SMAR Holdings Ltd.
Arun Pathak has always been a hands-on person; he believes in getting personally involved when he has a personal stake in the outcome. He actually does get his “hands dirty” – whether that means fixing a broken door hinge at one of SMAR Holdings’ rental units or making presentations about rental housing issues on behalf of the Hamilton & District Apartment Association. This approach has enabled him to develop a successful business, which should continue to grow with the help of his children.
12 march 2014
[ SMAR Holdings ]
Arun was born in India but moved to London, England when he was three years old. His father worked in Saville Row as a tailor, started a chain of supermarkets where Arun worked during his youth, and purchased and rented out homes. After graduating from the National College of Agricultural Engineering, Arun purchased and operated a dairy farm in Devon, England. During this time, he married his wife Rama, and they had their first daughter.
SMAR Holdings has focused on purchasing properties that are within a 30-minute drive from where Arun lives, which keeps him within the cities and suburbs of Hamilton and Burlington. Being geographically close has enabled the company to be hands-on in their approach to maintaining properties and servicing tenants. Because Arun has a degree in Agricultural Engineering, he has been able to apply his knowledge and experience with machinery, electrical controls, plumbing and construction. Arun gets his hands dirty when necessary.
In the early 1980s, after several family members moved to Canada, Arun decided to emigrate as well. He lived in Scarborough for several years, and later moved to Dundas, which is now part of Hamilton, where he and his wife raised their four children. While selling real estate for two different companies, Arun developed an interest in the rental housing industry. In 1985, Arun and three silent partners founded SMAR Holdings Ltd. to purchase and manage rental properties. Their first purchase consisted of two rental properties in Hamilton, with a total of 60 units; they sold these properties several years later. Since that time, SMAR Holdings has followed a buy and hold strategy, using refinancing to grow the portfolio to include six apartment buildings and a townhouse complex in and around the Hamilton area. “I looked for investment properties in Toronto that would fit our requirements and found nothing suitable,” said Arun. “It became obvious that there was an opportunity to invest in Hamilton and get better returns. That is still the case today. Some people consider Hamilton a secondary market, or less attractive city to invest in, but that perception is changing quickly.”
“When I only had one maintenance person, I kept a set of overalls in the office, so that I would be able to assist if a job required two people,” said Arun. “I have at times done the work of superintendent, cleaning, renting, snow shovelling, painting, etc. I think my education helped me understand the repair and maintenance side of the business, not only when our staff were doing it, but also when dealing with contractors and suppliers, in a way that some landlords do not.” Besides choosing geographically convenient locations, SMAR Holdings has focused on purchasing buildings that fit their investment and management strategy. They chose buildings in good locations that had good apartment layouts. The company also selected properties that lacked extra amenities, such as exercise rooms, tennis courts and swimming pools. This enabled SMAR Holdings to maintain reasonable rent levels while still offering clean, comfortable apartments or townhouse units. “Overall, rents in Hamilton are lower than those charged in the Greater Toronto Area, as well as Burlington and Oakville, which is why
“A number of people in the industry asked me why I took on that project, as the rewards did not justify the risk and work involved. Part of the reason we tackled this project was to end the bad press being heaped upon the rental housing industry in Hamilton, and to contribute to turning around the media view.”
14 march 2014
[ SMAR Holdings ]
many people choose to live here,” said Arun. “However, keeping rents down is becoming more difficult, as multiresidential property tax rates are higher than most municipalities, and the affordable rental stock is limited.” In 2009, SMAR Holdings bought an 18-storey apartment building with serious issues, as well as a vacancy rate above 50 per cent. The City of Hamilton was planning to evacuate the building, which had a number of serious structural and operational concerns, such as electrical safety issues and malfunctioning elevators. The Hamilton Spectator wrote several articles about the rental property to highlight the problems with the city’s rental housing industry. After purchasing the property from the mortgage company that had taken it over, SMAR Holdings renovated the building from top to bottom, which included a new roof, new boilers, new windows, balcony work, parking lot repairs and hardwood floor replacement in every room (except the bathrooms and kitchens). SMAR also dealt with work orders for general repairs, and a long list of fire safety deficiencies. “We turned that building around, as it is now full, and operating as a normal rental property,” said Arun. “A number of people in the industry asked me why I took on that project, as the rewards did not justify the risk and work involved. Part of the reason we tackled this project was to end the bad press being heaped upon the rental housing industry in Hamilton, and to contribute to turning around the media view.” Political activism When Bob Rae became Premier of Ontario in 1990, the provincial government implemented legislation that retroactively cancelled rent increases due to major repairs or renovations. The retroactive rent increase limits forced SMAR Holdings to cancel planned rent increases that were essential to running its business. These measures came close to devastating the company, and nearly wiped out
16 march 2014
[ SMAR Holdings ]
“Our industry is very heavily regulated because some smaller landlords have not been educated on following the rules or proper procedures. We need to reach out to these property owners and help them to be more professional. We can work together to improve our industry, which will be beneficial for everyone.”
the owners’ equity. After working hard to save SMAR Holdings, Arun decided to become politically involved to help defend his business and the rental housing industry. In 1990, Arun joined the Hamilton and District Apartment Association (HDAA), which represents landlords and property managers in Hamilton and the Golden Horseshoe; he became the association’s president in 2003. Over the years, he has made numerous presentations on rental housing issues to various committees of the Ontario Legislature, and the municipalities of Hamilton and Halton. He has been a part of the Halton Housing Advisory Committee (HHAC) since its inception. Arun has also been involved with the City of Hamilton’s Sub-Committee on the issue of multi-residential tax rates, and Hamilton’s Affordable Housing Flagship. “I have been interviewed on radio and television, and have written articles for newspapers and magazines on topics affecting the rental housing industry,” said Arun. “Although some of this work may not have shown immediate results, I feel I have added to the information and knowledge base about our industry.” Arun is involved in rental housing issues at the provincial and national levels, such as low rent increase guidelines and older rental housing stock. He has served on the Board of Directors for the Federation of Rental-Housing Providers of Ontario (FRPO), which represents landlords who own, manage and finance rental housing in Ontario. He is also on the Board of Directors of the Canadian Federation of Apartment Associations (CFAA), which represents the owners and managers of more than one million residential rental suites across Canada. Since SMAR Holdings owns and manages properties within Hamilton and the surrounding area, Arun has dedicated himself to dealing with
18 march 2014
local rental housing issues. One such matter was the City of Hamilton’s push to license rental properties. Arun and the HDAA mobilized the membership to attend city meetings and speak out against licensing, taking the stand that it is unnecessary because legislation and by-laws already exist that deal with problem properties. “We were very active in the fight against licensing, and having the City of Hamilton decide to put that aside for now was a great victory for the industry,” said Arun. “It is also a victory for tenants, who would have paid the added costs from licensing. I feel that my involvement has helped the rental housing industry, as well as my business, tenants and the community.” The importance of getting involved Arun often tells other landlords and property managers that being a part of an association will provide opportunities to get involved politically and network with other property managers. Association involvement will also enable them to build contacts with contractors, consultants and suppliers, which can help them to save money on building repairs, maintenance and upgrades. Meeting with experienced property managers will also allow them to expand their knowledge and learn from the mistakes of others. “Our industry is very heavily regulated because some smaller landlords have not been educated on following the rules or proper procedures,” said Arun. “We need to reach out to these property owners and help them to be more professional. We can work together to improve our industry, which will be beneficial for everyone.” RHB
RHB Magazine - March 2014