural at Sherbourne and Wellesley entitled “Escape and Explore: An Urban Adventure.” Shirin shared this story with other students during an evaluation exercise. It illustrates the benefits of showing the children’s work in their own community. “Today I went on a walking trip with my class and we passed by the mural. One of my classmates said, ‘There is your name on the painting, Shirin. Is that you?’ When I told them it was me, and that I had painted it with Art City, they were so impressed and excited. They didn’t know I was an artist. My teacher congratulated me. It made me feel so proud. My mother was so happy when I told her this story.” Shirin’s mother told Art City that, in the brief time she has been in Canada, it has only been since her daughter started coming to Art City that she felt truly connected to Toronto and part of her community. This project exemplifies Art City’s goal of developing community pride and unity through artistic expression.

8 august 2013

Future plans Art City is committed to staying in St. James Town and to offering free programs and events to children in the community. The organization is always looking for additional funds and resources, so it continues to work with supporters while getting more community members and corporations to participate in growing the program. Art City is also looking for a larger studio space so that it can offer more programs, support more children, and have a place to exhibit the students’ work for longer periods of time. “Of course, we want to hire more artists and staff to work with the kids,” said Alia. “We would like to do more public artwork, like the murals, so that people can experience and see the work of the talented kids in Art City. At some point, we may want to partner with more arts organizations so that we can expand the students’ experience with art.” For more information on Art City in St. James Town, or to donate to the organization, please visit them online at http://www.artcitytoronto.ca/v2 and www.artcitytoronto.wordpress.com. You can also find them on Facebook and Twitter. RHB


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Continued from page 22

promote. We are pleased to be presenting the The Right Honorable Brian Mulroney as this year’s keynote speaker. Award nominations are due by October 1. Winners are announced on December 5 that the Metro Toronto Convention Centre. Save the date to see the best in the business! www.frpo.org Tax Alert – Summer 2013 The 2013 Federal budget released March 21, 2013, announced changes to the foreign reporting requirements for Canadian resident taxpayers. The purpose is to improve the administration of the Canadian tax system and help ensure that Canadian resident taxpayers report their foreign income on their Canadian tax returns. The Foreign Income Verification Statement (Form T1135) is required to be filed by Canadian resident individuals, corporations, trusts, and partnerships that own specified foreign property located outside of Canada with an aggregate cost of more than C$100,000 at any time in the tax year.

Specified foreign property can include items such as funds in foreign bank accounts, shares of non-resident corporations, foreign rental properties, interests in foreign mutual funds, interests in foreign partnerships and interests in foreign trusts.

Specified foreign property does not include items held for personal use like a vacation home, works of art, jewellery or foreign property used in carrying on an active business located outside of Canada. The current version of the T1135 form requires only general information regarding the specified foreign property like the value, the continent where it is located and the generated amount of income.

The new changes to the T1135 form will require taxpayers to provide more detailed information regarding each specified foreign property including;; 1) The name of the specific foreign institution or other entity holding the foreign property; 2) The name of the specific country where the foreign property is located;

3) The exact amount of the income generated from the foreign property.

Other changes which will affect the administration of the T1135 form include the following: 1) A reminder to file the form will now be included on the taxpayer’s Notice of Assessment;

24 august 2013

2) The filing instructions for the form will be revised to provide clarified information;

3) The normal reassessment period for a taxpayer will be extended by three years if the taxpayer has failed to report the income from the foreign property on their tax return; and the form was not filed on time and/or was completed improperly. Currently, the normal reassessment period for most taxpayers is three years. 4) The CRA is currently developing a system that will allow these forms to be electronically filed. Currently, the form can only be paper filed.

5) Where the reporting taxpayer has received a T3 or T5 from a Canadian issuer in respect of a specified foreign property for a taxation year, that specified foreign property is excluded from the T1135 reporting requirement for that taxation year.

The changes to the T1135 form will be implemented for the 2013 and subsequent tax years.

These changes will increase the time needed to gather the necessary information, as well as the time to complete the form, which will lead to increased costs of compliance. With the changes to the T1135 form, it appears Canada is following the lead set forth by the IRS regarding foreign disclosure requirements. U.S. citizens are required to file the Report of Foreign Bank and Financial Accounts (also known as the FBAR form) to disclose detailed information regarding their financial accounts they hold outside the U.S. Also, starting in 2011, U.S. citizens are required to file the Statement of Specified Foreign Financial Assets (Form 8938) to disclose detailed information regarding their foreign assets they hold outside the U.S. In an effort to protect their tax base, many countries are looking at increasing the tax compliance rate of its residents.  Countries are sharing taxpayer information more than ever before in an effort to assist each other in this effort.  For further information please contact:

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AUGUST 2013

NATIONAL OUTLOOK

RHB EDITION

CFAA Rental Housing Conference

addresses key issues for landlords

The CFAA Rental Housing Conference 2013, held in Toronto during June, attracted over 275 delegates, who received insights from more than 50 speakers. The CFAA Conference provides education and networking opportunities for the landlords and suppliers who make up the Canadian rental housing industry, while the net proceeds help to fund the industry’s lobbying efforts. Shelley Wittal, Director of Property Management (Eastern Region) at Gateway Property Management, told RHB Magazine, “At the CFAA Rental Housing Conference 2013, the education topics were fresh and aimed at current challenges which had not been recently addressed.”

The conference took place from June 11 to 13, starting with the Building Innovations Bus Tour on June 11. Delegates who took the building tour saw innovative en-suite and entrance renovations to a mature building by Timbercreek, a modernized pool and fitness facility by Greenrock in one building, and a sculpture garden and rental office renovation in another, as well as a brand new building built to condo standards by KG Group. John Shnier, Greenrock’s architect, added value to the tour by addressing the issues involved in optimizing the phased work. During the Investment Conference on June 12, several key themes were discussed, including: • The likely future course of interest rates • Current pricing of rental housing assets • Emerging developments affecting revenue and costs • Student housing Among other issues, keynote speaker Benjamin Tal, of CIBC World Markets, discussed world economic trends and continued on page 2

Inside this edition Creating wealth through renting or owning In National Outlook (Digital edition) Available at www.cfaa-fcapi.org

CFAA pre-budget submission Apartment association merger in BC CFAA Rental Housing Employee Compensation Survey

CFAA grows its direct membership for better results In the rental housing sector, the federal government: collects 42% of the total taxes, provides 37% of the housing subsidies and benefits, and used to provide 28% of the energy retrofit incentives. But the rental housing industry allocates only 5% of its association resources at the federal level. To achieve more, landlords need to do more, and to work together more, especially at the federal level. Do you have tenants who are struggling to pay their rent? CFAA advocates for government to provide direct financial assistance to tenants to enable them to pay their rent. Over the past 10 years CFAA has caused CMHC to credentialize housing allowances for low-income tenants. BC and

continued on page 4

National Outlook - RHB Edition 1


NATIONAL OUTLOOK

the likely future of the Canadian economy, rental demand and interest rates. The Executive Round Table panelists commented Tal’s presentation and the impact of likely interest rate changes on the rental housing industry. Asset values were addressed not only by Benjamin Tal and the Executive Round table panelists, but also during the sessions on Major Rental Housing Sales. Delegates appreciated the speakers’ attention to specifics and the differing rental asset values among cities. Delegates also liked the use of clear and concise graphics and statistics to support discussions, and the representation of the large players in the various topic discussions. Within the theme of developments affecting revenue and costs fell sessions on developing trends and issues, landlord licensing, and housing finance. Delegates found especially interesting the information on government thinking on rent control, and the various approaches CFAA members associations are using to seek to avoid licensing. A discussion on student housing closed out the day and constituted the final theme. Besides speakers from Waterloo, Ruth Buckle of Killam Properties gave an overview of many interesting initiatives which her company has taken to address that often overlooked niche market.

CFAA Allied Members: Gold EnerCare Connections Gottarent.com My Ideal Home Network

RHB Magazine Yardi Systems Wyse Meter Solutions

Silver Cohen Highley LLP Excel Collection Services Landlord Web Solutions

Noble Building Supplies Places4Students.com RentMoola

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2 National Outlook - RHB Edition

AUGUST 2013

On June 13, the discussion topics revolved around rental operations, and featured themes including: • Human resources • Communications with tenants and the media • Innovations, both in building science and management Delegates heard from human resources and legal specialists about employment law, the labour market for the next 10 years, and employee compensation. Delegates found the discussions on employment contracts and their importance helpful. They also said that the compensation and labour market discussions provided important insight for senior managers into the expectations of the younger generation of employees. Sessions on communicating with prospects and residents, and handling a public relations crisis, gave delegates a crash course in communications techniques. Danny Roth of Brandon Communications had valuable input for the group during the presentation on crisis communications. He offered useful strategies for consideration, and key information on how the media and tenants react during times of crisis. Delegates also learned about innovations in rental housing in building science and technology. Martin Zegray of Realstar led the building science update panel and provided tieins to what property managers should take away from the engineers’ presentations. The panel on innovations in rental operations discussed what’s new in tech based management, provided good technical explanations and addressed the desire of the current generation for instant gratification. A panel on learning from the hotel industry provided food for thought on a possible paradigm shift in operations. “The 2013 CFAA conference was extremely valuable on many levels. The education sessions were informative, providing leading edge insights with regard to current challenges,” said Ruth Buckle, Vice President of Property Management at Killam. “If you can only attend one rental housing conference next year, the CFAA Rental Housing conference is the one to attend.” As to the networking at the CFAA Conference, Shelley Wittal of Gateway added, “The supper at the Hockey Hall of Fame was well organized and the dinner choices were amazing. Overall, it was a great evening of fun with friends and colleagues. I found the conference very helpful, and am very much looking forward to the next CFAA conference.” For more details on the next CFAA Canadian Rental Housing Conference to take place in Vancouver in June 2014, please visit www.cfaa-fcapi.org. To be placed on CFAA’s e-mail list for conference updates, or for 2014 partnership opportunities, please e-mail communication@cfaa-fcapi.orgs.


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NATIONAL OUTLOOK

AUGUST 2013

continued from page 1

Manitoba have expanded their housing allowance programs; and Ontario, Alberta and Saskatchewan have started to use direct assistance to tenants.

• Leads information sharing among member associations and landlords

Do you have a building built 40 or 50 or 60 years ago that was not designed for a high-efficiency heating plant?

• Stronger federal advocacy

CFAA stopped the federal government from insisting on high-efficiency heating plants in buildings not designed for them. As a result, you can still choose the heating plant best suited to your building. Have you worked out, or found out, the income tax you will have to pay on capital gains and recaptured depreciation if you sell your building? CFAA is working hard to try to get the government to allow a rollover, so that tax on capital gains and recapture will be deferred if a person sells one rental building and buys another one anywhere in Canada. In addition to advocacy, CFAA is a networking and communications resources for landlords. CFAA: • Publishes articles in member association newsletters and magazines • Assembles and provides rental housing information, such as industry-specific compensation and benefits data • Co-ordinates strategies for fighting bad policy initiatives in cities and provinces across Canada

The main benefits of direct landlord membership are: • Stronger advocacy to reduce the spread of municipal and provincial measures contrary to the interests of rental housing providers • Quicker, direct, notice of changes to government programs • Direct, advance notice of CFAA events • Direct, advance notice of CFAA service offerings, such as the CFAA Employee Compensation Survey As John Stang of Minto Properties says, “Rental housing owners and managers face many significant political issues at the federal level, including taxes, energy regulations, government’s approach to housing subsidies, and CMHC’s financing rules. To represent landlords in the strongest way possible, CFAA needs the support of landlords through direct membership from coast to coast.” To join CFAA as a direct member, visit the CFAA website at: http://cfaa-fcapi.org/DirectMembership.php or contact Spencer Kenney at: admin@cfaa-fcapi.org

Creating wealth through renting or owning By John Dickie, CFAA President

Popular wisdom in Canada and the United States suggests that a person is better off to buy a home than to rent, especially if the goal is to build wealth. A number of studies suggest the contrary. One was by Tsur Somerville and others.1

this author, the CFAA President, considers to be more realistic parameters. In both scenarios, renting is a better path to financial gains than home ownership, despite the popular perception to the contrary.

More recently, on May 16, 2013, the Globe and Mail published an article by Rob Carrick in which he reported on an exercise Professor Frank Tristani assigns each year to his finance students at McMaster University. Professor Tristani told Rob Carrick that “over six years no one has been able to substantiate buying as creating more wealth over the long term.”

Professor Tristani presents the exercise in Hamilton where house prices are much lower than they are in Toronto or Vancouver. However, the price he uses is realistic for Canada as a whole.

This article will present the results obtained from the parameters reported in the Carrick column based on the latest version of the exercise Professor Tristani used in his class, and also from what 1

At 3%, the inflation figure is higher than inflation for the last 10 years, but lower than inflation for the last 20 or 30 years. In any event, the key issue is the relation between the inflation rate and the rate of increase of house prices and the mortgage interest rate. Professor Tristani assumes house prices will increase at the rate of inflation, which has been well documented as their

T. Somerville, L. Qiang and others, entitled “Are Renters Being Left Behind? Homeownership, Renting, and Wealth Accumulation,” Centre for Urban Economics and Real Estate: Sauder School of Business. 29 Jan. 2007.

continued on page 6

4 National Outlook - RHB Edition


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NATIONAL OUTLOOK

Item

AUGUST 2013

Professor Tristani

CFAA

$400,000

$400,000

Inflation in house prices

3%

3%

Mortgage interest rate

3.99%

5%

Mortgage payment (per month)

$1,576

$1,745

Property taxes, maintenance & renovations

4% of value

3% of value

Realtor’s commisson on sale

0%

4%

Rent for equivalent property

$1,500

$1,500

Annual rent increase

1.5%

3%

6%

6%

Purchase price

Investment return

the difference in favour of renting is almost half a million dollars in total: $483,168 according to Professor Tristani’s assumptions, and $414,143 according to CFAA’s. The key difference between buying and renting is that over the long term, and on average, house values will rise at the rate of inflation, whereas an investment in a mix of companies traded in the stock market will generate returns of roughly twice the rate of inflation, or about 3% more than the rate of inflation. Renters need not fear they are missing out. In fact, renters can gain diversification, whereas home owners are investing in one specific asset which may or may not turn out to be a good investment.

long term trend line. A mortgage rate of only 1% over inflation is abnormally low; therefore, after the first five years CFAA has used a mortgage interest rate of 5%, 2% above the rate of inflation (which is still relatively low.)

Landlords are invited to reproduce this article to provide to renters who are contemplating moving to home ownership. Abundant evidence indicates that such a move is not a clear win in financial terms.

Because of the overall low property values in Hamilton, property taxes approach 2% of the value of a house, and then repairs and renovations are on top of that. CFAA has chosen to use 3% to reflect lower average property taxes across Canada, and some “sweat equity” in the form of owner performed repairs and renovations.

Especially when owner-occupied homes are being bought and sold at high values, as they are today due to the current low interest rates, it is not a good time to buy a home if building wealth is an important goal.

In his exercise, Professor Tristani suggested a rent of $1,500, equal to the mortgage payment at 3.99%. CFAA agrees with that intial rent for a home worth $400,000. However, Professor Tristani inflates rents at 1.5%, which is half the rate of inflation he assumes. CFAA believes it would be more likely that rents would increase at the rate of inflation, namely 3% in the model. Professor Tristani assumed a $300 per month payment for utilities and renter’s insurance, which he inflated at 3%. CFAA agrees. Professor Tristani assumed a $100,000 down payment. For the renter household he assumed a $100,000 investment in the stock market, and a return on investment of 6%. Six per cent may seem high, but 9% was the norm over the last 30 years, and 6% appears still to be realistic for good dividend paying stocks, such as utilities or railroads. Such dividends also bring with them the dividend tax credit so that the dividends are essentially tax free in the hands of an ordinary Canadian.

Item

Professor Tristani

CFAA

Down payment

($100,000)

($100,000)

Mortgage payments

($472,929)

($523,500)

Property taxes, maintenance & renovations

($583,348)

($437,511)

($1,156,277)

($1,061,011)

Proceeds received

$837,511

$804,001

Net position

($318,766)

($257,010)

FOR HOMEOWNERSHIP

Total Outlay

FOR RENTING AND INVESTING THE KEY SAVINGS Investment

($100,000)

($100,000)

Rent

($541,134)

($656,267)

Renters’ utilities & insurance

($131,253)

($131,253)

Total Outlay

($772,387)

($887,520)

Shown at the right are the outcomes of the model for the two sets of assumptions. A negative shows cash out; a postive figure shows cash in. CFAA accounts for a real estate commission of 4% on the sale of the owner-occupied home. (Much more than that would be paid if the investor buys and sells several homes over the course of the comparative investment horizon.)

Value of $100,000 after 25 years

$429,187

$429,187

Value of the maintenance cost difference – invested over 25 years

$507,602

$615,466

Proceeds received

$936,789

$1,044,653

With different reasonable assumptions, both Professor Tristani and the CFAA author come to the same conclusion: renting allows the accumulation of more wealth than home ownership. In fact,

Net position

$164,402

$157,133

ADVANTAGE TO RENTING

$483,168

$414,143

6 National Outlook - RHB Edition


[ Pest Control ]

The Cockroach Explosion By Dan McCabe

Over the last several years, bed bugs have taken centre stage in the world of pesky insect invaders. Seminars, pest control magazines, bed bug summits, news outlets and countless other organizations have dedicated much time and money to making us aware of the present threat, and more importantly, what we are going to do about it?

the days when cockroaches were plentiful, much more than today. Conversations like “these roaches will never die, they will even survive a nuclear attack” were often heard in the hallways of many a high rise or fine dining establishment.

While the bed bug was actively stealing all the attention, the long forgotten cockroach was quietly lingering in the background planning on how to take back the pest prominence it once had.

I’m not so sure about the nuclear attack part, but I do know that cockroaches were a very difficult pest to control and required a great deal of effort on the part of the pest control technician and the individual with the infestation.

Those of you who have been in the property management, hospitality and pest control industry for some time will remember

It was then, the early nineties, that a new product was introduced that would change the cockroach world. The timing couldn’t have been

26 august 2013


[ Pest Control ]

better. Year after year the most effective spray products were being taken off the market and de-registered and the ones that did remain were struggling with resistance issues, lacking the effectiveness they once had. The switch to bait products was on, but it seemed inconceivable at the time to think that simple gel baits in a syringe tube could possibly make even the slightest dent in the ever growing cockroach population. The war on the cockroach was on and new weapons were being used.

• Spray treatments with insecticides that are not resistant products will have to be applied in heavily infested cases.

For a free seminar on the cockroach explosion and other pest issues contact Dan McCabe, Magical Pest Control, 416-665-7378

• A flushing agent along with vacuuming will be part of some protocols.

1 Wang, Scharf, and Bennett, 2004, Behavioral and Physiological Resistance of the German cockroach to Gel Baits.

Cockroach baits that do not have the aversion issues will be heavily relied one. RHB

2 Integrated Pest Management Interventions for Healthier Homes. 3 Wang, Scharf, and Bennett, 2004, Behavioral and Physiological Resistance of the German cockroach to Gel Baits.

The results were outstanding. The cockroach populations began to diminish rapidly. Cockroaches no longer caused the same concern they once did, and for many years we all celebrated the coming of this miracle product. However, I guess the old saying “all good things must come to an end” is true. Just like the spray products, these baits began to lose their effectiveness due to the same issues of resistance, but now with an added problem called “aversion”. Researchers Changlu Wang, Michael Scharf, and Gary Bennett in a 2004 study described aversion this way: “the cockroaches avoided gel baits with certain sweeteners most cockroaches cannot resist”1. Simply put, the cockroaches lost the “sweet tooth” that made them so vulnerable to the pesticide in the baits.2 What makes matters worse is, in a follow up study in 2006 they discovered some of the offspring also had bait aversion. The trait was inheritable.3 It’s for these reasons that cockroaches are now beginning to show signs of a strong resurgence. The good news is the bait manufacturers are aware of the aversion issues and are very busy creating new products to offset these concerns. New products have been submitted to the Canadian Pest Management Agency for registration so that the products can be sold and used; however registration can take some time. So what do we do in the meantime to avoid a cockroach explosion? • We will have to rely on more dust applications such as Boric Acid. • Proper sanitation will play a larger role in keeping good control.

Rental Housing Business 27


From left to right: Peter Polley, Vice President; Jeremy Jackson, President; Rose Marie Howell, Executive Director

Investment Property Owners Association of Nova Scotia A group of landlords founded the Investment Property Owners Association of Nova Scotia (IPOANS) in the 1970s during a period of rent control. They decided to form the association to benefit from each other’s experience and use their collective strength to encourage change. In the 1980s, the association successfully lobbied the provincial government to repeal rent control, and Nova Scotia remains free of rent control to this day thanks to the association’s ongoing efforts. In 1995, IPOANS worked with three other apartment associations to found the Canadian Federation of Apartment Associations (CFAA), which represents residential landlords across Canada. IPOANS represents the interests of private residential property owners in Nova Scotia. Its nearly 400 members range from owners of one or two rental units to large property management firms, as well as suppliers to the property management industry. The association has continued to grow over the years by focusing on lobbying the government for legislative equity and educating its members on all aspects of the business and apartment industry. Its goals include enabling rental housing owners and operators to profit from their investments, ensuring equity in all levels of legislation, providing educational programs for members, and serving as an information centre for the apartment industry.

28 august 2013

In 2009, IPOANS established a new plan to help drive its strategies going forward. The association will continue to focus on three key areas: lobbying the government on policies that affect its membership; educating its members and creating public awareness of apartment industry issues; and providing services that enable its members to excel in their business. “We follow the mantra of ‘Plan the Work, Work the Plan’,” said Jeremy Jackson, President. “Once we understand the direction we want to go, we focus on accomplishing what is required to achieve our goals.” The IPOANS team IPOANS’ working committee consists of members from the Board of Directors and other association members. The committee meets weekly to discuss and implement strategies, and hear from the heads of other committees to discuss updates and action items. Its combination of experienced and younger members enables it to be more action oriented and achieve many of the goals set out for different committees. The working committee has successfully expanded IPOANS’ educational mandate and driven support to improve legislative representation for association members.


Rental Housing Business 29


[ IPOANS ]

Jeremy Jackson is current President of IPOANS. He studied Business Administration at St. Francis Xavier University and graduated with an MBA from St. Mary’s University. He has more than 25 years of sales and marketing management experience. Since 2005, Jeremy has been Vice President, Marketing and Sales, of Killam Properties. In his spare time, he is also the Club President and a coach for the West End Steelers Youth Basketball Club in Halifax.

“Peter Polley is the strength behind the legislative committee, as he lobbied tirelessly to change the Regional Water Commission’s rates as they apply to apartment buildings,” said Rose Marie Howell, Executive Director. “Since 2011, Peter and the committee helped to save landlords $4 million. He is now lobbying for incentives on water conservation because it costs less to take steps to save water than it is to fund massive development of new infrastructure.”

Peter Polley is Vice President of IPOANS. He graduated with a Bachelor of Commerce from Dalhousie University. In 1990, he founded Polycorp, which started out as a renovator of rooming houses and small apartment buildings, and is now a builder of new housing developments.

IPOANS continuously lobbies the Nova Scotia government to make the Residential Tenancies Act more equitable for landlords. For example, Nova Scotia modified the Act in 2011/2012 to reduce notice provisions for tenants in rental arrears situations. The changes reduced the notice period from 15 days notice after a tenant is in arrears for 30 days to 15 days notice after being 15 days in arrears. Damage deposit interest rates were reduced from 1% per annum to 0%, which resulted in sizeable savings for larger rental portfolio owners.

Mark Bergman is Chair of the Communications Committee and is responsible for publishing the IPOANS newsletter, iNSight. He graduated with a Bachelor of Commerce from the University of Halifax and completed his MBA at the Richard Ivey School of Business. He has been involved in investing in real estate since 2003, and has helped other people to become real estate investors. Mark also teaches property management and investing part-time at Nova Scotia Community College. Rose Marie Howell is Executive Director of IPOANS. She attained her RPA and FMA designations from BOMI and a certificate in Business Management from Henson College at Dalhousie University. She started her property management career at a shopping centre in Moncton, and has worked in the field for more than 20 years. Rose Marie has helped to create and chair the association’s Green Committee, and served as liaison with Efficiency Nova Scotia.

“IPOANS has presented and maintains a very long list of items that must be addressed in the next round of Residential Tenancies Act negotiations,” said Peter Polley, Vice President. “Changes range from correcting inequities to fixing decades of poor legal drafting and ambiguities in the legislation.” Property tax increases have also been an issue of concern for IPOANS. Nova Scotia caps property tax increases on single-family homes at one to three percent per year. However, there is no cap on property tax rate hikes on apartments and mobile homes. The association is working with the government to make property tax increase more equitable for tenants and rental property owners.

Legislation and rental housing issues

Member services

One of IPOANS’ primary goals is to ensure equity for its members at all levels of legislation. The association has worked to become the voice of rental property owners in Nova Scotia, and has developed a reputation as a credible representative of rental property issues. Its working committee deals with municipal and provincial matters, and the Residential Tenancies Board provides the association with information on all government decisions that affect the industry. The government often invites input from IPOANS on matters related to the Residential Tenancies Act before changes are proposed.

Education is one of the central tenets of IPOANS’ service offerings to its members. The association offers educational programs to its members on all aspects of investing in real estate and managing properties. Its goal is to heighten its members’ professionalism and increase the competence of landlords. IPOANS provides information (through the iNSight newsletter and other communication avenues) on different topics, such as the province’s solid waste plan, potable and waste water initiatives, changes to the Residential Tenancies Act, taxes and assessments, and more. The association also works with suppliers to provide members with discounts on relevant products and services.

The legislative committee consistently lobbies government departments and utilities to get fair representation for landlords and property owners on all matters that influence the industry. The committee’s most recent success involves its challenge at the Nova Scotia Utility and Review Board with the Halifax Regional Water Commission, which increased water rates to fund the replacement of the city’s aging water infrastructure and pay for deferred maintenance. The commission has imposed higher water rate increases on multi-family buildings than on single-family buildings and commercial properties. The legislative committee rallied large property owners, as well as owners of commercial properties, to sign petitions and lobby the Regional Water Commission to make the rates more equitable for landlords and people living in apartment buildings.

30 august 2013

“Our newly formed member services committee is focused on developing a supplier services program aimed at creating buying power for smaller landlords,” said Rose Marie. “Larger landlords already have the power to negotiate with suppliers, so we are focusing on creating membership value for smaller landlords.” Three years ago, the association launched the IPOANS Certified Apartment Manager (ICAM) training program in association with Nova Scotia Community College. Its goal was to help raise the professionalism and skills of new property managers, which is beneficial for tenants and the industry. The 15-week program covers five core modules: management of residential issues; property marketing and leasing; the law and property management;


[ IPOANS ]

tenant relations; and property maintenance. The format emphasizes student interaction with plenty of teamwork, healthy debate and interaction with facilitators. Various experts with practical knowledge in various subjects use real-life case studies to cover different topics each week. “We’ve tailored the program to the Nova Scotia market, and have had dozens of successful graduates from various backgrounds, including property management, new construction, public housing and independent investors,” said Mark Bergman, Chair, Communications Committee. “We’ve been able to create an exciting classroom experience where students and industry experts share best practices with an emphasis on practical application.” IPOANS holds an annual general meeting that has become a mustattend event for people in the rental housing industry. The event includes an awards gala, guest speakers and fundraising opportunities. This September, IPOANS plans on hosting a first-of-its-kind symposium on affordable “workforce” rental housing in Halifax, which will bring key stakeholders together to discuss the challenges facing seniors, students, the working class and other members of this demographic. The symposium will use factbased presentations to discuss government policies, taxes, development fees, permits, utility rates and other factors that increase costs that are flowed through to tenants.

“We want people to get involved in making workforce rental housing more affordable,” said Jeremy. “We want to get input from different stakeholders, and try to employ successful models used in other sectors to deal with these issues. We’d also like the government to create incentives for landlords to help with solving these problems.”   Future plans IPOANS’ agenda for the upcoming year includes addressing the general attitude of provincial and municipal legislators toward the impact of their actions on the supply and demand balance in the marketplace. The association believes that legislators regularly make policy decisions without first considering the economic consequences of their actions. “Property assessment and property taxes will also be an ongoing focus during this symposium session,” said Peter. “Since property taxes are ultimately paid by tenants, IPOANS will continue to reiterate that the province’s Capped Assessment Program places a disproportionate share of the property tax burden on those who can afford it the least – the young, the poor and the elderly.” RHB

Rental Housing Business 31


[ Due Diligence ]

Factors affecting ROI on real estate investment By Scott Chandler, MRICS

Apartment buildings continue to represent one of the most stable real estate investment sectors in Canada. Yes, the income returns may sometimes not be as high as the returns on other, more volatile asset classes, but investors benefit from a very steady and predictable income stream. In a market environment where everyone is chasing reliable yields, this has also resulted in strong investor demand for apartments and subsequent capital gains. The benefit of low interest financing (aided by CMHC) and

limited returns from alternative investments (e.g., bonds) has perpetuated this run. However, with the summer increase in interest rates (10-year bond yields have moved as much as 70 basis points since June); there is a little more uncertainty on the horizon. Investors have recognized these return characteristics and poured capital into the sector when product becomes available. Already among the lowest cap rates across real estate sectors, apartment cap rates have Annualized Total Returns (Ending June 2013)

1 yrs

3 yrs

5 yrs

10 yrs

Apartment Buildings

15.3%

12.5%

8.8%

10.0%

Public Equities

8.2%

4.6%

-1.2%

8.4%

Real Estate Equities (REITS)

10.0%

16.1%

5.3%

9.5%

Bonds

-1.4%

5.6%

6.0%

5.7%

Inflation

1.2%

1.9%

1.3%

1.8%

Source: IPD (Investment Property Databank Ltd.)

Figure 1: Apartment cap rates 2007-2013

32 august 2013

Figure 2: Average increase in assessed values


[ Due Diligence ]

declined further since the latter half of 2012 and through the first half of 2013. The availability of capital, particularly for REITS, has greatly benefitted these sales volumes, unlike the experience in 2009. While cap rates remain near historical lows, the net operating income (NOI) which generates these returns is often overestimated, suggesting that realized yields may be even lower in some cases. The apartment sector remains a fragmented ownership base with landlords of many types, including those which may be deferring maintenance and running current returns at the expense of future yields. Establishing benchmark operating costs against actual costs that truly reflect the realistic stabilized nature of the property’s performance is a critical component of valuation.

For further information on property tax and how it affects your multi-residential holdings, please contact me at 416-359-2466 or darlene.webb@ca.cushwake.com. Scott Chandler, MRICS, Executive Managing Director, Cushman & Wakefield Valuation & Advisory, E: scott.chandler@ca.cushwake.com

Whether it is ensuring your property’s income performance is accurately portrayed or establishing and defending an appropriate assessed value, Cushman & Wakefield’s PTS Group is here to help.

P: 416-359-2517

And the largest component of property costs, realty taxes, is another area where property tax services groups are kept busy. As outlined in the chart above, apartment buildings across Canada have generally traded at cap rates in the sub-5% to 6.25% range since 2007. Depending when your assessment cycles take place, this market timing can have a profound impact on your tax bill – as can your individual property’s income performance at that time. Nowhere is this more evident than in Ontario. There the Municipal Property Assessment Corporation (MPAC) has released information regarding the average increase in assessed values across the province. Multi-residential assets have seen among the largest increases in assessed value over the 2008-2012 assessment cycle. With average assessed value increases of 16.1% since 2008, which is more than other sectors have experienced, apartment owners could well be facing higher tax bill increases than other owners. Since residential rental owners lack the ability to pass on these tax increases to tenants, this cost will flow directly to the bottom line for landlords. While the apartment sector has enjoyed strong historical returns, the security of those returns is impacted by rising interest rates and potential tax increases. Now, more than ever, it is important to diligently review your property tax bills. RHB

Rental Housing Business 33


COAST TO COAST LPMA – 2013 LPMA Charity Golf Tournament September 9 FireRock Golf Club

PPMA – General Membership Meeting September 18 Masonic Memorial Temple

The London Property Managers Association is hosting a Charity Golf Tournament at the FireRock Golf Club in Komoka, Ontario. For information, visit the LPMA website at http://www.lpma.ca.

The Professional Property Managers Association (of Manitoba) hosts its General Membership Meetings on the third Wednesday of the month.

EOLO – Fall Networking Event September 10 Centurion Conference Centre The Eastern Ontario Landlord Organization is hosting a fall networking event. Afternoon education topics will include how landlords can accommodate isolated seniors, update on regional vacancy rates, and derelict buildings. Registration is free for EOLO members, and limited to EOLO members, whether landlords or suppliers. For information, visit the EOLO website at http://www.eolo.ca. WRAMA – Q & A with the experts in Residential Rental Industry September 11 Golf’s Steak House and Seafood The Waterloo Regional Apartment Management Association is hosting a Q & A dinner seminar. Panellists are to be determined. For information, visit the WRAMA website at http://www.wrama.com. HDAA – Dinner Meeting September 11 Waterfront Centre The Hamilton District Apartment Association is hosting a dinner meeting. Panellists are to be determined. For information, visit the HDAA website at http://www.hamiltonapartmentassociation.ca.

IPOANS – 2013 Golf Tournament September 19 Chester Golf Club The Investment Property Owners Association of Nova Scotia is hosting a Golf Tournament at the Chester Golf Club. For information, visit the IPOANS website at http://www.ipoans.ca. FRPO – Member Fall Social (Invite Only) September 25 The Federation of Rental-housing Providers of Ontario is hosting a Fall Social event for Members. The event is invite only. For information, contact Lynzi Michal at lmichal@frpo.org. CAIC – Canadian Apartment Investment Conference September 25 Metro Toronto Convention Centre Canadian Apartment Investment Conference - Operating, Developing, Investing and Innovating in Today’s Market! The Canadian Apartment Investment Conference brings together owners, managers, developers, investors and lenders to provide valuable insights into the multi-unit residential market. Last year’s conference attracted over 550 attendees. For 2013, this highly focused, one-day conference will examine major trends, issues, opportunities, and strategies in Canada’s multi-unit residential market. Join the Real Estate Forum on September 25th at the Metro Toronto Convention Centre. Register today at: http://realestateforums.com/caic/en/index.php

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MHPOABC - Annual General Meeting and Seminar September 28 Meeting 9am – 4pm HDAA – Dinner Sandman Signature Hotel & Resort Richmond

SRHIA – Member Luncheons Saskatoon October 9 FRPO – MAC -Awards Gala Regina – (Tentative) October 10

November 13 The Manufactured Home Park Owners Alliance of British Colombia is hosting an Annual General Meeting. The Keynote Presentation is called, Waterfront Centreyour family business for a successful future,” and will “How to prepare feature experts discussing how to avoid the common pitfalls of the family The Hamilton District Apartment Association is hosting a dinner meeting. business as well as the “must do’s” for success. Panellists are to be determined. For information the HDAAorwebsite You must pre-register by calling Janet Walker at visit 604 926-3506 at http://www.hamiltonapartmentassociation.ca. emailing at janw@telus.net

December 5 The Saskatchewan Rental Housing Industry Association is hosting two member luncheons. Panellists and topics are to be determined. For The Federation of Rental-housing of Ontario is hosting the information, contact Paula Simon Providers at srhia@sasktel.net. annual Marketing, Achievement & Construction (M.A.C.) Awards Gala. For information, visitMembership the FRPO website at http://www.frpo.org. PPMA – General Meeting October 16 Masonic Memorial Temple

FRPO – New York City Housing Tour October 2-3 LPMA - Property Management 101 - Maintaining Your Cash Flow The Federation of Rental-housing Providers of Ontario is planning a housing tour in New York City. For information, contact Lynzi Michal at November 18 lmichal@frpo.org. Mocha Shrine Centre LPMA - Members’ Dinner & General Meeting October 8 The London Property Managers Association is hosting a dinner seminar Best Western Lamplighter Inn on Maintaining Your Cash Flow. For information visit the LPMA website The London Property Managers Association is hosting a dinner seminar. at http://www.lpma.ca. Panellists and topics are to be determined. For information, visit the LPMA website at http://www.lpma.ca.

The Professional Property Managers Association (of Manitoba) hosts its 2014 Real Estate Conference in on thethe Sunthird Wednesday of the month. General Membership Meetings March 9, 2014 GTAA –2 –2013 AGM- Annual Meeting and Dinner October 24 The Rental The LibertyHousing Grand Council of British Columbia is host partner of the 2014 Real Estate Conference in the Sun, in Playa de Carmen, Mexico. The Greater Toronto is hosting its Annual Meeting For information visit Apartment the websiteAssociation at http://www.bcaoma.com or the and Dinner at The Liberty Grand. For information visit the GTAA website conference website at http://www.recis.ca/. at http://www.gtaaonline.com. LPMA - Property Management 101 - Property Management Basics November 4 Mocha Shrine Centre The London Property Managers Association is hosting a dinner seminar on Property Management Basics. For information, visit the LPMA website at http://www.lpma.ca.

WRAMA – Dinner Seminar Meeting PPMA – General Membership October 9 Golf’s Steak November 20 House and Seafood The Waterloo Regional Apartment Management Association is hosting MemorialPanellists Temple and topics are to be determined. For aMasonic dinner seminar. information, visit the WRAMA website at http://www.wrama.com. The Professional Property Managers Association (of Manitoba) hosts its General Membership Meetings on the third Wednesday of the month.

WRAMA – Dinner Seminar November 13 Golf’s Steak House and Seafood The Waterloo Regional Apartment Management Association is hosting a dinner seminar. Panellists and topics are to be determined. For information, visit the WRAMA website at http://www.wrama.com.

http://www.cfaa-fcapi.org/ Tel: (613) 235-0101 | Fax: (613) 238-0101 Email: admin@cfaa-fcapi.org Rental Housing Business 35


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