Page 1

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

No.4 September 2014 lhousingbusiness.ca

RENTAL HOUSING HOUSING BUSINESS BUSINESS RENTAL

RENTAL HOUSING BUSINESS

BEAUX

PROPERTIES Spanning generations and geography

+

Market Report Update As the Fog Clears: Benjamin Tal on the Economy Student Housing Report


YARDI Energy Solutions

TM

Smarter Utility Management

Increase NOI with a new revenue stream. Get more from energy management and utility billing built into Yardi Voyager.Ž Yardi Energy Solutions reduces costs and promotes conservation with automated daily meter reads, direct resident billing, vacant unit management, paperless processing of utility payables — and analytics for budgeting and benchmarking. To learn more, call 888.569.2734 or visit yardi.com/energysolutions. Yardi Energy Solutions™ is a service of YES Energy Management, Inc.


C

FAA is taking a new approach to our government relations work. Rather than seeking tax reform for rental housing by promoting it directly, we are now going to begin by educating the public and decision makers about the problems in Canada’s rental housing markets. See the article with that title in National Outlook, following page 38. As well as government relations and media relations, CFAA continues to offer several member services, including the Rental Housing Employee Compensation Survey for 17 cities or areas across Canada, which includes both building-based and head office positions. Held in Vancouver, the CFAA Rental Housing Conference 2014 received very positive reviews. The 2015 conference is scheduled for Toronto with the building innovation bus tour on Wednesday, June 10, and the two education days on June 11 and 12. As in 2014, the 2015 conference will address both rental investment and rental operations topics on both days. There will be four keynote speakers, two per day, to add new ideas to the conference. Benjamin Tal will be back on June 11, 2015, with his alwaysentertaining economic update. Other keynote speakers will be announced over the next few months.

The Conference will include the building innovations tour (during the afternoon of June 10), an evening social event on June 11, and lots of networking opportunities. National Outlook includes an article about lessons from the Toronto ice storm and the Calgary flood. In the digital edition of National Outlook there is also an article about the recent reforms to the Manitoba Residential Tenancies Act. Elsewhere in RHB Magazine you will find a profile of the Manufactured Home Park Owners Alliance (of BC), a profile of Beaux Properties and a report on student housing. For details about the compensation survey, or to become a direct landlord member of CFAA, visit www.cfaa-fcapi.org or telephone 613-235-0101 (between 9:00 and 5:00 Eastern time). We look forward to hearing from you!

John Dickie John Dickie, CFAA President

Besides the keynote speakers, CFAA will present 50 experienced landlords, consultants and suppliers, in a total of over 25 education sessions. Speakers will address topics of relevance to landlords of all sizes on both days.

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

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

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

Landlord BC www.landlordbc.ca P: 1-888-330-6707

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 Saskatchewan Rental Housing Industry Association (SRHIA) www.srhia.ca P: 306-653-7149 Waterloo Regional Apartment Management Association (WRAMA) www.wrama.com P: 519-748-0703 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


TABLE OF CONTENTS

From Left to Right: Peter Persechini, Chief Operating Officer; Roy Birnboim, Owner; Jason Birnboim, President

10

BEAUX PROPERTIES Beaux Properties has been in business for more than 60 years, spanning three generations of purchasing and self-managing multiunit residential rental properties.. Along the way, it has continued to succeed and grow its real estate portfolio by expanding into the development of condominiums and commercial properties through joint venture partnerships.

SEPTEMBER 2014

NATIONAL OUTLOOK

RHB EDITION

32

AS the fog clears: benjamin tal on the economy At the CFAA Rental Housing conference held in June, Benjamin Tal, Deputy Chief Economist of CIBC World Markets, provided a tempered forecast for 2014-15 in a talk entitled “As the Fog Clears.”

34

association spotlight: MHPOA

37

student housing report

Problems in Canada’s Rental Housing Markets

In the early 2000s, several associations that represent manufactured home park owners in BC united to form the Manufactured Home Park Owners Alliance of British Columbia (MHPOA).

The 2014 RHB Student Housing Report serves to inform the Canadian rental housing industry on the most current and pertinent information fuelling this profitable and rewarding segment of the multi-unit rental housing industry.

By John Dickie, CFAA President

Canada has problems in the residential rental housing market. Many people are aware of some of the problems, but little concern is shown for other problems, nor for the potential for the situation to worsen in the foreseeable future. It is important that the problems be recognized as an important public policy issue, and that a dialogue take place about why these problems exist, and about what is required to fix them. What follows is an edited version of CFAA’s pre-budget submission for the 2015 federal budget. The state of Canada’s rental housing market More than 30% of Canadians rent their homes, but for the last 25 years, less than 10% of all new housing has been built for the rental market. In Canada outside Quebec, the rate is even lower. This contrasts dramatically with the rental construction rates of the 1960s and even the 1970s and 1980s. Because of the economies of scale and other savings in land, services, construction costs and professional fees, rental housing is the most affordable housing which can be built and operated. But Canada is not building enough new purposebuilt rental housing.

In National Outlook (Digital edition) Available at www.cfaa-fcapi.org

Manitoba changes its residential tenancies law (This is an expanded version of the information reported in “In the Know” at page 36)

Rental housing is the housing of choice for most workers moving to Canada or within Canada, for many newly-formed households, for new Canadians, for low-income households and for many seniors. The negative impacts of insufficient new rental housing include these: • High growth communities cannot attract an optimal labour force to grow as much as they could • High growth and new communities face high housing costs and difficulty attracting the young workers they need to provide government services, such as fire, police and hospitals • Many communities see rising rents throughout the rental market, much to the disadvantage of low-income people (and of governments which support many of them) continued on page 3

2014 Apartment market report update This report provides a mid-year update on rental asset sales in the Greater Toronto Area, Calgary and Vancouver, as well as highlights of CMHC’s April rental market report and CMHC’s Spring Housing Outlook reports for 20 centres across Canada.

Lessons from the Toronto Ice Storm and Calgary Flood By Chrystal Skead and Randy Daiter

Within the last 15 months, landlords in two of Canada’s major rental markets faced serious trouble from a natural disaster. At CFAA’s Rental Housing Conference in June, delegates were able to hear from two experienced managers who had to mitigate that trouble. Chrystal Skead, CPM, ARM, is the Senior Director of Property Management - Residential with Bentall-Kennedy, with responsibility for the company’s buildings in Vancouver, Victoria, Regina, Toronto and Calgary. In June 2013, a continued on page 4

National Outlook - RHB Edition 1

RHB_Sept2014.indd 39

39

9/15/14 9:54:20 PM

NATIONAL OUTLOOK National Outlook, the newsletter of the Canadian Federation of Apartment Associations (CFAA), provides political news, policy updates, association news and other information to keep rental housing providers up to date and ready for future opportunities and risks.


SAVE THE DATE!

artment Owners, Managers and Association Executives

H Business

NG

CFAA RENTAL HOUSING CONFERENCE 2015

artment Owners, Managers and Association Executives

H business June 10 - 12, 2015 Westin Prince, Toronto

Don’t miss Benjamin Tal’s Economic Update

NG

Everyone interested in our great industry should attend this event!

artment Owners, Managers and Association Executives

H

NG

Building Innovations Bus Tour - June 10 Education Sessions (day 1) - June 11 Evening Social Event - June 11 Education Sessions (day 2) - June 12 For more information on the conference visit www.cfaa-fcapi.org or call 613.235.0101

Organized by CFAA with the support of the Federation of Rental-housing Providers of Ontario and the Greater Toronto Apartment Association.

artment Owners, Managers and Association Executives


Editor’s Note

B

y the time this issue lands in your mailbox, my daughter will have started Junior Kindergarten. It is an exciting and nerve-wracking time for all of us, as my daughter will be meeting new friends and facing new experiences, while my wife and I will be watching her reach a new milestone and take the next step to growing up. I am sure that there will plenty of tears and smiles to go around.

The first feature in this month’s issue of Rental Housing Business covers Beaux Properties. This real estate company spans three generations and 60 years of operation, experiencing growth at each stage. The company has employed careful acquisition and development to amass long-term holdings of prime real estate. Its portfolio consists of several thousand multi-residential units, and it has moved into purchasing and developing commercial centres and condos. The sidebar discusses three of Beaux Properties’ most recent developments. This issue includes an in-depth study on the state of student housing in Canada. This report discusses property development of student housing in Canada and development financing, as well as the topics of student ownership and property management. It also takes a look at The MARQ, one of the larger student housing property managers in Canada. We also provide a mid-year update on rental asset sales in the Greater Toronto Area, Calgary and Vancouver, as well as highlights of CMHC’s April rental market report and CMHC’s Spring Housing Outlook report. They include forecasts of vacancy rates and average rent increases for about 20 centres across Canada. The magazine reported on CMHC’s October 2013 survey information in the March 2014 issue. Make sure to check out the rest of the magazine, including our trivia contest, CFAA’s newsletter, National Outlook, Benjamin Tal’s take on the economy from the CFAA Rental Conference, and our association spotlight of MHPOA. Enjoy the issue!

David Gargaro

Vol. 7 No. 4 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

Mark Bezek Irina Bourzenkova

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

All contents copyright © RHB Inc.

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

Canadian Publications Mail Product Sales Agreement No. 42652516


Industry Trivia Brought to you by:

New is our Industry Trivia, a fun way to test your rental housing knowledge. Topics range from politics to marketing and everything fun in-between! Have a go and let’s see who has what it takes; you may just win a free pair of tickets to a major industry event!

1. 2.

?

Top scoring sub missions will be entered into a draw to win t wo o

day passes t

ne

o CFAA’s Rental H ousing Conference 20 15.

3. 4. 5. 6. 7.

RENTAL HOUSING Which Canadian province registered the most new construction (rental housing) developments in the first half of 2014? Which Canadian province has the most (registered) student housing units?

POLITICS In the Canadian government, what does the acronym PMO stand for? Who is the Leader of the Opposition?

LEGAL In your province, what is the name of the body that adjudicates residential landlord-tenant disputes? In your province, when a tenant does not pay their rent on time what is the first legal step a landlord needs to take?

MARKETING/SOCIAL MEDIA How many million Internet users visit Twitter per month?

Submit your answers now to www.rentalhousingbusiness.ca/IndustryTrivia


We specialize in providing the Property Management industry the right product at the right price. With over 14,000 maintenance products in stock daily, choose H&S as your one stop source for all your needs. Call us and we’ll show you why.

RAKES

PAINT SUPPLIES

FLOOR MATS

MOPS

GARBAGE BAGS


From Left to Right: Roy Birnboim,Owner; Jason Birnboim, President


Beaux Properties Spanning generations and geography

There are many successful family owned and operated companies, and then there is Beaux Properties. This real estate company spans three generations and 60 years of operation, and has experienced growth at each stage. Along the way, it has amassed long-term holdings of prime real estate through careful acquisition and development. Beaux Properties’ portfolio consists of several thousand multi-residential units, and it has a growing interest in commercial centres in a number of markets across the country.

Rental Housing Business 11


[ Beaux Properties ]

From Left to Right: Peter Persechini, Chief Operating Officer; Roy Birnboim,Owner; Jason Birnboim, President

Background Menashe (Max) and Sophie Birnboim immigrated to Canada from Poland after World War II and settled in Winnipeg to raise a family. Max was a Talmudic scholar who earned a living as a private Hebrew teacher. He was also good with his hands, and this skill enabled him to supplement his family’s income by doing property maintenance. The Birnboims saved their money to purchase a property that was in dire need of repair; Max then restored and sold the property for a modest profit. The Birnboims used their profits to launch Birn Investments for the purpose of purchasing rental properties. These early investments targeted single-family homes and row housing (terraces) that needed extensive repairs. They followed this investment strategy until 1962, when they developed a 75-suite apartment building near the University of Manitoba, which become known as the Arizona Plaza. By this time, the Birnboims’ youngest son, Roy, who grew up in the family business, had graduated as a Chartered Accountant and was working toward an MBA from the University of Western Ontario. When

12 september 2014

Sophie had a stroke, Max became her primary caregiver, which left a significant void in the Birnboims’ finances. Roy decided to become more involved in his family’s business and, under Max’s counsel, he managed and grew the real estate portfolio. While Roy was a partner in his accounting firm, he took on Birn Investments as a primary client. This enabled him to contribute to the accounting firm while continuing to manage and grow the Birnboims’ real estate portfolio. It also allowed him to cultivate various investment and development opportunities from within his firm’s existing networks. Roy eventually came to realize that Class “A” and “B” properties were more profitable investments over the long term, so he gradually liquidated his family’s portfolio of single-family homes and row housing. Sophie passed away in 1974; four years later, Roy sold his interest in the accounting practice and moved his young family to Toronto. Shortly thereafter, Max followed his son to Toronto, and Roy sold the family’s Winnipeg portfolio. He then launched an entity that eventually became Beaux Properties International Inc., initially focusing on


Congratulations to the Birnboims, Beaux Properties and all of their excellent staff

At Tri-Con Restoration Ltd. Our Company is driven by, excellence, value and devotion to meeting our client’s schedule and budget. With over 30 years of industry related experience we have produced examples of our exceptional quality and craftsmanship that can be found in established properties throughout the GTA. Our list of services is extensive and covers the full range of residential and commercial construction.

Common Area Capital Improvements Lobby, Corridor, Laundry Room complete with all millwork, electrical, drywall, plaster and paint. Apartment Upgrades and Turnover Includes all kitchen and vanity cabinetry, granite counters, plumbing, all electrical including breaker panel, plaster, paint, floor sanding, staining and finishing. City Work Order Directives Including balcony, underground, stairwell plaster and painting.

info@triconltd.ca 647.799.3212


[ Beaux Properties ]

purchasing multi-residential properties. Over the first six years of business, the company bought and sold a number of apartment buildings in different parts of the city, which enabled Roy to get a better feel for Toronto’s neighbourhoods and the market. In 1984, Beaux Properties purchased its first true prime apartment building at 66 Broadway Avenue, located in the highly desirable Yonge and Eglinton area. This property remains the company’s flagship rental apartment building to this day. “My approach to growth can be summed up as follows: If you take it slower, you’ll get there faster,” said Roy Birnboim, Owner. “This philosophy has enabled me to withstand every major real estate market correction, expand our company’s holdings and provide a superior return on our invested capital.”

starting out by sourcing purchasing opportunities and structuring deals. He later moved into operations to oversee property management. Jason led Beaux Properties’ transition beyond multi-residential properties by expanding geographically and diversifying its asset base. “We’ve since expanded into commercial development and investment, which is providing greater opportunities for risk-adjusted returns,” said Jason L.S. Birnboim, President. “We’ve expanded throughout Southern Ontario and have purchased prime rental properties in BC, Calgary and New York.” Purchasing and growth philosophy Throughout the company’s history, Beaux Properties has focused on buying, managing and developing high-quality assets, from multi-

“My approach to growth can be summed up as follows: If you take it slower, you’ll get there faster. This philosophy has enabled me to withstand every major real estate market correction, expand our company’s holdings and provide a superior return on our invested capital.”

Roy’s son, Jason, also grew up in the business, learning everything there was to know about buying and managing prime multi-residential rental properties from the ground up. He went on to earn a law degree from Touro College, a Master of Laws degree from Fordham University and a Masters of Science in Real Estate from New York University. After being called to the Bar in New York State, Jason became a practicing attorney at a prestigious Wall Street law firm, focusing on real estate finance and commercial mortgage loan securitization for a number of institutional clients. While working in New York, Jason helped Beaux Properties to acquire under contract the 725-unit Lexington Hotel in Manhattan. This speculative transaction led to swapping the hotel for the 425-unit Executive Plaza Hotel in Chicago. In 2002, Jason decided to join the family business,

14 september 2014

residential rental properties to commercial developments. Through all three generations, the Birnboims have dedicated themselves to disciplined analysis and investment parameters to achieve solid riskadjusted returns. Multi-residential rental properties have been, and likely always will be, a core element in the company’s growth. “When buying in dense, high barrier to entry markets, high-rise rental apartment buildings are one of the safest investments around,” said Jason. “Every month, you know how much cash is coming in, and you can control your cash flow. While it is not quite as liquid as cash, financing is robust for these assets and you can find a buyer even during market interruptions. But you have to truly understand, care for and love these assets so that you can stay on top of expenses, which will lead to safe and regular returns.”


F.SHAW MANAGEMENT & CONSULTING INC. ELEVATOR AND ESCALATOR MANAGEMENT AND CONSULTING SERVICES

F. Shaw Management and Consulting Inc. (FSMCI) is a licensed, aspects of the management of your vertical elevating devices. With over 200 years of collective elevator and escalator experience on our team, coupled coupled with a portfolio of 250 buildings managing nearly 550 elevators, F. Shaw Management (FSMCI) prides itself on working with a very prestigious client base that includes some of the most high

Our Core Values Financial Prudence Transparency

Safety

Professionalism

Asset Managment

Honesty

Dedication

Services • Management of elevator and escalator services from A-Z

• General Elevator Consulting & Management Services

• Capital Expenditure Planning and Long Term Forecasting

• Detailed Maintenance Audits

• Improved Service Quality resulting in Reduced call backs, down time and effective contract management

• On-site Progress Inspections to verify completion of work and code compliance

• Contract Review and Negotiation • Project Management of elevator and escalator modernizations and new elevator and escalator installations • Elevator and Escalator Repairs and Upgrades • Expert Witness

• Procurement Assistance • Financial Control – Invoice review and minimization of extra fees • Increased reliability, ensured longevity of equipment

• Preparation of tender documents for construction, modernization and preventative maintenance programs

visit us online at www.fshaw.ca 45 Marrakesh Drive, Toronto, Ontario Canada, M1S 3W9 Email : info@fshaw.ca • Tel : 416-850-9153 • Fax : 416-850-9154

Canadian Elevator Contractors Association

Rental Housing Business 15


[ Beaux Properties ]

During the 1980s, Beaux Properties was successful in making a significant number of high-quality purchases as deals on rental properties were more readily available. The company increased its investment stake in the rental housing sector, and steadily grew its cash flow, which enabled ownership to realize solid returns. In the 1990s, Beaux Properties was able to use its leverage and capitalize on market corrections to make conservative investments and expand its portfolio. “We typically hold onto income-producing assets, and when we sell properties, it is likely the result of receiving unsolicited offers that are nearly impossible to refuse,” said Jason. “When new multi-residential acquisitions no longer fit our primary investment criteria, we began to pursue other opportunities, such as purchasing an interest in a stable commercial plaza in BC. Every significant investment decision is based on knowing how much equity we have to invest and when we would be able to monetize the investment either through refinancing a stabilized asset or an outright sale.” Beaux Properties also provides mortgage and related loans through its lending arm, BP Capital. This niche lending product targets condominium corporations that require capital for unbudgeted major repairs and large capital expenditures. It also provides bridge loans and funding for partnered projects and niche lending opportunities. Focus on property management Beaux Properties self-manages its Torontobased multi-residential rental properties. The company engages third-party property management firms for its properties outside the GTA including BC, Alberta, New York and the Bahamas, but actively oversees much of the operations. On the commercial side, Beaux Properties manages some of its assets while its joint venture partners manage other holdings. Beaux Properties places great importance in its property management because this function Continued on page 26

16 september 2014

Roy Birnboim, Owner


CONGRATULATIONS TO BEAUX PROPERTIES. 3 GENERATIONS AND STILL GROWING!

GIVING NEW LIFE TO YOUR BUILDING. ADDING VALUE TO YOUR INVESTMENT. Aztec Structural Restoration has the assets, heavy equipment, and over 20 years of expertise to provide restoration and new construction services of the highest quality and dependability in High Rise Residential, Industrial, Commercial, and Specialty Contracting. Start Your Next Project on the Right Foundation. Call Today to Request a Complimentary Consultation.

FOUNDATION AND PARKING GARAGE WATERPROOFING | CONCRETE RESTORATION | UNDERPINNING | BRICK REPAIR & TUCK POINTING

(905)-794-1696

WWW.AZTECRESTORATION.COM


Congratulations Beaux Properties. We wish you continued growth and future success!

Century Building Restoration Inc. is proud to present you with the highest quality of se Century Building Restoration Inc. is proud to present you with the highest quality Century Building Restoration Inc. restoration is proud toavailable present on youthe with the highest quality of se workmanship concerning building market. of workmanship services and concerning workmanship concerning BUILDING RESTORATION and PARKING building restoration on the market. Being in this business for over 25 years we haveavailable established a solid leadership and a sound re GARAGE REHABILITATION. Being in this business for over 25suppliers. years we have established a solid leadership and a sound re with our clients, customers and Being business for over 30suppliers. years we have established a solid leadership with in ourthis clients, customers and and a sound relationship with our clients, customers and suppliers.

CENTURY CENTURY CENTURY Building Restoration Inc. Building Restoration Inc.

Building Restoration Inc.

18 september 2014

86 Ringwood

T. T.

395 Steelcase Road East Stouffville, Ontari 86 Ringwood Markham, Ontario L3R 1G3 905-640-7773, TF.Ontari 1-86 Stouffville, T. 905-415-7773, 1-877-575-7773 TF.T.TF. www.centuryrestorat TF. 1-86 www.centuryrestorationinc.com TF.T. 905-640-7773, info@centuryrestorat paul@centuryrestorationinc.com www.centuryrestorat

info@centuryrestorat


[ Beaux Properties - Developments SIDEBAR ]

Beaux Properties

Developments

Beaux Properties has a successful history of purchasing and selfmanaging multi-unit residential rental properties. Over the years, numerous factors have made it difficult for the company to continue following this investment strategy, including compression of capitalization rates, relaxation of rent control legislation and reduced inventory of high quality rental properties.

Rental Housing Business 19


[ Beaux Properties - Developments SIDEBAR ]

We also assess the deal based on who brings it to us, as that person will likely become Beaux Properties’ long-term partner. We’ll look at their track record, whether we’ve worked with them before and if our interests are aligned.”

Beaux Properties decided to shift its goals to acquiring real estate through development with joint venture partners. In 2002, the company partnered with Quaestus Corporation to develop its first commercial property: a 57,000 square foot retail commercial plaza located in a busy Ottawa neighbourhood. “This was our first investment in this particular area, and it has been profitable on both a cash flow basis and from a return on equity perspective,” said Jason L.S. Birnboim, President, Beaux Properties. “We were able to get back most of our investment within a year, and it continues to provide steady cash flow for us and our partner.” Beaux Properties determined that investing in commercial developments would provide superior returns with manageable risk and satisfy its long-term strategy of building its portfolio through conservative growth. The company evaluates every development opportunity by identifying how much equity is required and how it fits within its investment guidelines and structure. It also considers the particular sector and how each location can be repositioned for higher use, density or rents, as well as the potential income stream. “We also assess the deal based on who brings it to us, as that person will likely become Beaux Properties’ long-term partner,”

20 september 2014

said Jason. “We’ll look at their track record, whether we’ve worked with them before and if our interests are aligned.” While Beaux Properties has found that commercial developments provide steady risk-adjusted returns on its investments, these projects provide very different challenges than purchasing and managing multi-unit residential rental properties. Zoning considerations have provided a host of challenges, and have required the company to develop a higher comfort level with a project before committing funds. Beaux Properties and its joint venture partners have learned to work with various levels of government on zoning issues, appealing to the Ontario Municipal Board when necessary to get projects approved and overcoming concerns from neighbours about new developments. Beaux Properties typically provides most of the equity for developments. The company and the lender will only proceed when they have obtained substantial pre-leasing by credit-quality tenants or pre-sales by qualified purchasers. This approach meets Beaux Properties’ conservative criteria and has enabled it to obtain attractive construction financing and permanent financing once a property is stabilized.


[ Beaux Properties - Developments SIDEBAR ]

“We have found that investing in commercial retail development projects has a very high upside from a risk and cash flow perspective with relatively manageable downside,” said Jason. “While we cannot ever mitigate market risk, we have thus far always been able to engineer a positive cash flow stream, even if it means extending a project’s timeframe or topping up the equity. As such, we are cautiously excited about the potential for growth in this part of our business.” Beaux Properties has been involved with numerous significant development projects and properties over the years, on its own and with different partners. While its most recent projects are relatively diverse, the company adheres to a model that has enabled it to successfully grow its portfolio of quality investments. Beaux Properties’ most recent developments (detailed below) include a power retail centre in a former rubber factory in the west end of Toronto, a condo development in a prime midtown area of Toronto and a commercial retail property in Ottawa. Rubber Factory, Etobicoke Beaux Properties and its joint venture partner, Quaestus Corporation, had been interested in purchasing this particular

property for several years. It is one of the last undeveloped nodes near Sherway Gardens, a popular retail mall in the west end of Toronto, and well located near complementary retail centres and two highways. The purchase and subsequent development had been held up by the city’s plan to build a tunnel through the property to increase traffic flow. As a result of various environmental assessment and cost studies, the city decided against pursuing this option. The joint venture negotiated a deal to purchase the property from the original vendor, completing the deal in May. Beaux Properties and Quaestus Corporation are repositioning the site into a 90,000 square foot power centre with ten retail units, which is expected to open in summer 2015. The site has several key tenants in place, including Michaels, DSW Designer Shoe Warehouse and Pier 1 Imports Canada, with others lined up to fill the remaining units. The property also has longerterm prospects for intensification and high-rise development. “This is one of our most exciting commercial development projects to date,” said Jason. “We believe that Quaestus has envisioned something really great here, as this development will have a positive impact on the area, in addition to the jobs that will be created.”

Rental Housing Business 21


[ Beaux Properties - Developments SIDEBAR ]

CAPTION FOR PHOTO?

Beaux Properties and Quaestus Corporation are pursuing an environmentally responsible path in the development of the property. The joint venture is tearing down half the building and reusing the steel frame, roof structure and concrete slab from the remainder to construct the new retail development. It is also reconfiguring the building to support retail-friendly loading bays and support structures. A new façade will cover the older part of the building, and the existing structure will be integrated into the new building. Upgrades to the mechanical and electrical systems will contribute to making the power centre more energy efficient. “While the property will not be LEED Gold certified, we believe that it is still very environmentally friendly,” said Barry Godfrey, President, Quaestus Corporation. “In addition to reducing construction costs and development charges, we are very proud of the fact that we will be reusing the existing structure and much of the building materials, which reduces the project’s environmental footprint.” 101 Erskine Avenue, Toronto In the mid-2000s, Beaux Properties invested as a lender in several condominium development projects that provided attractive returns. As a result, ownership decided to pursue its own condominium project on surplus land next to its flagship multi-unit rental property at 66 Broadway Avenue.

22 september 2014

Originally purchased in 1984, this highly desirable plot of land is located in the Yonge and Eglinton area of midtown Toronto. Beaux Properties hired an architect to research development opportunities and determine if it was feasible to build a condominium on the property. Since Toronto city council was pushing for more intensification in core areas, the company decided to pursue full rezoning for the area and come up with design ideas for this project. After completing much of the rezoning requirements, Beaux Properties began searching for an experienced condominium developer as a joint venture partner. The company wanted to ensure that the new building would not negatively impact its adjacent multi-unit residential rental building. After doing its research and due diligence, and adding an industry veteran to its team for an advisory role, Beaux Properties entered into a partnership with Tridel for this particular project. “It’s important to trust your partner in any development, and it was especially true for this project, which is why we chose to work with Tridel on this one,” said Jason. “Tridel is a trusted name in the condo industry. It brings tremendous strengths to the table, such as in-house expertise, decades of experience in the industry, and a proprietary sales and marketing system.” Beaux Properties and Tridel have started construction and are expected to complete the development known as 101 Erskine Avenue in fall 2016. The 32-storey building will consist


Nacora Insurance would like to Congratulate Beaux Properties & the Birnboim family for their years of continuous contribution to the Real-Estate Industry Nacora Specializes in Commercial Property Insurance At Nacora Insurance Brokers our goal is to meet our client’s insurance needs and to exceed their expectations.

Many of Canada’s leading REITs and property management firms rely on En-Pro to help them navigate through the complex energy markets.

Nacora specialize in the following types of Insurance; • Property Schedules

Beaux Properties chose En-Pro to help them reduce and control their costs, and manage the risks associated with procuring energy.

• Residential Apartment Buildings • Industrial Buildings

En-Pro’s team is dedicated to providing the best guidance and advice available today. Our energy strategies ensure you pay the least amount possible for your energy and commodities at all times.

• Commercial Malls • Condominium Corporations Contact: Jeff Rodin T: 905 307 0307 x226 jeff.rodin@nacora.com 80 Tiverton Court, Ste 801 Markham, ON L3R 0G4

Call today for a free, no-risk analysis Toll-free: 1.800.686.6449 or email: info@en-pro.com www.en-pro.com | www.ener-wire.com Trusted, Proven, Objective Energy Strategies Since 1985.

Congratulations Beaux ProPerties from Harley redlick, cmlS financial 416-726-1607

cmlS financial is a leading commercial mortgage lender originating $2.5B+ annually and providing financing for all income producing asset classes across canada. There is an array of products including cmHc insured, conventional (including higher yield), and pre-leased construction. leveraging strong internal relationships provides access to land development, construction, mezzanine and equity capital.

i look forward to working with you to provide the funding required to grow your real estate portfolio. Rental Housing Business 23


[ Beaux Properties - Developments SIDEBAR ]

This is one of our most exciting commercial development projects to date. We believe that Quaestus has envisioned something really great here, as this development will have a positive impact on the area, in addition to the jobs that will be created.”

of 410 condominium suites and 10 townhomes with integrated parking, and will be built to LEED standards. Amenities will include an outdoor pool, yoga and fitness areas, and attractive landscaping. The property will also feature a linear park area with public access, which was integral to the city’s plans for this neighbourhood. Beaux Properties is also renovating the adjacent rental property with updated landscaping, a new outdoor pool and common area improvements. 700 Hunt Club Road, Ottawa In 2013, Beaux Properties and Quaestus Corporation purchased four acres of land on Hunt Club Road, located in close proximity to one of its existing plazas and near the Ottawa airport. After having the site rezoned for commercial and retail development, the joint venture sold a portion of the land to a local developer who planned to construct an apartment building in that neighbourhood. Beaux Properties and Quaestus Corporation then used the funds, as well as construction loan financing, to begin development of a commercial retail building, with expected completion in the fall of 2014. The Hunt Club Road property will include two restaurant pads and 18 individual retail units, some of which will be combined by tenants to former larger retail units. The restaurant pads were pre-leased to A&W Restaurants and Lone Star Texas Grill, whose interest in the location helped

24 september 2014

to drive the project. The joint venture has leased or sold most of the remaining retail units to a number of commercial services providers. “The building is being condo-ized, so to speak, as we have had a number of local businesses that have interest in purchasing units in our building,” said Barry. “At present, we have a bank, a mortgage broker and a cell phone retailer, among other businesses, that have leased or purchased units. It’s a very popular area, and we know that this property will do well.” Conclusion Beaux Properties has many other projects and deals in the works, and plans to continue pursuing development projects. The company intends to focus on additional intensification opportunities in Toronto, and has an eye toward expansion throughout urban locations in Ontario, Alberta and British Columbia. As Beaux Properties continues to expand and diversify, it expects that more institutional partnerships will emerge. “We recently formed a joint venture partnership with a Vancouver-based developer,” said Jason. “We are optimistic about establishing a presence in that market as well by sticking to our core beliefs and values of conservative growth in high quality locations.”


Daoust Vukovich LLP is a leader in the field of commercial real estate and landlord & tenant law. Our boutique law firm specialises in commercial leasing, commercial real estate purchase/sale and financing and related litigation. Our business-minded lawyers, understand your objectives, whether it be landlord or tenant representation, the purchase/sale or financing of an office building, shopping center or industrial park, due diligence lease review, injunction application, a claim for arrears of rent or the negotiation of a telecom building access agreements. We have built our reputation on learning what clients need and delivering services quickly and responsively. T: (416) 597-6888 F: (416) 597-8897 20 Queen Street West, 30th floor, Toronto, Ontario, M5H 3R3 ddaoust@dv-law.com

C

ongratulations

BEAUX PROPERTIES from your friends at HARRIS, SHEAFFER LLP!

YONGE CORPORATE CENTRE 4100 Yonge Street, Suite 610 Toronto, Ontario M2P 2B5 Telephone: (416)250-5800 / Facsimile (416)250-5300 Website: www.harris-sheaffer.com

Proud to be Working with Beaux Properties Building New Communities

9094 CAVANAGH RD - ASHTON, ON - K0A1B0 P: 613-257-2918 - F:613-253-0071- MAIL@THOMASCAVANAGH.CA

Rental Housing Business 25


[ Beaux Properties ]

“Beaux Properties understands that there are no tenants in apartment buildings – they are customers and they should be treated as such. They are responsible for making buildings profitable, as they pay the rent. When you respect your tenants as the customers who drive your business, you learn to treat them properly and do what is necessary to keep them in your buildings.”

Continued from page 16

directly correlates to the preservation of the value of its assets. The company believes in providing services that are commensurate with the quality of the property, as top-quality properties requires topquality service and amenities. While Beaux Properties deals primarily in A-level properties, it is more liberal in establishing relative rents. “We do not want to be at the top end of the market or leasing spectrum,” said Roy. “We position our units around the middle with respect to rents. This enables us to keep vacancy and bad debt levels at or below one per cent. While we cannot control the market when it gets harder or softer, we can control some things to ensure that we maintain full buildings.” When tenants vacate an apartment unit, the site staff always go in to ensure that the apartment is “lease ready.” They will clean the unit and invest in whatever is needed to bring the unit up to its standards, such as making minor repairs, painting walls and refinishing the floors. Beaux Properties also performs extensive suite upgrades in many of its buildings, sometimes spending more than $20,000 to do so. When new tenants inquire about available units, they are given the option of choosing either a lease-ready or upgraded unit. More often than not, tenants will choose the latter option because Beaux Properties ensures that all rents are competitively priced. “Beaux Properties understands that there are no tenants in apartment buildings – they are customers and they should be treated as such,” said Marvin Sadowski, Property Management Consultant. “They are responsible for making buildings profitable, as they pay the rent. When

26 september 2014

you respect your tenants as the customers who drive your business, you learn to treat them properly and do what is necessary to keep them in your buildings.” Paying attention to maintenance Beaux Properties maintains building and unit standards by being proactive and staying on top of potential issues so that repair costs do not get out of hand. The company also ensures that it diligently addresses staff or tenant issues. Building managers are at the forefront of problems and know what is going on in their buildings. While it must still adhere to its buildings’ budgets, the company is willing to take action to address problems when necessary. Management understands that it cannot satisfy every tenant all the time, but they can address issues in a timely manner. Beaux Properties follows a conservative yet hands-on approach to the management of its multi-residential rental properties. It engages in capital work when necessary to provide quality properties with the necessary amenities to bring in appropriate rents. The company understands the systems that make buildings work, and so do its building managers. Every member of Beaux Properties is keenly aware that there is more to property management than answering phones and collecting rent. Maintenance is key to Beaux Properties’ conservative approach to growing its portfolio. The company focuses on taking care of its assets, such as doing capital upgrades to a building’s underground garage or changing elevators. Energy conservation is a central component of the corporate


Proud suppliers to Beaux Properties! Congratulations and Continued Success!

March Elevator Limited can provide simplistic and realistic solutions to your vertical transportation needs. Our certified service technicians are experienced in passenger or freight elevators; traction or hydraulic. We also provide services for dumbwaiters.

MARCH ELEVATOR

416 533 1135 marchelevator.ca marchelev@aol.com

Modernizations, Installations & Maintenance

CONSULTING ENGINEERS

Mechanical

MODERN IDEAS PROFESSIONAL SOLUTIONS Electrical

Energy Audits

LEED

Services - Fire Protection Upgrade & Design - Steam To Hydronic Conversion - Maintenance Scheduling - Capital Planning Report / RFS

416.250.7222 www.me-eng.com

- Boiler Design - Domestic Piping - Chiller Design - Emergency Generator Design

1700 Langstaff Rd. Ste 2002

info@me-eng.com

- Building Audits - Project Mangement - Power & Lighting Design

Vaughan, Ontario L4K 3S3 Rental Housing Business 27


[ Beaux Properties ]

strategy, which includes installing new energyefficient windows in all buildings, upgrading boilers, heating and cooling systems, and replacing lighting when feasible. The company has also instituted water-saving programs in all of its buildings. “Beaux Properties has succeeded by putting its money back into the core of its business, which is its multi-residential rental properties,” said Peter Persechini, Chief Operating Officer. “Re-investing in properties has helped the company to maintain low vacancy rates whether the rental market is strong or weak. We get positive feedback from our tenants and the trades because we don’t cut corners on maintenance.” Beaux Properties pays close attention to the training and education of its staff. The company ensures that staff understand all aspects of what is required to maintain buildings and their various components. It provides in-house training to ensure that employees know how to deal with various issues, which includes employing conservation techniques and new technologies to minimize utility costs. Field managers also visit all buildings in the portfolio to show building managers how to handle different situations. Many of Beaux Properties’ building managers have been with the organization for more than 10 years, which gives them a solid understanding of the properties and tenants. The company will also screen and do background checks on all trades and service providers to ensure that they meet its high standards before entrusting them to work on its properties.

Peter Persechini, Chief Operating Officer

28 september 2014

“A number of companies in our industry have moved away from on-site building staff, employing a roving handyman and cleaners for their buildings,” said Peter. “All of our building managers are on site and one call away for tenants. It’s a more traditional approach to property management, and it enables us to provide tenants with a higher quality of service and more attention. We get a lot of positive feedback from our tenants, so we know that it works.”


Congratulations Beaux Properties from your friends at Green Air Mechanical We provide superior quality and performance, We make installing and maintaining those solutions simple as well. Understanding that proper building control and maintenance can help manage costs and maintain high standards for energy efficiency, We are expertise in automated building systems, HVAC service, remote monitoring and other services to help achieve maximum efficiency.

Preventative Maintenance Heat pump Service and Installations 24 Hour Emergency

Energy Management Chiller and Boiler Retrofits Multi-Tenant Residential Service

GREEN AIR

Service: 416 845 9502 | Admin: 416 272 0219 www.greenairmechanical.com info@greenarimechanical.com

MECHANICAL

Congratulations to Beaux Properties from Congratulations to Brook Restoration Ltd. from

Parking Garage Rehabilitation â—Š Window Replacement Balcony Slab & Guardrail Rehabilitation Reserve Fund Studies â—Š Roofing Solutions Building Restoration & Rehabilitation Contract Administration & Project Management

www.delbove.ca 2345 Wyecroft Road, Unit 17, Oakville, Ontario L6L 6L8 Tel: 905.465.9200 Fax: 888.667-5550

Rental Housing Business 29


[ Beaux Properties ]

“Whether I’m doing something new or repetitive, I believe that it’s always possible to learn something new. It is important to not go into things blindly, and recognize and appreciate other perspectives. Solicit other people’s opinions, but make your own decisions based on your objectives.”

Increasing involvement in development The Birnboims first entered the development world when they were living in Winnipeg. During the 1960s, they built a multi-residential rental property and had to rent to students because the initial lease period was difficult, and rental living was not as prevalent at the time. Later, one of Roy’s private clients approached him about developing a restaurant for another client. He found, purchased and developed the building for the restaurant, and then leased it to the proprietor for 10 years. “Several years before we entered the Toronto market, an architect approached me about an opportunity to get involved in developing a social housing project,” said Roy. “By spending only $50, I was able to secure the necessary property and submit a proposal, and it turned into a profitable venture. These initial successful experiences planted the seeds that paved the way to a more active involvement in commercial development.” Development is becoming a more significant aspect of Beaux Properties’ business. Since the company takes a conservative approach to investing, it mitigates as much risk as possible prior to committing to a project by conducting a lot of research and investigation into zoning considerations, financing environment, investment hurdles analysis and other key areas. Beaux Properties typically forms partnerships with experienced developers for any significant projects, whether the project involves multi-unit residential, condominium or commercial developments. One key strategy includes purchasing greenfield sites and turning them into retail centres. (See sidebar on Beaux Properties’ most recent developments.) Lessons learned Roy: “Whether I’m doing something new or repetitive, I believe that it’s always possible to learn something new. It is important to not go

30 september 2014

into things blindly, and recognize and appreciate other perspectives. Solicit other people’s opinions, but make your own decisions based on your objectives.” Jason: “I’ve learned the most from deals that did not go well, even though we still made money due to our staying power and perseverance. I’ve also learned that small deals take as much time to complete as large deals. We have a finite amount of time to do everything, so we want to make sure that we do things that are large and impactful.” Future plans Now into its third generation of family ownership, Beaux Properties will continue on the same path that has enabled it to reach its current level of success. The company plans to pursue opportunities to intensify its portfolio of multi-residential rental properties and other investments in the Greater Toronto Area. Expansion plans are in place for additional purchases in Western Canada, particularly Calgary and Vancouver. Beaux Properties also maintains holdings in the Caribbean and is actively developing a luxury boutique hotel on Rose Island in the Bahamas. “We intend to expand our investment and development horizon where possible, and will do so by taking on partnerships for larger transactions and forming additional joint ventures,” said Jason. “My grandparents and my parents established a very solid foundation for the business, a tremendous framework for making decisions on key opportunities, and a strong social conscience. We also plan to keep having fun and enjoy what we’re doing.” RHB


Natural Gas Supplier to Beaux Properties Congratulations to Roy, Jason and the rest of the team at Beaux Properties on your outstanding growth and success!

PY RESIDENTS QUICK FIXES D TO GO D-IN-HAND.

For 12 years, Superior Energy has been a trusted energy supplier specializing in the Multi Residential market.

Give us a call today for a free no-obligation quote. Toll-free: 1-877-784-4262 Email: comsales@superiorenergy.ca Fax: 1-905-542-5935

www.superiorenergy.ca

High Rise Aluminum Windows by Fibertec Your energy savings start here

Enhance tenant comfort and safety. Quality installation directly from manufacturer

maintain satisfied residents. es ordering easy, inventory of over Call usannow! 1-(888)-232-4956 epair supplies, plus next day freight (905)-660-7102 you efficiently and professionally.

sionals. For professionals.

2-0557 | Fax: 1-800-782-2517 | hdsupply.ca

HD Supply proudly congratulates Beaux Properties for all of their success - past, present and future! Phone: 1-800-782-0557 | Fax: 1-800-782-2517 hdsupplysolutions.ca

ties. Freight-free cities include Toronto and GTA, Ottawa, Montreal, Quebec City, Vancouver and GVA, Calgary, Edmonton, Regina, Saskatoon, and Winnipeg. Special orders, alogue items have extra charges, quoted on request. Orders less than $100 are subject to a $25 handling fee. Š 2012 HDS IP Holding, LLC. All Rights Reserved.

Visit Our Website:

www.fibertechighrise.com

Rental Housing Business 31


[ Economy ]

As the Fog Clears

Benjamin Tal on the economy

At the CFAA Rental Housing conference held in June, delegates warmly welcomed keynote speaker Benjamin Tal, Deputy Chief Economist of CIBC World Markets. With his classic elements of humour, Tal provided a tempered forecast for 2014-15 in a talk entitled “As the Fog Clears”. “2013 was the year between something bad, and something better. Not good, but better,” began Tal. Apart from Japan, the major world economies have substantially smaller fiscal drags than they had in 2013. According to Tal, China is becoming “less commodity-centred, with a greater focus on consumers.” He believes this will moderate commodity prices in the future, potentially moderating Canada’s returns on resource development.

32 september 2014

Turning his attention to the United States, Tal addressed first the intentions of the Federal Reserve under new Chair Janet Yellen. He noted that, in the US, real wages tend to fall when unemployment is over 6%, to remain flat between 5 and 6%, and to increase only with unemployment below 5%. Since unemployment as low as 5% is not on the horizon, the Fed can wait to tighten monetary policy until mid-2015. Interest rates may well remain low for a considerable period of time, with 10 year yields between 3.5 and 4%, even with inflation at 2%. Tal referred to price increases in American housing markets such as Las Vegas and Phoenix as evidence that the “first leg of a recovery” is completed. “We have a generation of Americans who realize the


[ Economy ]

American dream of owning a house, can be a nightmare. So they have decided to rent,” said Tal.

control and adding in the condo market, Tal estimates the ratio at 130, which is not nearly as much of a concern.

But Tal warns that investors who are only now beginning to look for promising multihousing properties in the U.S. market will be disappointed. “I used to say, buy anything that moves in America. But what’s left is junk. Investors are not buying in because most of the remaining stock is in poor locations or is poor quality.”

Based on demographics, Tal suggests that the growth in demand for rental units has peaked. He does not anticipate a sharp drop, but a gradual decline from 50,000 households per year to 40,000 per year by 2020. In fact,

However, Tal believes that within half of a year, a second leg of the recovery will begin, with American lenders and banks becoming more willing to loan credit due to normalized mortgage delinquency rates. “We are in this soft zone, which should be considered an invitation,” says Tal, hinting that investments in conventional real estate properties in the U.S. could still be attractive.

the projected new rental demand from 2014 to 2020 appears to be slightly higher than the annual increase in rental demand from 2006 to 2011. Tal predicts a very modest surplus of new rental supply over new demand in Toronto and Vancouver due to the continued strong supply of condo units for rent. RHB

Leading Canadian Manufacturer and Installer of Windows, Doors, Railings and Curtainwall

However, the number of Canadian firms in manufacturing has declined by 20% since 2002; and so, Canadian manufactured exports are not rising with US economic growth as much as they have in the past. Canada can expect to operate with a lower share of our economy in manufacturing than the US does, although labour productivity in Canada has improved, especially in industries sensitive to the Canadian dollar. Tal predicted that the Bank of Canada will raise interest rates very slowly in 2015 or 2016. Much more than in the past, any sharp increase in interest rates on household debt would have a significant effect on consumer spending. Fortunately, the growth in household credit (borrowing) has eased dramatically from a year-over-year increase that peaked at 12% in 2008 to the current rate of 4%. Even within that modest 4%, the growth is all in mortgage debt. Consumer credit has gone flat or declined slightly since 2010. Tal then turned to the Canadian housing markets. From a base of 100 in 1997 the house price-to-rent ratio has skyrocketed (to 198 or 150 depending on whether one uses the “CPI rent deflator” or CMHC’s average rent figures.) However, adjusting for rent

We are committed to THE BEST PRODUCT, THE BEST SERVICE, THE BEST VALUE

944 South Service Road • Stoney Creek, ON • L8E 6A2 • www.norstarwindows.com T: (905) 643-9333 1-800-363-4810 F: (905) 643-3633 Montréal: (514) 447-0243 Ottawa: (613) 336-3159

Rental Housing Business 33


[ Association Spotlight ]

Manufactured Home Park Owners Alliance of British Columbia Geographic area served: All of British Columbia Association establishment: Various associations represented manufactured home park owners in BC as far back as the 1970’s. The current MHPOA branched out from one of those in 1997. Then in the early 2000’s, the other organizations joined the MHPOA, creating one unified voice for MHP owners across BC. Total membership count of MHPOA: 330 park owner members, with approximately 20,000 manufactured home households. The main MHPOA roles: • Providing legal information, operational assistance, education, government and media representation. • Identifying and acting upon issues created by all levels of government that affect our industry. • Maintaining a federal presence through CFAA. • Working with the BC government to develop and implement changes to policies and regulations that affect our industry.

The most important issues facing HHPOA today: • The stereotype of “trailer courts,” rather than manufactured home communities. • General dislike of manufactured home communities by municipal politicians. • Tax increases being charged by local municipal authorities, and increases in municipal user fees being offloaded disproportionally onto landlords. The most important challenges MHPOA faces: Changing the image of manufactured home parks with municipal and regional governments, and the media.

JAY GAUDREAU President (a volunteer position) Main occupation: Manufactured home park owner and manager. Jay comes from a background of operating heavy equipment and construction, and continues to do that also.

AL KEMP Executive Director Main occupation: Rental housing industry professional.

Length of involvement in rental housing: 25 years as a landlord.

Most rewarding aspect of leading MHPOA: Helping park owners and managers succeed in providing affordable housing alternatives to thousands of British Columbia households.

Most rewarding aspect of leading MHPOA: Meeting with, and getting to know, our members and our federal partners. The key thing Jay would change in rental housing: Changing federal taxation rules to create a more fair and beneficial treatment of landlords as business owners, which would reflect and appreciate our value to the Canadian economy, and spur the development of more manufactured home parks and rental housing.

34 september 2014

Length of involvement in rental housing: 20 years as a landlord, and 17 years as a rental housing industry professional.

The key thing Al would change in rental housing: Creating a new view of manufactured home parks as desirable communities with permanent residents in modern, spacious homes. RHB


BIGGEST BREAKTHROUGH IN

[ Technology ]

EXPENSE MANAGEMENT SERVICES SyNERGY:

REAL-TIME UTILITY EXPENSE MANAGEMENT • Audited. Fixed. Paid. • No late payment. • Budgeting & Benchmarking.

CONTROL: CONTRACT MANAGEMENT • Track critical contract dates. • Ensure vendor compliance. • Go paperless!

CALL TODAY FOR NO OBLIGATION DEMO! 1.800.672.1134 submeter@wysemeter.com

Wyse is proud to be the exclusive submetering provider for CASA II.

Rental Housing Business 35


IN THE KNOW Manitoba Changes its Residential Tenancies Act

would more accurately reflect the operating costs of the rental housing industry. However, the broad CPI has the benefit of being easier for the public to understand. It is also more stable. As of January 1, 2015, there will be new rules which deal with applications for above-guideline rent increases and building renovation programs.

As of August 1, 2014, Manitoba landlords can charge a pet damage deposit of up to one months’ rent (up from one-half of one month’s rent.) People who have a charge in place for continuing tenants will not be able to increase the deposit for those tenants to the new amount.

Landlords can also obtain an eviction for unlawful activity that interferes with the reasonable enjoyment of other tenants or the landlord, or negatively affects their security, health, safety or well-being, without their having been a conviction. (That is similar to the laws in Ontario and BC, which by the Courts’ interpretations, have never required a criminal conviction.)

Manitoba has made changes to its Residential Tenancies Act. Starting with the upcoming announcement for increases to take effect during the year 2015, the Government will set the guideline at the Consumer Price Index (CPI) for Manitoba as announced by Statistics Canada.

The guideline for next year will be the average of the annual change for the 12 months from July of the previous year to June of the current year. That resulted in a 2015 guideline of 2.4%. The guideline will be kept within the inflation targets used by the Bank of Canada, currently between 1% and 3%. The use of the broad CPI was not the first choice of Manitoba landlords, who would have preferred a special price index which

By the new rules in Manitoba, if a landlord or a tenant does not take part in a hearing for an order for possession for non-payment of rent at the Residential Tenancies Branch, they need to obtain permission to appeal from the Residential Tenancies Commission. Tenants are given new protection if a landlord seeks to evict them by pretending to renovate or repair a rental unit in a way that makes the suite unliveable. This does not apply if ordinary renovations or repairs are conducted in a reasonable manner, even if they disrupt the tenant’s use of the rental unit. For example, if a bathroom basin or bathtub is not usable for several days (to replace them), that is not deemed to be a termination.

More details will be available in the digital edition of National Outlook, at www.cfaa-fcapi.org. Continued on page 37

Hassle-Free Laundry Rooms For more information, contact us today! 1.877.755.5302 ■ info@coinamatic.com ■ www.coinamatic.com 36 september 2014


2014 STUDENT HOUSING

REPORT

1 DEVELOPMENT FINANCING AND PROPERTY DEVELOPMENT

2 STUDENT OWNERSHIP AND PROPERTY MANAGEMENT

3 THE MARQ

CASE STUDY


Buffalo Construction Inc. is a full service project management and general contracting business. In operation since 1992, we offer a full range of construction and renovation services all over the province of Ontario. We are a multifaceted general contractor with our head office located in Toronto and satellite offices in Kitchener and Ottawa. We specialize in servicing the rental living community in a variety of ways including occupied unit service calls, vacant unit renovations and common area renovations.

• • • •

• • • •

Demolition Plumbing Electrical Drywall

Tile Carpet Vinyl Laminate Flooring

• • • •

Floor Refinishing Cabinets Plaster Paint

Fully insured and WSIB compliant.

B

Buffalo Construction 26 Thorncliffe Park Drive, Unit 109 East York, ON, M4H 1H9 Office: 416 433 5342 | Cell: 647 989 8875 edmcquade11@gmail.com


2014

RHB STUDENT HOUSING REPORT

A

ccording to Statistics Canada, there were more than 1.2 million people pursuing an undergraduate degree in 2013, which included 898,400 full-time students. About half of these students need student housing. These numbers have increased year over year, and studies have shown that they will continue to rise. Many universities will provide a place of residence to first-year students who need accommodations during the school year. However, this is not always possible. According to a Canada Mortgage and Housing Corporation (CMHC) survey, only two-thirds of colleges and universities in Canada own student housing either on- or off-campus. Also, once students complete their first year of post-secondary education, they must find their own place to stay. Student housing in Canada is a growing market, but it is at least 10 years behind the US with respect to its relative size and available offerings. In fact, the US has 10 times the number of student housing units on a per capita basis. According to CMHC research, most post-secondary institutions have very low vacancy rates, and some housing options are filled to capacity. Even though enrolment is increasing year to year, many post-secondary institutions have no immediate plans to increase the number of student housing units. This means that there is a lot of room for growth and opportunities for private developers and property managers. The 2014 RHB Student Housing Report serves to inform the Canadian rental housing industry on the most current and pertinent information fuelling this profitable and rewarding segment of the multi-unit

rental housing industry. This article will showcase the student housing industry and how it is undeveloped and underserviced in Canada. The 2014 RHB Student Housing Report is divided into three sections: • Section one covers development financing and property development of student housing. It discusses the different financing models for student housing properties, construction challenges tied to these types of buildings and issues to consider when upgrading or rehabilitating student housing. • Section two covers the topics of student ownership and property management. It discusses the options associated with student housing from a student’s perspective, and the issues and challenges involved in owning and managing student housing properties. • Section three is a case study of The MARQ, the student housing management platform of Centurion Asset Management Inc. It examines The MARQ’s approach to managing student housing and how Centurion works with developers to fund and build new student housing projects. To evaluate and deliver the most pertinent and up-todate market information for this report, RHB Magazine collaborated with Greg Romundt, Wayne Tuck and Steve Stewart from Centurion Asset Management Inc., the asset manager for Centurion Apartment REIT; Mark Humphreys from Humphreys & Partners Architects; Dario Battista from isure & Belpac Capri Insurance Brokers Ltd.; and Greg Spangler from Halsall Associates.

2014 RHB Student Housing REPORT | 3


1

DEVELOPMENT FINANCING AND PROPERTY DEVELOPMENTS Before putting shovel to ground to build student housing, you should answer a number of important questions: • How much will it cost, and how long will it take to recoup your investment? • How will you finance the development? • Where will you build it? • When will it be completed? • What amenities are available in the area, and what do you need to provide? • What factors should be considered when converting properties to student housing? Development financing Almost all property developers require some amount of financing to fund their construction projects, as there are significant expenses with building multiunit properties. However, traditional lenders are not always comfortable with providing financing for certain asset classes in which they have little or no experience. Student housing typically falls into this category. As a result, developers must find other sources of financing to help with developing new properties or stabilizing existing assets. One type of funding is mezzanine financing, where the developer will get additional financing to bridge the gap between what they have borrowed from a traditional lender and what they still need to complete the project. A traditional lender will typically provide maximum financing that equals 65% of the project’s finished value or 75% of the total cost of the project. Mezzanine financing provides a portion of the remainder of the funding required to

Steve Stewart - Director Mortgage Investments, Centurion 4 | 2014 RHB Student Housing REPORT


complete the project, typically 85–90% of the project cost. Some deals include the right of first offer to purchase the project when completed, which gives the developer a ready buyer when the time comes to sell. Developers can also choose to raise a higher level of financing through equity participation or equity coinvestment, where the lender takes an equity position in the development, as well as a share of the profits, in exchange for construction financing. In this scenario, the financing firm typically provides a “promote” to the developer by taking a smaller equity interest than the percentage of equity provided. For example, in a project requiring $1 million of equity, the financing company might provide 75% of the equity but only earn 50% profit participation, so the developer will still earn half the profits while only contributing 25% of the equity. However, the financing firm might require the full return of its capital before the developer’s equity contribution is paid out, which makes it a safer position for the financing partner. The contract can also include the right of first offer to purchase, which will typically lead to an arrangement to acquire the new building when development is complete. “Developers might find that it is difficult to arrange financing for student housing projects, as there are a limited number of active conventional lenders,” said Steve Stewart, Director of Mortgage Investments, Centurion. “There are also a limited number of mezzanine and joint venture partners. Student housing is not broadly understood among traditional finance partners, as it is a relatively niche market. It’s important to form partnerships with firms that understand the space and its challenges.” Property development When it comes to real estate, everyone knows that location is one of the most important factors in determining property value; this is especially true with student housing. A building designed for student housing can have amenities and design features that would appeal to every student, but they won’t rent there if it’s too far from campus. There are a limited number of available and desirable sites near every campus, and there are many issues that can prevent a developer from purchasing or building on those properties. Municipalities, residential communities and educational institutions can provide a number of roadblocks to building on the best sites. In some cases, there may be older housing stock around the university, and there could

Wayne Tuck - VP Operations, COO, Centurion

be pressure to preserve these buildings. Some people who live near the university also have a NIMBY attitude, and don’t want large student housing projects in or near their neighbourhoods. Municipal governments might prevent rezoning of properties, even when there is a demand for higher density around the university. “The appetite for student housing varies across municipalities, and achieving the required rezoning can be difficult,” said Steve. “For example, we are aware of projects in the Guelph and Kingston markets where the municipality was strongly opposed to significant rezoning applications near the universities. In Waterloo, the municipality took the progressive approach of rezoning a large multi-block area near campus to allow extensive redevelopment of student housing.” Every construction project is subject to deadline pressures. With a typical multi-residential apartment building, if the project is completed a month later, all you lose is a month of rent. However, timing is crucial when planning the construction of a student housing project. If your student housing project is not ready for the start of school year, you’ll lose a whole year of rental income. At the same time, you don’t want to complete a project too early, as it will sit around for several months not earning rent. While student housing is a growing market, it should be noted that some neighbourhoods near colleges and universities are more built up than others. In some cases, there is too much supply to meet the demand, and some markets are nearing (or have reached) their saturation points. With more companies entering the sector and more student housing being built, it will become more

2014 RHB Student Housing REPORT | 5


“However, any dividing of existing residential suites would constitute a change in occupancy,” said Greg Spangler, Project Principal, Halsall Associates. “A conversion from office to residential building would be an obvious change in occupancy. In some cases, the change of occupancy would trigger the need to install a sprinkler system.” When contemplating major renovations, owners should consider five key areas:

Renovated kitchen at The MARQ London – 75 Ann Street

difficult to fill a building at the desired rent levels. This can have a deleterious affect on the investment and ongoing rental income. “There is a lot of buzz for the sector, and a lot of companies trying to get into this space,” said Greg Romundt, President, Centurion Asset Management Inc. “Some have a ‘build it and they will come’ mentality, but you cannot fix a bad location with a good building. Some sites will be developed that shouldn’t be, and that will result in bad investments.” Upgrading and repurposing student housing Repurposing multi-unit rental properties for student housing has its challenges. In addition to location, you must carefully consider the market and whether changes to existing floor plans will go far enough to meet the needs of today’s student renter. Despite the allure of higher revenues and margins, you have to calculate the current gap between multi-unit rental and student housing cap rates when assessing the economic viability of such a conversion. Student housing owners must ensure that their rental properties meet current building codes when they engage in major renovations or there is a major change of occupancy. A major renovation would typically involve removal and reconstruction of building components, such as interior walls, floors or roofs. Any extensions or additions to the building would also need to comply with the current code. If a building is being converted from a multi-unit rental property to student housing, then there would be no change in major occupancy as long as the number of suites remains the same and the interior renovations are limited.

6 | 2014 RHB Student Housing REPORT

• Personal safety: Light levels must be adequate in the parking garage, stairwells and corridors, and windows should have opening restrictors. Balcony guards should exceed minimum code requirements. • Fire safety: Fire safety components, such as the fire alarm, signaling devices, sprinklers and fire extinguishers, need to be maintained and regularly inspected. • Durability: Finishes must be durable to withstand the high occupancy and annual turnaround at these buildings. • Structure: To minimize concrete deterioration (and potential safety risks from loose concrete), regularly inspect and maintain exposed structural components such as concrete balconies and parking garage slabs. Any loose concrete that could fall should be immediately removed. • Building envelope: Water penetration into the building can lead to deterioration of concealed components and the development of mold. The building envelope must be designed to keep water away from the interior components. It must also be kept in a state of good repair. Depending on the property’s age, owners might need to undertake cladding and roof repairs to address existing leaks or as preventative maintenance to avoid future leaks. Effectively coordinating completion of this work with the typical school cycle will allow the owner to schedule the work during times of lower occupancy, such as the summer, rather than being forced to complete emergency repairs during less ideal times. “With all residential properties, timing of work is important, but with student housing, it’s critical,” said Greg Spangler. “It’s important to minimize the amount of construction and obstructions during peak move-in and move-out seasons. And noisy work should be scheduled outside of peak study periods.”


DBS is your ONE-STOP source for design-build and facility maintenance services for the multi-residential and ICI sectors.

Congratulations to CENTURION APARTMENT REIT

12 Vansco Rd., Toronto, ON Tel. 416.255.7370 www.dbsair.com


2

STUDENT OWNERSHIP AND PROPERTY MANAGEMENT If you’re going to get into the business of managing student housing, then you need to answer the following questions: • What are students looking for in a rental property? • What do you need to do to adequately service their needs? • What amenities should you provide in your student housing property? • How is managing student housing different than other rental properties? • What type of insurance is required for student housing? What’s available for students? In the past, students might have had to rent a room or basement apartment on their own, or get together with friends to rent an apartment or house. If they were lucky, they might have been able to get into a house or apartment that was converted into student housing, or an older building run by a sole proprietor. Even though first-year students often have the option of staying in school-provided dormitories or other accommodations, they might not want to pursue that option for the fear of living with strangers. Today’s college and university students have many housing options available to them, including renting a unit in purpose-built student housing. These properties are very similar to apartment buildings, but they are aimed at housing students. The buildings are typically located on or near college and university campuses, and are often part of a larger community of student residences. Student housing is designed with the students’ interests in mind, and includes amenities geared to them, such as access to public transportation, study rooms, exercise and entertainment areas, Wi-Fi, staffing and security.

Greg Romundt - President, Centurion Asset Managment Inc.

8 | 2014 RHB Student Housing REPORT

“Student housing provides college and university students with a better campus living experience because it is as much about the social experience as it is about


the accommodations,” said Greg Romundt. “Parents also know that their children will be living in a safer environment, as student housing offers professional property management, security features and more.” Layouts, amenities and trends Buildings designed specifically for student housing have different layouts and amenities than most apartment buildings. One key difference is the bed-bath ratio. A typical two- or three-bedroom rental unit might have one or two bathrooms. However, a newer student housing unit would likely be built with one bathroom for every bedroom to achieve bed-bath parity, and some units could include five bedrooms. Kitchens are typically smaller and designed to be used by more people than would occur in an apartment unit.

“Student housing units tend to have smaller bedrooms, so the cost per unit is lower compared to a typical apartment unit based on bedroom sizes,” said Greg Romundt. “However, student housing buildings will also have more amenity-focused spaces, such as movie theatres, soundproof music rooms, gyms, games rooms and lounges, study and meeting rooms. They also have less available parking per unit, so there is less space allocated for vehicles in student housing.” There is a growing trend to provide more upscale student housing options with more available amenities. Units are becoming more lavish, with higher end finishes in kitchens and bathrooms, granite countertops, hardwood floors and other features. Bed-bath parity is becoming practically mandatory, as well as bike storage, fully wired or wireless buildings, attractive landscaping and more. Some property

managers will also provide students with free bus passes or free shuttle buses to make it easier for them to get around. “Student housing is obviously different than typical rental housing because you are leasing to 18- to 25-year-olds, and this is their first apartment,” said Mark Humphreys, Chief Executive Officer, Humphreys & Partners Architects. “They want high-speed Internet, to be close to campus and a good price. Room sizing is also very important and how bathrooms are arranged, but one of the most important things is that they want a cool, hip place with loads of amenities.” Property management Different types of rental properties create a range of issues for property owners and managers. Multi-unit residential apartment buildings typically offer one-year leases and experience relatively low turnover rates on a year-over-year

basis. Hotels are at the other end of the spectrum, as the rooms turn over nearly completely on a day-to-day basis. Student housing has a turnover rate of about 50% per year, and the average student will rent their unit for one to three years. A key challenge in managing student housing involves dealing with move-ins and move-outs. Most properties have two very busy time periods: the mass move-ins and outs in April and September. These periods will challenge the logistics and efficiency of any property management firm, as managers have to coordinate large groups of tenants moving in and out at the same time. Consequently, marketing and leasing both operate on seasonal cycles, and are tied to the schools’ academic calendars. “Managing the leasing cycle is another significant challenge,” said Greg Romundt. “When managing a

2014 RHB Student Housing REPORT | 9


can lead to difficult situations, which can have an impact on the property. Also, students are often living in their first real home away from home, so it becomes a learning experience for everyone involved.

On call at The MARQ London

typical apartment building, after someone moves out, you can follow standard marketing procedures to attract new tenants and avoid missing out on too much rent. When you don’t fill a unit in student housing, it can equate to a full or partial year of lost rent. It takes effort and coordination to ensure that units are ready to be filled by tenants.” Property management firms in the student housing space must juggle a number of priorities to ensure that their properties are filled. They must work with colleges and universities so that they can make students aware of their housing options, such as during tabling events at universities and colleges where they can promote their particular product. While student housing firms must deal with students, they also have to appeal to the parents, who are responsible for validating their children’s housing option choice. “In a typical rental property with 250 units, you’ll have 250 clients,” said Mark. “When you have 250 student units, you might have 750 beds or 750 clients, each with two parents, so you have to deal with 2,250 clients.” Property management also involves people management. This means that property managers must learn how to address a wide range of issues, from handling tenants’ repair requests to dealing with problem tenants. Most tenants are experienced renters, and they know what to expect from rental living. They also tend to view their rental units like their homes, and other tenants as their neighbours. Student housing is a very different challenge for property managers. Many students are living away from home for the first time, and they might not have much experience with living in a rental property. They must learn to co-exist with virtual strangers in a relatively small living space. People and personalities can conflict, and that

10 | 2014 RHB Student Housing REPORT

“Generally, the students are respectful, but as a property manager, you have to work with them to ensure that they recognize they are living in a communal environment, cohabitating with many others who are looking to balance their studies and an active social life,” said Wayne Tuck, Vice President of Operations and COO, Centurion. “You also need to keep a close eye on the building and units, so typically you will conduct unit and common area inspections more frequently than in apartment buildings.” What about insurance? It should be noted that typical renters tend to treat their rental properties as their primary residence; they often personalize and form an attachment to their space. However, student tenants know that their rental accommodations are temporary, and will sometimes treat it as such. This can increase the property owner’s liability exposure. Insurance geared toward rental properties can provide sufficient coverage for student housing. The challenge for owners is that some insurance companies and brokers are not as familiar with the student housing industry. As a result, they might charge higher insurance rates than normal or offer reduced coverage, and some will even refuse to insure this sector. Student housing owners should first find a broker who understands the sector and its needs. They should also understand the types of insurance required for these types of rental properties. When purchasing insurance, owners should determine whether the coverage is broad form or includes named perils. The policy should cover issues typical for rental properties, including boiler and machinery breakdowns, sewer backup and rental income, as well as adequate building and liability limits. It is also helpful to deal with an insurance company that provides risk management services. “Student rental housing market is very much misunderstood by many brokers and insurers,” said Dario Batista, President, isure & Belpac Insurance Brokers Ltd. “Insurance products can be customized to meet the needs of student housing. High quality coverage can be found through a brokerage that understands student housing and that has relationships with insurers prepared to offer proper coverage.”


YOUR COMPLETE RESTORATION RESOURCE SINCE 1974! Serving Ontario’s multi-residential, commercial and institutional sectors, Maresco Limited is a premier provider of masonry, concrete restoration and related services. Providing customers with the highest levels of quality, safety and technical expertise.

MASONRY REPAIRS

WEATHERPROOFING

CONCRETE REHABILITATION

BALCONY GUARDS

EXTERIOR WALL CLADDING

STRUCTURAL MODIFICATIONS

Congratulations Centurion Apartment REIT on your continued success and commitment to growth

171 Basaltic Road, Unit #2, Concord, Ontario T 905.669.5700 www.marescolimited.com

Rental Housing Business 47


3

The birth of The MARQ Centurion owns and manages about 2,000 student housing units, and has been operating in this space for a number of years. Centurion determined that the student housing industry was relatively undeveloped and underserviced in Canada, and there were significant opportunities for growth. It believed that it could leverage its multi-residential rental housing experience to provide institutional-grade asset and property management services to a marketplace filled with smaller players. At the same time, students would benefit from Centurion’s combination of multi-residential management experience, systems and services. Centurion engaged a brand development consultant in 2013 to help it develop its student housing platform. The goal was to first identify its customers’ needs, which involved talking to college and university administrators and personnel, as well as students and their parents. Centurion also wanted to engage a variety of stakeholders in the student housing industry to determine where people thought that it was going. The company launched The MARQ brand in early 2014, and rebranded several of its properties and units to spread its message. It currently manages six properties in London and Waterloo, and will continue to expand across the growing student housing portfolio. “The MARQ’s key message is to make its student living options the centre of its residents’ overall university experience,” said Wayne. “It aims to do so by providing a safe, clean and secure living environment with modern décor and amenities in a convenient location, where it’s all about an authentic university experience.”

12 | 2014 RHB Student Housing REPORT

CASE STUDY When Centurion first entered the student housing market, it worked with third-party property managers to learn best practices for managing these types of properties. Centurion had a lot of experience with managing multi-residential rental properties, but it wanted to learn how to apply this knowledge to student housing. Management believed that it could bring its background as an institutional-grade property manager to the student housing space and raise the overall level of professionalism and service offering. For example, The MARQ employs a higher staffing complement than typical rental properties, which includes a dedicated on-site housing manager to provide operations oversight and a touch point for residents and parents, dedicated administrators to handle typical rental transactions, and a maintenance team to respond to resident requests and generally take care of the property. The MARQ takes a sophisticated approach to marketing, developing specific tactics and campaigns within a broader strategy to engage the students, their parents and the university at every level possible. Comprehensive market data analysis, social media touch points, athletic and academic sponsorships, and special events play a big part in helping to get the message across. “We leveraged our extensive experience in typical property operations, and incorporated what we had learned about student housing,” said Wayne. “We are committed to this space and are comfortable that The MARQ can provide property management services to other student housing developments. Our aim is to be recognized as industry leaders in the provision of these


CONGRATULATIONS, CENTURION, ON YOUR NEWEST VENTURE: THE MARQ A PARSONS BRINCKERHOFF COMPANY

Repair and Renewal • Property Condition Assessment Green Buildings and Energy Services • Structural Engineering Enclosure Engineering

Halsall.com Engineering Better Buildings

To find out how Halsall can engineer solutions to meet your needs, contact: Greg Spangler, P.Eng. / 416.644.2891 / gspangler@halsall.com

Leading the Way in Student Housing Design 663 Princess Street | 502 Beds Kingston, Ontario

Concept Design | 750 Beds Toronto, Ontario

Northpoint Crossing | 1,855 Beds College Station, Texas

The Standard at Athens | 610 Beds Athens, Georgia

ARCHITECTURE | INTERIORS E D MO N TO N • TO R O N TO • DA LL AS • C HICAGO • NEW ORLEANS • NEW YORK • NEWP OR T B EACH O R L A NDO • SCOT TSDA LE • SAN RAMON • CHENNAI • D UB AI • HANOI • MONTEV ID EO

TORONTO >> 647.694.0319

EDMONTON >> 587.487.5767

VISIT >> WWW.HUMPHREYS.CA

EMAIL >> ASHLEY@HUMPHREYS.CA

2014 RHB Student Housing REPORT | 13


very specialized management services, and to improve overall standards in the student housing industry.” Growing the portfolio Centurion has been involved in many different student housing projects, ranging in size from 25 units (75 beds) to 100 units (489 beds). It has focused on markets outside the Greater Toronto Area, such as Montreal, Waterloo and London. Centurion is currently involved in financing several building projects in Waterloo and London, with about 1,500 units in development, and is also looking into opportunities in Toronto, Guelph, Hamilton, Barrie and Kingston, as well as in other provinces.

said Steve. “The bank loaned the developer 75 per cent of cost, we financed 10 per cent of cost and the developer covered the remainder primarily through unencumbered land value.” As for The MARQ, apart from additional management opportunities in its growing portfolio and its developers, Centurion is actively pursuing third-party management contracts for student housing developments where it sees there is a strategic fit, and the goals of owners are aligned with its own philosophy and approach under The MARQ brand.

Wayne Tuck, VP Operations, COO, Centurion | The MARQ and Romina Talarico, Housing Manager of The MARQ Waterloo in a renovated unit at 173 King St. N

“The brand is off to a good start,” said Greg Romundt. “The properties operating as The MARQ in London and Waterloo are not only full for the Fall 2014 cycle, they are also capturing more than their fair share of the market.” The key path to growth involves providing construction financing to student housing developers. It plans to achieve this in different ways. In most cases, the company provides either mezzanine financing or equity co-investment, and it will include the first right of offer to purchase the completed project if and when the developer wants to sell the property. Centurion also provides bridge financing in cases where there is a short-term repayment gap between the level of interim construction financing in place as construction finishes and the level of available takeout financing available after initial lease stabilization. “In one instance, we provided a developer with mezzanine financing for a high-rise student residence,”

14 | 2014 RHB Student Housing REPORT

“We hope to grow the brand, in support of our overall marketing efforts at the property level,” said Wayne. “We want people to identify with The MARQ, and recognize that it is all about that authentic university experience, where students can find that safe, comfortable environment where everyone can learn, socialize and grow. At the same time, we create a situation where owners can realize a real value-add.” Conclusion Student housing is a relatively small but growing niche in Canada, and it is at least a decade behind the US in terms of offerings and options for students. While there are many challenges for new property managers entering the market, there are also numerous opportunities for growth. Finding the right location is the first major step, but it is also important to provide students with the appropriate amenities and to tailor your property management approach to this particular demographic.


isure is one of Ontario’s fastest growing fully independent Property/Casualty Insurance Brokerage. Located in Vaughan, Ontario, and entirely independently owned and operated, isure provides clients unbiased advice, choice, and selection from Canada’s largest and most reputable insurance companies. These “isure Approved” insurers represent the widest range of commercial and personal insurance products and services in the marketplace.

Innovative Insurance Solutions for Professional Owners, Managers and Builders of Student Housing Expertise & Coverage Highlights include: • • • • • • • •

isure.ca o/b Belpac Capri Insurance Brokers Ltd.

Realty including Multi Unit Residential & Student Housing Property Management Development & Construction Property, Liability Insurance Business Interruption, Loss of Income, and Rental Income Insurance Errors & Omissions, Directors & Officers Insurance Corporate & Commercial Bonding, Crime & Fidelity Insurance Commercial Fleet

T: 905.264.8550 TF: 1.877.51.isure (47873) E: bsure@isure.ca www.isure.ca www.belpaccapri.com

CONGRATULATIONS

CENTURION APARTMENT REIT ON THE LAUNCH OF YOUR NEW STUDENT HOUSING PROGRAM

© 2014 Cassels Brock & Blackwell LLP. All rights reserved.

www.casselsbrock.com

Cassels Brock - September 3, 2014 RHB Student Housing Report 7.125” x 4.75” (half pg horizontal)

Designer: Heather Murray hmurray@casselsbrock.com 416 869 5782 - fax 416 642 7137

Please PRINT a hard copy of the 2014 RHB Student Housing REPORT | 15 file and either FAX it or SCAN and EMAIL it back to me, thanks!


Congratulations Greg and the entire Centurion Team

Our success for complete customer satisfaction is based on quality and prompt service and maximum savings. Our experienced personnel can usually make our service call in the shortest amount of time and in the long run effect substantial savings. • Full Complete Plumbing Services & New Construction • Backflow Prevention Services • Video Camera Inspections/Locate

• Fire Protection • Installation of gas, water, & sewer lines • Riser Replacements • HVAC • Power washing & Vacuum Drain Services

905-569-7558 gtaplumbing.com

West Renovation approaches each project with enthusiasm and finishes it with pride! We are a highly experienced team of professional carpenters, plumbers, painters, tile installers, electricians and general sub contractors who can take care of all your project requirements and/or property renovation needs. • Complete suite renovations • Corridor upgrades • Painting • Ceramic tile installation • Trim work • Cabinetry • Counter tops • Closet shelving and organizer installations • Wood and metal door installations • Door frame installations • Plumbing • Drywall • Flooring • Unit clean up, demolition and site bulk removal

416 880 3815 | westreno.ca

16 | 2014 RHB Student Housing REPORT

Apartment Valuation Specialists Dan Tapping, Jim Telford, Matt Telford, Mark McManus, Andy Levers

Student Housing Appraisals and Feasibility Studies Province Wide Andy Levers

1-800-305-2650 www.valcoconsultants.com


Continued from page 36

CMHC predicts a soft landing

members as BC’s top resource for owners and managers of rental housing.

David joined LandlordBC (BCAOMA) in early 2013 as a senior executive with proven leadership skills and strengths in general management, relationship building, innovative marketing and, motivating and developing people. In his short tenure with LandlordBC, David has significantly influenced the vision and direction of the organization, while demonstrating that he is an open-minded critical thinker, and a positive and personable leader and collaborator. His past hands-on experience with leading edge, web-based technology solutions has been instrumental in the development of LandlordBC’s new technology platform, ConnectedLandlord™, an application built for our members to engage, screen, set-up and manage their tenants relationships. David can be reached at davidh@landlordbc.ca. SAVE THE DATE for CFAA Rental Housing Conference 2015 In its Third Quarter Housing Market Outlook report, based on information up to July 16, 2014, CMHC predicts total housing starts in 2014 of 184,800 units. Of those units, 74,000 are expected to be single family homes and 110,800 to be multiple units, including row, semi-detached and apartment units, both for the rental market and the condo sale market. The forecast for 2015 is for a total of 183,100 housing starts of which 74,400 are expected to be single family homes and 108,700 to be multiple units. CMHC also publishes a range for the total number of 163,000 to 203,200 units for 2015. The number of sales of existing homes is expected to rise modestly in both years from 457,300 sales in 2013 to 463,600 sales in 2014 and 474,300 sales in 2015. New CEO for LandlordBC Having held the position on an acting basis for some time, David Hutniak was appointed as Chief Executive Officer (CEO) effective June 30, 2014. As CEO, David is responsible for the external and internal leadership of LandlordBC, and to ensure the organization fulfills its mandate on behalf of its

The CFAA Rental Housing Conference will return to Toronto on June 10 to 12, 2015. The building tour will take place Wednesday afternoon, June 10, with the education sessions on June 11 and 12, and the social event in the evening of June 11. Benjamin Tal will give his economic update on Thursday morning, June11!

Rental Housing Business 37


FRPO Spring Golf Classic Raises Over $66,000 for Interval House 2014 Golf Tournament Held at Angus Glen Golf Club on May 28th

Thank You

to our event sponsors

Bronze Sponsors

Gottarent.com Phelps Apartment Laundries 4Rent.ca CMHC Midnorthern Appliance Sparkle Solutions Interface

$1000 Hole

Pretium Anderson Lincoln Paving

Beverage Cart

Maxim Group General Contracting

Water Bottle Sponsor

Solid General Contractors Inc.

Chocolate Sponsor Halsall

Wine Sponsor

All Professional Trades

Hospitality Tent The Byng Group


SEPTEMBER 2014

NATIONAL OUTLOOK

RHB EDITION

Problems in Canada’s Rental Housing Markets By John Dickie, CFAA President

Canada has problems in the residential rental housing market. Many people are aware of some of the problems, but little concern is shown for other problems, nor for the potential for the situation to worsen in the foreseeable future. It is important that the problems be recognized as an important public policy issue, and that a dialogue take place about why these problems exist, and about what is required to fix them. What follows is an edited version of CFAA’s pre-budget submission for the 2015 federal budget. The state of Canada’s rental housing market More than 30% of Canadians rent their homes, but for the last 25 years, less than 10% of all new housing has been built for the rental market. In Canada outside Quebec, the rate is even lower. This contrasts dramatically with the rental construction rates of the 1960s and even the 1970s and 1980s. Because of the economies of scale and other savings in land, services, construction costs and professional fees, rental housing is the most affordable housing which can be built and operated. But Canada is not building enough new purposebuilt rental housing.

In National Outlook (Digital edition) Available at www.cfaa-fcapi.org

Manitoba changes its residential tenancies law (This is an expanded version of the information reported in “In the Know” at page 36)

Rental housing is the housing of choice for most workers moving to Canada or within Canada, for many newly-formed households, for new Canadians, for low-income households and for many seniors. The negative impacts of insufficient new rental housing include these: • High growth communities cannot attract an optimal labour force to grow as much as they could • High growth and new communities face high housing costs and difficulty attracting the young workers they need to provide government services, such as fire, police and hospitals • Many communities see rising rents throughout the rental market, much to the disadvantage of low-income people (and of governments which support many of them) continued on page 3

Lessons from the Toronto Ice Storm and Calgary Flood By Chrystal Skead and Randy Daiter

Within the last 15 months, landlords in two of Canada’s major rental markets faced serious trouble from a natural disaster. At CFAA’s Rental Housing Conference in June, delegates were able to hear from two experienced managers who had to mitigate that trouble. Chrystal Skead, CPM, ARM, is the Senior Director of Property Management - Residential with Bentall-Kennedy, with responsibility for the company’s buildings in Vancouver, Victoria, Regina, Toronto and Calgary. In June 2013, a continued on page 4

National Outlook - RHB Edition 1


YARDI Voyager 7S ®

Our most advanced property management platform with full mobility.

Voyager 7S Procure to Pay

Energy Solutions

RENTCafé

Take advantage of Yardi Voyager 7S, our advanced Software as a Service (SaaS) mobile property management platform. You’ll gain instant access to your data using any browser, with the freedom to work from your mobile device. Achieve a business-wide solution by adding products from the Yardi Multifamily Suite.™ To learn more, call 888.569.2734 or visit www.yardi.com/residential. 40 september 2014


NATIONAL OUTLOOK

SEPTEMBER 2014

continued from page 1

• Housing of all types is becoming less affordable (apart from today’s low interest rates, which will not last forever) • People lack choice in addressing their housing needs • Shortages of rental housing interfere with labour mobility • Rentals by landlords with no on-site staff (such as condos) are creating community problems in condo buildings and in established neighbourhoods • Excess home-ownership rates raises unemployment Isn’t the issue rent controls? Rent control is a factor that makes it less attractive to invest in rental housing. However, the number of rental starts is extremely low in all provinces, including growing provinces which do not have rent control, like Alberta, Saskatchewan and Newfoundland, while the federal tax rules apply nation-wide. What about low interest rates? In the last one or two years some rental starts have been triggered by low interest rates. Low financing costs make rental development more feasible than it would be at more normal interest rates, but it has not enabled construction of the number and type of new rental units needed. When interest rates rise, even the current low level of rental development may well dry up. Yet that same rise in interest rates may very well impact demand for rental housing, as those people who have stopped renting and instead bought residential accommodation may no longer find it affordable, and may seek to move back to rental homes. What about incenting new supply, especially affordable supply? Most often when people talk about a lack of affordable housing, the reaction is to look at subsidizing the construction of affordable housing. However, since building new housing is inevitably expensive, a large subsidy is required to reach affordable rent levels. The more economic approach is to make it more attractive to build at the high-end for high-end rents, and thus enable the move-up effect to make affordable units available to low-income tenants. Moreover, subsidies for new social housing crowd out existing affordable housing, often as much as one-to-one. Crowding out occurs because the subsidized construction uses up available land, construction labour and contractors, and takes up the effective demand. Subsidies to build “affordable housing” are extremely expensive, and often work poorly. The purpose-built rental housing market is highly competitive, both inside the rental market and with close substitutes. Rental owners almost always invest capital in the rental assets they own, and must make a sufficient return on that capital

to justify keeping it in that use (rather than buying shares or bonds, etc.) If rental owners are making any abnormal profit, other investors will come into the market to buy assets, and thus stimulate new rental construction. If rental owners are making below normal rates of return, then they will want to pull out of rental housing, or at a minimum will not buy more rental assets, and so few new rental assets will be built. The cause of insufficient rental housing production The fact that few purpose built rental assets are being built reflects the fact that rental owners are not making a high enough return to justify more investment. The cause of the problem is largely the current tax system and its impact on the after-tax rate of return and the incentive to invest or divest. The impact of the tax system is felt by renters, who end up being treated unfairly compared to home-owners. Within the broader housing sector, home-owners do not pay tax on the capital gains of their homes. However, capital gains tax is charged on the value gains made within rental housing. Since the after-tax rate of return is determined by the market, tenants must pay enough rent to pay the capital gains tax on their homes (over time through their rents.) On average, tenants have half the income of home-owners, but yet they have to pay a tax which home-owners are spared. Providing a sufficient number and type of rental units at a reasonable level of profit is the challenge undertaken by the industry. Canada is not seeing enough new purpose-built rental housing to meet the housing needs of workers moving to new jobs, low-income Canadians or large families. Conclusion Improving the rate of return on purpose-built rental housing will increase how much rental housing investors want to hold. That will draw out new rental housing construction and address the problems listed above in a way which helps communities, renters, landlords and neighbours.

National Outlook - RHB Edition 3


NATIONAL OUTLOOK

continued from page 1

major rain storm settled in at the edge of Rocky Mountains in Alberta, just west of Calgary. In 36 hours the storm produced 220 mm of rain, when the ground was still frozen and not absorbing water. Due to extensive flooding, residents of major areas of Calgary were advised to evacuate, including a Bentall-Kennedy highrise with 294 suites. However, evacuation was not enforced.

KEY ISSUES Know your building

Asset protection

Backup generator

Staff training

Communications

The landlord notified residents of the evacuation order. City Emergency Medical Services teams responded to help mobility-challenged tenants vacate their suites. The security contractor’s staff did not report for their regular work shifts. As a result, the landlord engaged a replacement security contractor to provide patrols 24-7 and staff the front desk. They and the building staff made a door-todoor inventory of who remained in the building, and then maintained a log book of people leaving and arriving. The main problem was that electrical power was shut off. Among the building challenges, the elevators were undergoing modernization, and as a result did not operate on the emergency power. The water pumps were also not hooked up to emergency power, and so there was no water service higher than the 17th floor. Bentall Kennedy’s call centre, ClikFIX, which is available through a 1-800 number, provided information to residents over their telephones, while the on-site staff attended

KNOW YOUR BUILDINGS Check what systems run under emergency power, by powering down the building. Lighting – generator or battery

Security cameras

Elevators

Sump pumps

Building access systems

Cold water booster pumps

Garage door

Domestic hot water pumps

Compactor

4 National Outlook - RHB Edition

to building issues. Managers in all asset classes sent updated information to everyone on the team, via ClikFIX by Blackberry every 4 hours. The lobby became a central social area and gathering place. The ClikFIX manager ordered in pizza and pop for staff and residents on the second day of power outage. Staff delivered food to those who could not come to the lobby. The landlord allowed residents to come and go from their suites, for example to water plants, feed cats, or check on loved ones who did not evacuate. Staff regularly monitored the tenants who stayed on site, and even charged cell phones in cars when needed. After 2 days with no power, staff went through the suites, removing all perishables from the refrigerators to prevent damage to them. In preparation for the restoration of power, staff also shut off breakers in all suites to mitigate the potential fire hazard of any appliances left on when the residents evacuated. Notices were left in the suite with instructions on how to turn the breakers back on. The Toronto Ice Storm Similar problems occurred in Toronto during the ice storm of December 2013. Randy Daiter is the Vice-President of Residential Properties for M&R Holdings spoke about the M & R buildings that lost power. Because 300,000 accounts were affected, a long wait was anticipated before power could be restored, and power and heat were off for up to five days at 60% of the M & R portfolio. Power was on in some surrounding locations. To communicate what the tenants needed to do, M & R was able to print instructions and copy them at a local copy shop. The instructions included information that the situation was a major municipal crisis, and not to use candles, or combustible cooking materials. For on-going communications, the building staff set up a whiteboard in the lobby, on which they could post updates, and any new instructions. As a goodwill gesture, the landlord distributed blankets, flashlights, snacks and bottled water to tenants, as well as hot coffee from McDonalds and Starbucks. To protect the building, staff monitored the interior and exterior wall temperatures and drained the boilers (when the exterior walls or radiators reached below 40 F degrees (4 degrees Celsius). Staff also turned off the breakers for key mechanical and electrical equipment so that relays, motors and other components in the base building equipment would not be shorted out when the power came back on.


SEPTEMBER 2014

The building staff had recently updated their information about residents with disabilities; and so, they could easily check on them, and see if they wanted assistance to move to another location. M & R had protocols in place, and their team stepped up to address the problems. The company has subsequently developed a comprehensive Loss of Power Plan and List of Preparedness Items. It consists of three main areas, namely: 1) practical building equipment modifications worth considering, 2) communications and public relations, and 3) a checklist of items staff should have on-site at each building.

OTHER CONSIDERATIONS

Randy has held several Senior Management and Executive roles in the rental housing industry. Prior to M&R Holdings, Randy was the Vice-President, Operations, at CAPREIT and the Vice-President and General Manager at O’Shanter Development Company. Randy is the current chair of the Federation of Rental Housing Providers of Ontario (FRPO) Certifications Committee. Randy can be reached at rdaiter@mandrholdings.com.

CFAA SUPPLIERS COUNCIL: Gold

A white board for the lobby

EnerCare Connections Gottarent.com Rent Hello RHB Magazine

Flashlights

Communications plan

Silver

Pre-printed emergency instructions at each site

Reliable and loyal key contractors (e.g. security, plumbing, electrical)

Dual fuel generators Power for the office on site Battery operated radio on site

Pre-printed notices of entry (1 or 2 sets), including inunit breaker instructions

Randy quoted Harvey Silver, who said, “When you succeed in planning, you’re planning to succeed, so when you plan well, you’ll do well.” In both Calgary and Toronto, the fundamental challenge was dealing with a loss of electrical power. Both landlords experienced some things working well, and other areas where more investigation and pre-planning for the response would have helped. As Benjamin Franklin said, “By failing to prepare, you are preparing to fail.” Chrystal has been active in property management since 1985. As well as being the Senior Director of Property Management - Residential with Bentall-Kennedy, Chrystal facilitates courses for the Real Estate Institute of Canada. Chrystal was awarded her Accredited Residential Manager (ARM) designation in 1990 and her Certified Property Manager (CPM) designation in 2000. Chrystal can be reached at cskead@bentallkennedy.com.

Excel Collection Services IRC Building Sciences Group Landlord Web Solutions

Visa Wyse Meter Solutions Yardi Systems

Noble Building Supplies Places4Students.com RentMoola

Bronze 4Rent.ca Assured Thermal bazinga! Technologies BCAP Belanger Engineering Bentall Kennedy (Canada) LP Carma Industries CMLS Financial Cohen Highley LLP Coinamatic Enbridge Gas Distribution FIXO H&S Building Supplies

Humphreys & Partners Architects, L.P. InSinkErator Orkin Canada Pattison OneStop Rainmaker LRO Rent Check Credit Bureau Renters Guide Rogers Communications Sparkle Solutions Suite Collections Telus Water Matrix Winmar Zipsure.ca

National Outlook - RHB Edition 5


We’ve been working with Apartment Owners and Investors for over 90 years Buying, Selling or just Advice, the National Apartment Group of Cushman & Wakefield has one single focus... Apartments! With a wide range of clients from first time investors, family owned operators and large corporate and institutional organizations we offer our clients a highly coordinated marketing process and broad-based investor coverage led by our innovative industry experts.

Highest Exposure Superior Results Maximum Value for your Property

For more information, please contact:

Tony Manganiello* T. 416-359-2639 TF. 800-870-5862 tony.manganiello@ca.cushwake.com www.cushwake.com 8 National Outlook - RHB Edition

*Sales Representative, Cushman & Wakefield Ltd. Brokerage


2014

RHB Apartment Market Report update By John Dickie and Tony Manganiello


2014 RHB Apartment Market Report

construction, suggesting that completion levels will remain above the ten-year average during both 2014 and 2015.

This report provides a mid-year update on rental asset sales in the Greater Toronto Area, Calgary and Vancouver, as well as highlights of CMHC’s April rental market report and CMHC’s Spring Housing Outlook reports, which include forecasts of vacancy rates and average rent increases for close to 20 centres across Canada.

Expect the vacancy rate in Halifax to inch upward to 4.3% in October 2014 and 4.6% in October 2015. The average rent is expected to rise modestly to reach $995 in 2014 and $1010 in 2015. (In April 2014, Halifax reached an average rent of $1,010.)

The information is for census metropolitan areas, which include all of a City’s suburbs, including numerous separate municipalities. Since the rental market differs from season to season, CMHC insists that the details of the April figures can only be compared with the April figures of the previous year, not with the October figures. RHB Magazine reported on the October 2013 survey information in our March 2014 issue.

Moncton In Moncton, the vacancy rate averaged 3.9% between 1990 and 2012 (perhaps reflecting the absence of rent control in New Brunswick.) In October 2013, the vacancy rate increased to 9.1% following four consecutive years of above-average rental construction. In 2012 and 2013, at 1,173 units, the combined number of apartment units completed in Moncton, was the highest two-year total on record going back to 1965. CMHC expects the vacancy rate to remain over 10% in October 2014.

ATLANTIC CANADA

St. John, NB At October 2013, Saint John posted a vacancy of 11.4% due to soft demand rather than excess supply. The rate was 10.0% in April 2014. CMHC expects the average rent for a two-bedroom unit to increase between 2 and 3% in both 2014 and 2015. Given the vacancy rate, the authors question that forecast.

St. John’s, NL In April 2014, St John’s, NL, showed a sharp increase in the vacancy rate over both April 2013 and October 2013. In keeping with that, the April average two-bedroom rent was lower than the October 2013 figure. However, in the Spring Housing Outlook report, CMHC notes that 2012 marked the first time in over 25 years, when private investors developed purpose-built multi-unit residential projects in St. John’s. Paired with new units, CMHC believes steady demand for rental units will provide a steady growth to the rental market in 2014 and 2015.

QUEBEC

CMHC expects the average two-bedroom monthly rent to increase from $864 in October 2013 to $900 by October 2014 and to $925 in October 2015. Time will tell whether that forecast turns out accurate given the April 2014 vacancy rate of 4.8%.

In Montreal and Quebec, the rental market situation appears to be largely unchanged from October 2013.

Halifax The economy of Nova Scotia is expected to record 1% growth in 2014. The weaker Canadian dollar is expecting to create opportunities in the manufacturing and tourism sectors in Halifax, and contribute to employment growth of 0.5% in 2014 and 1% in 2015.

Quebec City After having remained stable in 2013, employment in Quebec City will likely post modest increases in both 2014 and 2015. On the supply side, CMHC anticipates that there will be as many starts this year as in 2013, with 1,600 new units. This addition of dwellings will have an impact in 2015 and should contribute to an easing of the market then. CMHC forecasts that the average rent will rise moderately in both 2014 and 2015, reaching $770 and $785, respectively.

The Halifax rental apartment universe grew by an average of 575 units per year between 2007 and 2011. Approximately 1,700 units reached completion in 2013. Currently, over 2,000 units are under Atlantic Canada

Vacancy rate % (all apartment sizes)

Average rent (2 BR) $

Change in average rent (fixed sample)

April 2013

April 2014

April 2014

St. John’s, NL

1.5

4.8

857

2.6%

Halifax

3.0

4.1

1,010

0.9%

Moncton

7.4

10.7

768

NR

Saint John, NB

10.4

10.0

687

NR

40 september 2014


2014 RHB Apartment Market Report

Quebec Vacancy rate % (all apartment sizes)

Average rent (2 BR) $

Change in average rent (fixed sample)

April 2013

April 2014

April 2014

Quebec City

2.2

1.8

766

1.5%

Montreal

3.0

2.7

742

2.3%

Montreal In Montreal in 2014 and 2015, the vacancy rate will likely be similar to the levels observed in recent years, namely between 2.5% and 2.9%. The average monthly rent for two-bedroom apartments will likely reach $740 in 2014 and $750 in 2015. (The average rent at April 2014 was $742.).

30% drop in apartment sales year over year as available deals dwindle. Although interest rates remain low, many owners are holding on to buildings or opting for re-financing rather than selling. For the first half of 2014, the GTA recorded 47 transactions of buildings with 20 or more units with a total value of $555 million. This is down considerably from the same time last year which had 67 transactions with a total sales value of just over $1 billion. The data clearly illustrates that not only is sale velocity slowing but so is the actual size of the deals which are now concentrated on the smaller mid-market. Unless the sales activity picks up considerably in the latter half of this year, 2014 will be the slowest year since the recession of 2009. Although the selection of deals is slim, buyers have shown that they are more than willing to step up and pay, with the average unit selling for almost $145,000, up 3% year over year.

ONTARIO

Between April 2013, and April 2014, most Ontario cities saw modest increases in the vacancy rates and in rents.)

In 2013, the new supply of purpose-built rentals decreased slightly, but supply of new condo apartments reached an unprecedented 13,000 units. The increase in purpose-built rentals will remain minimal in 2014 and 2015, but the supply of rental condo apartments will grow significantly again in 2014, as many of the record number of apartment condominiums which were started in 2012 reach completion. Despite strong growth in each, CMHC expects that rental demand and supply will remain roughly in balance throughout 2014 and 2015, which will limit changes in both the vacancy rate and rents. (As noted at page __, Benjamin Tal largely agrees.)

Ottawa In Ottawa, federal government cuts have largely taken effect; and so, private sector growth will now raise employment. CMHC expects the rental vacancy rate to inch down to 3.2% by October 2015 as overall employment in Ottawa increases. (Approximately 41% of renter households in Ottawa are between the ages of 25 and 44, making them the most important age group for the rental market.) Toronto In Greater Toronto, CMHC forecasts that the vacancy rate for purposebuilt rental units will rise modestly in 2014, and then stabilize in 2015. The increase in average rents will be modest in both years.

An encouraging trend is a shift to full-time employment among all age groups. Population growth is a key determinant of housing demand. The contribution of migration to population growth in Toronto will gradually increase in 2015, after dropping to a low of about 52,000 in 2014. Generally, Toronto gains population due to international migration, but loses as a result of inter and intra-provincial migration.

Multi-residential property sales for the first half of 2014 were down considerably from the same period last year. So far the GTA has shown a Ontario

Vacancy rate % (all apartment sizes)

Average rent (2 BR) $

Change in average rent (fixed sample)

April 2013

April 2014

April 2014

Ottawa

3.7

3.2

1,136

1.3%

Toronto

1.6

1.9

1,241

3.2%

Hamilton

3.7

3.9

943

2.8%

Kitchener-Waterloo

3.4

3.6

960

2.9%

London

3.1

3.6

921

1.5%

Windsor

6.3

5.0

801

2.0%

Sudbury

2.9

5.0

940

NR

Rental Housing Business 41


2014 RHB Apartment Market Report

London CMHC forecasts vacancy rates in London, Ontario, at 3.2% in October 2014 and 3.0% at October 2015. Growth in the number of immigrants to London and a slowing of out-migration to the western provinces are two demographic factors that will support the rental market in 2014 by increasing demand for rental units.

country, to April 2014. Winnipeg showed a lower rent increase than in the previous six months. In Alberta, Edmonton took the lead with its average rent increase rising from 5.6% to 6.4%, whereas Calgary went in the opposite direction from 7.2% at October to 5.0% at April. Calgary’s increase was still the second highest among major cities across Canada.

Windsor After several years of out-migration from Windsor, in-migration and employment gains for those 15-24 years of age will drive demand for rental apartments. Demand for rental accommodation will come from increased student enrolment at the University of Windsor and St. Clair College. Seniors will add to the rental demand.

Winnipeg Winnipeg recorded an apartment vacancy rate of 2.5% in October 2013, up from 1.7% in October 2012. The factors that contributed to this increase will persist with the vacancy rate expected to reach 3.0% in October 2014 and 3.3% in 2015.

Virtually no new rental units have been completed in Windsor in a decade which has come off vacancy rates near 10% in 2012. For Windsor, CMHC predicts that the apartment vacancy rate will decline to 5% in 2014 and further to 4.5% in 2015. With a lower vacancy rate, expect the average rent to increase in 2014. Sudbury Supported by international students, burgeoning enrolment in Sudbury’s post-secondary educational institutions is putting pressure on the oncampus student residences, leading to a spill-over rental demand in the private rental market. However, three big purpose built rental projects which started in 2013 are expected to complete in 2014, bringing additional supply of rental units to the market. Nevertheless, the increase in rental demand in Sudbury is expected to outstrip supply in 2014 and 2015. CMHC forecasts the average rent for two bedroom apartments to increase by less than 1% to $920 in 2014, and to $930 in 2015. (In April 2014, the average rent is already $940. Therefore, those forecasts may be low.) MANITOBA, SASKATCHEWAN AND ALBERTA

In the Prairie region, the rental market situation saw only minor changes from October 2013, when it was the strongest region in the

CMHC expects continued movement by existing renters to homeownership due to favourable conditions including job gains among those aged 25 to 44, low mortgage rates, and a rising supply of listings in the resale market. Due to a decline in net migration, there will also be fewer new renters coming into the market to fill the vacancies left behind. The number of units in the private rental apartment universe has remained relatively stable despite elevated levels of new apartment rental construction, because removals through condominium conversion or demolition continue to offset new units. Continued increases in the vacancy rate will temper rent increases somewhat over the forecast period, with the average two-bedroom rent expected to rise to $1,010 in October 2014 and $1,035 in 2015. Saskatoon Rental apartment vacancies in Saskatoon are forecast to hover just under 2% in 2014 and in 2015. In 2015, additions of new rental units at higher price points will help push up the average monthly rent for a two-bedroom apartment to $1,105. Regina In Regina, builders have responded to the rental demand by building 730 new purpose-built rental apartments. The average apartment vacancy rate in Regina is projected to rise from 1.8% in October 2013 to 2.2% in 2014 and 2.4% in 2015, as more newly constructed units enter the rental universe and renters move into homeownership. (It is already at 2.5% in April 2014.)

Manitoba, Saskatchewan and Alberta Vacancy rate % (all apartment sizes)

Average rent (2 BR) $

Change in average rent (fixed sample)

April 2013

April 2014

April 2014

Winnipeg

1.9

2.0

969

3.4%

Saskatoon

3.3

3.0

1,075

4.4%

Regina

1.9

2.5

1,053

3.2%

Calgary

1.2

1.4

1,267

5.0%

Edmonton

1.2

1.4

1,180

6.4%

42 september 2014


2014 RHB Apartment Market Report

British Columbia Vacancy rate % (all apartment sizes)

Average rent (2 BR) $

Change in average rent (fixed sample)

April 2013

April 2014

April 2014

Vancouver

2.9

1.8

1,274

2.1%

Victoria

3.4

2.7

1,084

1.0%

The addition of newly constructed units, which typically rent for more than existing units with similar specifications, will produce higher average rents, even as the rents of existing units are moderated. In October 2014, the average monthly rent for a two-bedroom apartment is forecast to increase to $1,055 in October 2014, from $1,018 in October 2013, and to rise further to $1,085 in 2015. Calgary Following a record level in 2012, net migration into Calgary climbed further to a new high in 2013. The apartment vacancy rate in October 2013 was 1%. It is forecast to increase to 1.2% in October 2014 and 1.5% in October 2015. The two-bedroom rent is forecast to average $1,290 in October 2014, up from $1,224 in October 2013. In October 2015, the average two-bedroom rent is forecast to reach $1,330 per month, which may make it the highest across Canada’s major cities. Over 30% of Calgary’s condominium units were reported as rentals. The number of investor owned condominiums is likely to increase in 2014 and 2015. A few hundred market rental units have been completed since October 2013. As of March 2014, there were more than 300 market rental units under construction. Calgary’s sales volume remains the slowest of the 3 major markets in Canada, with a total of only seven transactions of buildings with 20 or more units for a total volume of $39 million. Over half of that volume was covered in two single transactions. Unlike Vancouver and the GTA, the average price per unit has actually dropped, falling to $138,000 from over $167,000 for the same time period last year. Although the average price per unit has fallen over 20%, the number is skewed due to the smaller number of large transactions which would indicate that the properties being sold are of lower quality than last year’s sales. Edmonton As migration comes down from its peak level, and employment growth slows, the Edmonton vacancy rate is forecast to increase to 1.6% in October 2014, and then to 1.7% in October 2015. High demand for rental accommodation has put upward pressure on rents. The average rent for a two-bedroom apartment is expected to increase to $1,195 in October 2014, and to $1,225 in 2015. There were 2,537 rental apartments under construction in Edmonton in March 2014, 37% higher than the previous year. As these units move to completion, the additional supply will relieve some of the upward pressure on the rents of existing purpose-built units. As well, almost one-third of the condo apartments in Edmonton are a part of the secondary rental market

BRITISH COLUMBIA

Vancouver The Vancouver rental asset market remains stable, with year over year sales remaining basically the same as they were last year. In the first half of 2014, there were 25 transactions completed of buildings with 20 or more units with a total value of $263 million. The average price per unit in the Vancouver market rose 13% in 2014 and remains the most expensive in the country at $208,000. In Vancouver, CMHC forecasts that demand for rental accommodation will remain solid this year and through 2015. The vacancy rate for purpose-built rental apartments is forecast to remain just under 2%. A growing population, that is expected to generate more than 17,000 new households each year, will be one factor supporting rental demand. Although the number of purpose-built rental units started in 2013 more than doubled compared to 2012, the impact of the approximately 3,000 new units on a universe of nearly 265,000 units will likely be negligible, although many new condo units will come onto the rental market as well. Rents for purpose-built apartment are forecast to increase at a modest pace, near the rate of consumer price index, in 2014, and at a slightly faster pace in 2015 Victoria Population growth is forecast to add an average of approximately 3,000 people to the Victoria region each year until 2018. Demand for rental accommodation is expected to keep pace with an increasing supply, leading to relatively stable apartment vacancy rates in 2014 and 2015. New purpose-built rental currently under construction, and units recently completed, as well as conversion from hotels, are expected to increase supply at a faster pace than rental demand in 2014. Both Victoria and Vancouver saw little change from October 2013. RHB The Cushman & Wakefield Apartment Brokerage teams are located across Canada and staffed by a number of experienced professionals that specialize in the acquisition and disposition of multi-residential properties across Canada. If you have any questions regarding a specific market, or if you would like to discuss your real estate needs in detail, Tony can be reached at 1-800-870-5862 or via email at tony. manganiello@ca.cushwake.com.

Rental Housing Business 43


COAST TO COAST FRPO – Chicago Housing Tour September 17-18 Chicago, Illinois FRPO’s annual Housing Tour will take place in Chicago September 17-18. The tour will include 3 or 4 unique properties, as well as a group boat cruise. To see if you can still attend the tour, contact Lynzi Michal at lmichal@frpo.org. PPMA – General Membership Meeting September 17 Masonic Memorial Temple, Winnipeg The Professional Property Managers Association (of Manitoba) presents a monthly membership information meeting. Registration and breakfast start at 7:30 am. Meeting 8:00 to 9:15 am, including a guest speaker. For more information, visit www.ppmamanitoba.com IPOANS – Luncheon, Golf Tournament and Dinner September 18 Chester, N.S. The Investment Property Owners Association of Nova Scotia will hold its annual golf event at the Chester Golf Course on 222 Golf Course Road. The luncheon will start at 12:00 noon, providing an excellent opportunity for participants to network. The golf tournament will then kick off with a shot gun start at 1:30 pm. The day will conclude with dinner by the water. For more information, email association@ipoans.ca. IPOANS - RTA Information Luncheon September 24 Halifax The buffet-style luncheon will be held at the Comfort Hotel at 88 Chain Lake Drive. Registration will begin at 11:45 am. Attendees will then hear from Dean Johnston, Director, Residential Tenancies. For more information, email association@ipoans.ca.

44 september 2014

MHPOA – AGM & Fall Conference September 26 and 27 Harrison Hot Springs, BC MHPOA is hosting its AGM and Fall Conference. The theme of the event is “Today’s Park: Aging Homes; Aging Tenants; Aging Infrastructure”. Watch the MHPOA home page for more information at www.mhpo.com/ WRAMA – Dinner Seminar October 8 Golf’s Steak House and Seafood, Kitchener WRAMA (Waterloo Regional Apartment Management Association) General Meetings feature industry experts presenting up to date information that matters for landlords and property managers. Join WRAMA members for the dinner in the dining room at 6:00 pm or join the General meeting at 8:00 p.m. in the banquet room. For details, visit www.wrama.com/events/calendar. PPMA – General Membership Meeting October 15 Masonic Memorial Temple, Winnipeg The Professional Property Managers Association (of Manitoba) presents a monthly membership information meeting. Registration and breakfast start at 7:30 am. Meeting 8:00 to 9:15 am, including a guest speaker. For more information, visit www.ppmamanitoba.com. SRHIA – Safer Communities and Neighbourhoods luncheons October 15 in Saskatoon October 17 in Regina The Saskatchewan Rental Housing Industry Association (SRHIA) is planning two fall luncheons on October 15 in Saskatoon, and October 17 in Regina. The topic for both luncheons will be the Safer Communities and Neighbourhoods Act (SCAN). SCAN legislation is intended to empower residents to take back their neighbourhoods by reporting problem residences or businesses that are habitually used for illegal activities. For more information, go to https://www.srhia.ca/


LandlordBC – Education, Trade Expo & AGM October 22 Vancouver This will be a day of education and networking with a trade expo and our inaugural AGM for LandlordBC! Events kick off around noon and conclude with dinner. Seminar presentations will be spread out through the day to allow for plenty of interaction between attendees and suppliers at the booths. At 5:30 p.m., there will be cocktails and hors d’oeuvres in the trade expo area, followed by dinner at 6:30 p.m. GTAA – AGM & Dinner October 23 Liberty Grand, Toronto GTAA is holding its AGM and dinner on Thursday, October 23. The meeting begins at 5:00 p.m., followed by cocktails and dinner at 5:30 p.m. For more information visit www.gtaaonline.com/events, or e-mail Lorraine at lfisher@gtaaonline.com. LPMA – Night at the Knights October 24 Budweiser Gardens, London Join the London Property Management Association for a social night at the October 24 London Knights’ game. Enjoy food and beverages in box seats and cheer for the London Knights as they take on the Ottawa 67s. Invite your friends and family and network with other LPMA members. For more information or to register, contact info@lpma.ca.

WRAMA Dinner Seminar November 12 Golf’s Steak House and Seafood, Kitchener For details see the October 8 WRAMA Dinner listed above. FRPO - MAC Awards Dinner December 4 Metro Convention Centre, Toronto The FRPO MAC Awards recognize the year’s best in the business. Join the Federation of Rental-housing Providers of Ontario to celebrate the winners in 15 categories including Marketing, Achievement and Construction. Register early; this event will sell out. Registration information will be available in Fall 2014. - See more at: http://www.frpo.org/events#sthash. ACDMcYFL.dpuf. CFAA - Rental Housing Conference 2015 June 10 – 12, 2015 Westin Prince Hotel, Toronto The building tour will take place Wednesday afternoon, June 10, with the education sessions on June 11 and 12, and the social event in the evening of June 11. Benjamin Tal will give his economic update on Thursday morning, June 11! For more information about the program, or to sponsor the conference, see www.cfaa-fcapi.org or telephone 613-235-0101.

LPMA – Property Management 101 Seminars November 4 & November 13 Mocha Shrine Centre, London Plan to attend these two dinner seminars designed for small landlords, investors and managers of rental property. Whether you are new to the business or well tenured, these seminars are for you. Participants will receive a binder with valuable course material to keep for future reference.

Tra ns pa re nt bi l l i ng Cont rol r i s i ng ut i l i t y cos t s Cus tomi ze d s ol ut i ons 3 5 ye a rs of e xpe r i e nce

http://www.cfaa-fcapi.org/ Tel: (613) 235-0101 | Fax: (613) 238-0101 Email: admin@cfaa-fcapi.org Rental Housing Business 45


Ad Index sponsored by:

TOTAL CONFIDENCE

Try us risk free for six months. If you are not happy with our services, we will cancel the contract and remove our equipment at no cost to you.

For more information on our Total Confidence Program, call: 1.877.755.5302

■ email: info@coinamatic.com ■ www.coinamatic.com

Aztec Restoration www.aztecrestoration.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Brook Restoration www.brookrestoration.ca . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . OBC Carma Industries www.carmaindustries.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 + 45 Century Building Restoration www.centuryrestorationinc.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 CFAA www.cfaa-fcapi.org . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 CMLS Financial www.cmls.ca . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Coinamatic www.coinamatic.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IBC + 36 + 46 Daoust Vukovich LLP www.dv-law.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Delbove Buolding Consultants www.delbove.ca . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 EN-PRO International www.en-pro.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 F.Shaw Management www.fshaw.ca . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Fibertec Windows & Door www.fibertechighrise.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 FRPO www.frpo.org . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Green Air Mechanical www.greenairmechanical.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 H&S Building supplies www.hsbuild.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Harris Sheaffer LLP www.harris-sheaffer.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 HD Supply www.hdsupplysolutions.ca . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 M&E Consulting Engineers www.me-eng.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 March Elevator www.marchelevator.ca . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Nacora Insurance www.nacora.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 norstar windows www.norstarwindows.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Superior Energy www.superiorenergy.ca . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Thomas Cavanagh Construction www.thomascavanagh.ca . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Tricon Ltd www.triconltd.ca . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Verda Paints www.verdapaints.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 WyseMeter Solutions www.wysemeter.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Yardi www.yardi.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IFC + 37 + 44 Bolded advertisers are members of CFAA’s Supplier Council

46 Profile


Garage Rehabilitation

WE TAKE THE HASSLE OUT OF LAUNDRY ROOMS. Unfortunately not the sorting, separating or folding though. Unfortunately not the sorting, separating or folding though.

Balcony Renovation

Windows & Seal Renewal

Cladding Restoration

For over 65 years, Coinamatic has been the leading provider Formulti-housing over 65 years,laundry Coinamatic hasin been the leading of services Canada offeringprovider premium of multi-housing laundry services in Canada offering premium coin vended and smart card-activated laundry services. coin vended and smart card-activated laundry services. Contact us and see what we can do for your facility. Contact us and see what we can do for your facility.

(1-877-755-5302) • info@coinamatic.com • www.coinamatic.com (1-877-755-5302) • info@coinamatic.com • www.coinamatic.com


Roofing • Restoration • Brook Anywhere • Restoration • Roofing 11 Kelfie ld St. , Tor o n t o, O N M9W 5 A 1 • T:416.663.7976 • www.brookrestora tion.ca

www.brookrestoration.ca

RHB Magazine  

September 2014