C A N A D A ’ S O N LY N A T I O N A L P U B L I C A T I O N F O R A P A R T M E N T O W N E R S A N D M A N A G E R S
VOLUME 6 / NUMBER 5 / december 2009 / January 2010
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Family Matters
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For over 45 years Gateway Property Management has treated its employees and clients like members of the family
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How to qualify for apartment financing Toronto Green Standard Search Engine Optimization for your website
Making a Difference Selling Apartment Buildings Across Canada Over 27,300 Units Sold in 11 Years in 31 markets!
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24 Cover Story
Family Matters For over 45 years Gateway Property Management has treated its employees and clients like members of the family
Family Matters
PM#40063056
For over 45 years Gateway Property Management has treated its employees and clients like members of the family
John Tenpenny
+
How to qualify for apartment financing Toronto Green Standard Search Engine Optimization for your website
contents...
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EDITOR’S NOTE Challenges await in 2010 John Tenpenny
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FINANCE Financing Made Easy How to qualify for apartment financing Peter Cook and Robert Fleet
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10 INSURANCE Technology: A mixed blessing? It should allow us to spend more time enjoying our business relationships Andy Schwartze
12 BUILDING MAINTENANCE Keep Residents—Not Pests—Happy Reflect on 2009 and assess your pest management program for the New Year Bill Melville
14 MARKETING Don’t Judge a Website by its Cover Your website must generate traffic and to do that you need Search Engine Optimization Carissa Drohan-Jennings
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18 TECHNOLOGY Accurate Measurements The essential premise underlying apartment building profitability Mike Laurie
20 ASSOCIATION Apartment Living is Green Living Promoting higher density development is more sustainable John Dickie
22 PORTFOLIO STRATEGY Is Your Property Everything You Think it is? Studying the market with objectivity will enable you to better understand your position in the marketplace Derek Lobo
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38 MULTI FACTS Industry News National Rental Vacancy Rate Increases … FRPO MAC Awards… and more
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4 www.canadianapartmentmagazine.ca
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editor’snote
Challenges await in 2010
While the economic outlook in general for Canada in 2010 points
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towards continued recovery, the multi-residential sector still faces challenges, namely increasing vacancy rates. The average rental apartment vacancy rate in Canada’s 35 major centres increased to 2.8 per cent in October 2009 from 2.2 per cent in October 2008, according to the Rental Market Survey released by Canada Mortgage and Housing Corporation (CMHC). Provincial vacancy rates in October 2009 increased in eight out of 10 provinces. “Demand for rental housing in Canada decreased due to slower growth in youth employment and improved affordability of homeownership options,” said Bob Dugan, Chief Economist at CMHC’s Market Analysis Centre. “Rental construction and competition from the condominium market also added upward pressure on vacancy rates.” The average rent for two-bedroom apartments in existing structures increased in all major centres. The largest rent increases in existing structures were recorded in Regina (10.2 per cent), Saskatoon (8.3 per cent), Victoria (5.0 per cent), and St. John’s (4.9 per cent). Overall, the average rent for twobedroom apartments in existing structures across Canada’s 35 major centres increased by 2.3 per cent between October 2008 and October 2009. CMHC’s October 2009 Rental Market Survey also covers condominium apartments offered for rent in Calgary, Edmonton, Montréal, Ottawa, Québec, Regina, Saskatoon, Toronto, Vancouver, and Victoria. In 2009, vacancy rates for rental condominium apartments were below two per cent in seven of the 10 centres surveyed. Rental condominium vacancy rates were the lowest in Toronto, Saskatoon, and Ottawa. However, Regina and Edmonton registered the highest vacancy rates for condominium apartments at 3.0 per cent and 3.1 per cent in 2009, respectively. The New Year may bring challenges for the industry, but at Gateway Property Management (cover profile on page 24), these challenges will be met together as they always have. More than 45 years after being founded as a family business, Gateway retains that family atmosphere even as it has grown from a local three-person office to a national company with 130 corporate employees in nine locations and 500 on-site employees in 40 communities, managing 32,000 multi-family residential units and 2.5 million square feet of commercial space. John Tenpenny Editor johnt@mediaedge.ca
Quoteworthy
“We started as a family operation and although the company is significantly larger today we still try to keep that family – page 26 philosophy.”
6 www.canadianapartmentmagazine.ca
PUBLISHER Chuck Armitage chucka@mediaedge.ca EDITOR John Tenpenny SENIOR DESIGNER Annette Carlucci PRODUCTION MANAGER Rachel Selbie CONTRIBUTING WRITERS Barb Carss, Peter Cook, John Dickie, Carissa DrohanJennings, Robert Fleet, Mike Laurie, Derek Lobo, Bill Melville, Andy Schwartze CIRCULATION MANAGER Cindy Younan CIRCULATION INQUIRIES 416.512.8186 ext. 232 customerservice@mediaedge.ca For sales information call (416) 512-8186 ext. 223 Canadian Apartment Magazine is published six times a year by:
5255 Yonge St., Suite 1000, Toronto, Ontario M2N 6P4 E-mail: info@mediaedge.ca
Tel: (416) 512-8186 Fax: (416) 512-8344 President Kevin Brown Copyright 2009 Canada Post Canadian Publications Mail Sales Product Agreement No. 40063056 ISSN 1712-140X Circulation ext. 232 Subscription Rates: (GST Included) Canada: 1 year, $46.30 2 years, $82.60 Single Copy Sales: Canada: $8.00 Reprints: Requests for permission to reprint any portion of this magazine should be sent to Chuck Armitage Authors: Canadian Apartment Magazine accepts unsolicited query letters and article suggestions. Manufacturers: Those wishing to have their products reviewed should contact the publisher or send information to the attention of the editor. Sworn Statement of Circulation: Available from the publisher upon written request. Although Canadian Apartment Magazine makes every effort to ensure the accuracy of the information published, we cannot be held liable for any errors or omissions, however caused. Printed in Canada
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finance
Financing Made Easy How to Qualify For Apartment Financing By Peter Cook and Robert Fleet
We’ve been asked on numerous occasions to explain how we, as a lender in the industry, qualify borrowers for multi-residential mortgages. In other words, “What should you do to qualify yourself for a mortgage?” As a borrower, whether an individual, partnership or corporation, you need to qualify for the mortgage with sufficient net worth and management experience. The property has be acceptable to the lender in terms of loan to value and debt coverage ratio. Chart 1
Required Borrower Info If a corporation, then 3 yrs. financial statements Completed personal application Net worth statement Borrower resume detailing real estate experience
in personal net worth. When calculating your net worth lenders will generally consider cash and real estate but will exclude cars, boats etc. RRSPs will be valued at 50% of their current worth. Your lender will typically look for a credit bureau report with a satisfactory credit score of 680 or higher. Net worth statements will be required from all beneficial owners. Are you experienced? To evaluate your ability to manage a rental income property, you (and any other principals) will be asked for a resume. In particular your lender will be looking for experience in managing income properties—ideally multiresidential properties. If you have little experience, your lender may make it a condition of financing that you hire a property management company for at least the first year of operation. This can be an unanticipated expense for many first time multi-residential investors. A summary of the common items your lender will need to qualify you for the mortgage can be found in Chart 1. Chart 2
Details of additional real estate holdings or assets including details of current debt
Required Property Information
Satisfactory credit report
Current rent roll
About The Borrower Lenders will inevitably ask, “What is the purpose of the loan? Is it a purchase or are you refinancing? If a purchase, “How much down payment are you willing to contribute?” Your lender will require a minimum down payment of 15% of the lending value for an insured mortgage. They will need to know the source of your down payment. You are required by law to prove that your down payment came from a legitimate source. You’ll need to produce a record over time to show that you’ve accumulated the funds through savings, by selling an asset or by whatever means you used to acquire those funds. This is to help the government detect and deter money laundering from criminal activity. In addition to your down payment your lender may expect you to have a minimum net worth of 25% of the loan amount 8 www.canadianapartmentmagazine.ca
Property operating statements for the past 2 years Details describing the property Photographs of property Phase I environmental report Property tax bill for current year Details of recent improvements to the property
About The Property Your lender will want to make sure the investment has sufficient cash flow to meet debt coverage ratios. Your lender will need to know where the property is located and will want to inspect the condition of the property. Each city has different capitalization rates and vacancy rates which will factor into the value of the
marketing
property. It stands to reason that a well maintained fully rented building with high net operating income is more likely to obtain the maximum loan amount available. Your lender will establish what is known as the “lending value” by underwriting the property. Don’t be surprised if the value of the property as determined by your lender is less than the market value. If you provide all the items listed in Chart 2 you will have most of the things your lender will need to help them evaluate the property. Prior to placing an offer, have your lender underwrite the property to determine their estimated loan amount and the appropriate amount of time for due diligence. Do this before presenting a firm offer on the property. Your lender will ask for various reports. You will need to have the property appraised if you are applying for a conventional mortgage. An appraisal is rarely required with a CMHC insured mortgage. A phase one environmental report is required on all properties with six units or more. A satisfactory building inspection report is usually required to obtain a conventional mortgage. These reports are at the expense of the borrower. If one of your objectives is to obtain the maximum loan amount available, a CMHC insured mortgage will allow you up to 85% loan to value. A conventional mortgage will typically restrict you to 70% or 75% depending on your lender and the property. Typically the minimum debt coverage ratio required is between 1.20 and 1.30 depending on the term of the mortgage.
About The Approval Process Once you have provided the required information and submitted your application, the mortgage will be underwritten to determine the loan amount. This is where all the risk factors are taken into consideration and a lending value is established. Lenders will use different underwriting criteria to determine the lending value. Sometimes the lending value may be lower than the market value. Once reviewed, your lender should provide you with Letter Of Intent within 24 hours. This will provide a summary of the terms and conditions of the mortgage proposal.
Normally within three to four weeks all the necessary inspections and reports are completed and reviewed. Provided that the reports are satisfactory, you and your lender will then continue to the commitment stage of the process. A commitment letter is a document provided to you by your lender detailing every aspect of the proposed mortgage. This document should be reviewed with your lawyer. Upon acceptance you will be required to sign the document and provide your lender with a cheque for the holding fee. This is typically 1% of the loan amount. Once the signed document and cheque have been received the lender will instruct their lawyer to prepare the mortgage documents and complete the transaction. Funding will take place fifteen to twenty business days after the commitment letter has been returned. The holding fee will be returned to you as part of the closing adjustments provided you complete the transaction. As you can clearly see, it is important that you prepare in advance and provide your lender with all the information needed to qualify for your mortgage. Your selection of a lender should be based on more than just the lowest rate. Choose a lender that is able to process deals quicker without making you jump though hoops to get your desired loan amount. This will save you valuable time and frustration and help you accomplish your investment goals on schedule. CA M Peter Cook and Robert Fleet are “Apartment Financing Specialists” with First National Financial LP. Together they have originated over $3 billion of mortgages. Their combined 32 years experience with mortgage financing has lead to frequent speaking engagements across the country. If you have questions, Peter and Robert may be reached by phone or email. Peter Cook—(416) 593-2913 pcook@firstnational.ca; Robert Fleet—(905) 301-3449 robert.fleet@ firstnational.ca. December 2009 / January 2010 9
insurance
Technology: A mixed blessing? It should allow us to spend more time enjoying our business relationships By Andy Schwartze
That first computer I bought, for a lot of money back in 1986, had all the possibilities of being the ultimate weapon of choice for the creation of juicy bottom line profits. Here was the new magic tool that was going to transact business with the push of a button, store files in a tiny space and never argue about wanting to take time off for illness or family matters. Quitting would no longer be an option and performance would always be to the same high standard, not to mention a solid day’s work—no lunch and no coffee breaks. Heaven had finally descended upon my office and all that needed to be done was to count the money and walk it to the bank. It was a great dream about to come true and the excitement of transforming business, from the world of paper to an electronic format, was enervating. Then came the breathtaking moment of unpacking this mysterious toy, turning it on, listening to the hard drive spool up like a small jet engine and the sudden realization that I didn’t have a clue how to deal with this new fangled contraption. One look at the user manual, written in a foreign language that belonged to no country that I was aware of, and the seeds were sown for a long term love-hate relationship, that has lasted to this day. 10 www.canadianapartmentmagazine.ca
In the world of physics, calculus, mathematics and other number crunching environs, one can only marvel at the speed and the efficiency of computerized technology. In the service business, however, computers can be seen to be the equivalent of the double-edged sword. While on one hand they create the ability to store vast amounts of information, which can be sorted and coughed up in many different combinations, they have also created a work environment that has some significant disadvantages for the mere mortal. In the age BC (before computers) work flowed at a slower pace. If someone needed an original document, and in a hurry, it was typed out and then sent by taxi. Often the recipient was billed for the fare. I even had a teletype, the surest sign of international importance that I could afford. The statement “it’s in the mail” actually meant something. Anyone calling the office, upon finding that the individual being sought was out, would leave a message. This resulted in the accumulation of a stack of pink slips which could then be dealt with “in due course.” I remember times when someone would say “I don’t want to talk to him today, I’ll do it tomorrow”—and got away with it! This more leisurely style of doing business, coupled with less taxes and more
insurance expense write-off flexibility made for a pretty good day as an insurance professional. Customer expectations were tolerable and, while paper was the core of every transaction, it flowed at a slower pace and the volume was actually less. Today’s insurance office is probably not much different from that of a property management operation. Databases with a multiplicity of individual client information have to be maintained, constantly updated, sorted and managed. Bill Gates, it is said, receives thousands of e-mails every day and has three full-time employees whose only job it is to act as human filters so that he just gets to see the most important ones. Templates, insurance summaries, correspondence, e-mail records and all sorts of information that defines the relationship between the service provider and the client clutters up an otherwise simple human relationship. Templates are used for insurance proposals, requests to insurers have to be precisely timed (so that the competition doesn’t get there first) and the constant communication between the three parties to each transaction (client, broker and insurer) is heavily laden with “can you e-mail it”, “can you PDF it”, “can you fax it” and “I need this immediately” (the last word carrying the implication that you need to “drop everything you are doing or I’ll do business with someone else”). We’ve gone from reliability to the “need for speed”. Whoever runs the fastest is often the one who wins. In spite of all that, what is interesting about this transformation, of the past 20 years, is that many have made the mistake of assuming that technology has become the core of a business relationship. That by having the latest, and the greatest, one can outshine the competition because technology is a standard bearer that separates you from the competition. It’s a mistake that can, all too often, leave a service provider wondering why the client has gone elsewhere. Those magnificent flow charts, Excel presentations, and pricing models were so impressive—how could the deal have fallen through? Technology lost the deal and the human being didn’t see it coming. We need to remember that our clients like to see stuff that they can understand coming from a person whom they can
trust. In the insurance business we know that it is not our technical and computer skills that tie our clients to us. It is the human concern, the compassion, the interest in what is going on—all the things that have little to do with the actual insurance transaction. Clients instinctively know that, by dealing with the right person, they can enjoy some wonderful human contact in an otherwise boring world of insurance and technology, which enables the business transaction to be conducted with a minimum of fuss. If technology has done anything to aid the service provider, it has allowed us to spend more time enjoying our business relationships because technology has taken over the drudgery and performs the boring tasks at a high speed and without complaint. A double-edged sword indeed, but I get to relate to my clients instead of dictating letters. A new world, far from perfect, but one which I still prefer to the old carbon copy and Gestetner days. Technology is nothing more than a tool. One uses the relevant technologies that support the human relationship between service provider and customer. For each type of business the relevant technology is different but, in the end its role is not to lead, but to follow. CA M Andy Schwartze, BSc., MBA, CIP, is an insurance broker specializing in property management and real estate. He is a former President of the Insurance Institute, has taught in the community college system and provides continuing education to other brokers. He can be reached at andy@takecover.ca.
Andy’s Tips •
If you still can’t type, it’s not too late.
•
Never ask a client to view your laptop presentation.
•
Black and white is out, colour is in.
•
Only use real signatures, never computerized ones.
•
Form letters are an insult.
December 2009 / January 2010 11
buildingmaintenance
Keep Residents— Not Pests—Happy Reflect on 2009 and assess your pest management program for the New Year By Bill Melville
It’s nearing the end of the year, and while for many things tend to wind down, apartment owners and operators must stay on top of resident requests and property chores in order to keep up tenant satisfaction. In the New Year, your residents will have the opportunity to reassess their living situations and consider other options. The last thing you want to do is give them a reason to move. So use the end of 2009 to review your pest management program and make improvements as needed; because just one pest might send your residents running for the apartments down the street. If you don’t already have an Integrated Pest Management (IPM) program in place, consider implementing this environmentally friendly alternative to traditional pest control. Rather than waiting and reacting to pest problems after they occur, IPM promotes a proactive approach that stresses preventive methods to prevent pests, before they infest your buildings. An IPM program can help to reduce pest pressure in multifamily environments by removing access to food, water and shelter—the three things pests need to survive on your property. With an IPM program in place, you can easily review your existing pest management program, and make the necessary preparations for next year.
Evaluate ’09 Efforts Plan to sit down with your pest management professional and discuss the current pest control situation on your property. Make sure to mention any concerns you have such as reoccurring pest issues, treatment options or response time. Assess any problems that occurred during 12 www.canadianapartmentmagazine.ca
the year, and how they were handled, to determine if any changes need to be made. Also, consult your pest management professional about what “green options” they can offer for the New Year. As consumers become more eco-conscious, your residents might demand a more environmentally friendly approach. With an IPM program in place, you’ve taken the first step, but also consider green pest monitoring and control tools that may be available. Once you and your provider are on the same page, you’ll be ready to continue preventing pests in 2010.
Inspect from Top to Bottom You should inspect your property regularly for needed repairs or ongoing maintenance, but also consider performing an end-of-year inspection to take a closer look at pest “hot spots”—places where these unwanted tenants are most likely to visit. Laundry facilities; dumpsters and recycling areas; picnic spots, especially those with grills; maintenance closets; common areas; and employee rooms are all prone to pest infestations because they provide access to pests’ basic needs—food, water and shelter. Look for elements that might attract pests such as excess water, or places where pests could get inside, like holes or cracks in the foundation. If you spot droppings or exoskeletons that suggest the presence of pests, contact your pest management professional immediately.
Create a Sanitation Plan Sanitation is a necessary part of any pest management plan, but is especially important to IPM programs as it can help
buildingmaintenance to remove the conditions that attract pests in the first place. Increased sanitation efforts can actually aid in reducing chemical applications, since you’ll be preventing pests to begin with, and reducing overall pest populations. Create a sanitation plan for your property that outlines the areas regularly in need of cleaning. Then, assign roles to your staff so everyone knows their responsibilities when it comes to stringent sanitation. Encourage your residents to keep their units clean with monthly sanitation tips or by holding a pre-spring cleaning event.
residents’ apartments. Unfortunately, next year will not only help to prevent these pests multiply quickly and can pests from moving in, but it will help grow into an infestation in a short to keep your residents happy and reamount of time. Make your residents signing their leases as well. C AM aware of these issues and provide tips they can use to prevent pests in their Bill Melville is Quality Assurance Director own homes. And, when you prepare for Orkin PCO Services. Mr. Melville has apartments for the next tenants, 35 years of experience in the industry and is perform a full inspection for pests an acknowledged leader in the field of pest before allowing anyone to move in. management. For more information, email CARMA_CondoBusiness_01-19-2009_CS2--F.pdf 2/3/09at bmelville@pcocanada.com 5:41:35 PM Taking the time now to evaluate Mr. Melville your pest management program for or visit www.orkincanada.com.
Take a Team Approach The most important element in a pest management program is a strong partnership between you, your staff and your pest management provider. Starting with a solid foundation of support from these parties can help to make sure nothing slips through the cracks—pests included. Take the time to define roles and determine who is responsible for each part of your pest management program. Also, ask your pest management professional to train your employees on best practices in pest management. Teach staff to report pest sightings immediately, which can help to prevent a few pests from turning into an infestation. With everyone on board you’ll ensure a successful team effort.
Monitor Moving Forward Your IPM program is in place, sanitation efforts are in full swing, and your staff is trained on pest management – so what’s next? Monitoring is an ongoing part of the IPM process. Ask your staff to be the eyes and ears of your property. Since pests are a constant threat to multifamily environments, monitoring is one method that can be done by everyone—including residents—to help combat pest issues. Hitchhiking pests are especially a problem in apartment communities. Pest such as cockroaches or bed bugs can latch onto clothes or personal belongings and make their way into December 2009 / January 2010 13
marketing
before building or re-designing any website. Take it from an industry leader. When I recently spoke to Trish Macpherson, Marketing and Sales Manager at CAP REIT, and recent winner of FRPO’s MAC award for Corporate Website Design, she commented that, “Even before we began redesigning our website, we had search engine optimization in mind. We knew that at least a third of all of our traffic had to come from the search engines. That is why we took great care in designing our website to be search engine friendly.” Case in point, taking that extra time before diving into a redesign allowed CAP REIT to develop an effective marketing tool.
the search engine rankings have been playing the SEO game for years. They’re constantly working on adding content and they consider SEO with every new page they put up. Don’t be swayed by unfounded promises. It takes time to climb in the rankings.
What If You Have Already Designed A Website? If you’ve already spent money on a redesign, all is not lost and it’s certainly not too late. There are still a number of strategies that can be implemented to improve your website’s SEO. I’d suggest searching for a qualified designer or consultant that specializes in SEO.
Make Sure You Hire s Qualified Designer
Understanding SEO Jargon
When searching for a website designer it’s not enough that they can make a fancy website; you need to make sure they know how to incorporate SEO. Remember to ask for references and be sure to talk to other clients to see how their websites have performed. Are they satisfied with the final product and the results (traffic) that it generates? Does the website measure up to their expectations? “Never believe it when a designer tells you they can get you to rank number one in the search engines,” says Macpherson. “Other companies are there for a reason and it’s not something that can happen overnight. It takes time to climb in the rankings.” This is very true. Most companies that sit high in
Search engine optimization sounds a lot more complicated than it actually is. Let me be the first to say that it is easy once you know and understand what you’re doing. It’s all about giving the engines what they want. Let me explain some of the terms and jargon you’ll encounter when discussing search engine optimization with an expert or a web designer. Google Bots are what crawl (scan) your website and read the text. Yahoo uses them, Bing’s got them, so on and so forth. Bots follow every link and read every word on your website. They track how your content flows and they see what keywords are used on your website. They also follow every link that leaves December 2009 / January 2010 15
marketing
“Even before we began redesigning our website, we had search engine optimization in mind. We knew that at least a third of all of our traffic had to come from the search engines. That is why we took great care in designing our website to be search engine friendly.” your website to see what content you’re directing people to. Basically, they work to figure out what your website is all about. It’s important to know that they are not only reading what a reader sees, but they also read the code that’s behind the text and images on your website. They’re looking for specific things like meta tags and alt tags to determine what you’ve created this site for. Meta Tags are coding tags that appear before the body text of a website. They are the description tag and keyword tag. They are the first thing the Google bots encounter when reading the
page. This means they are important because they tell the bots what the page is about and what keywords to pay attention to. Keywords are simply a word that you’re trying to be ranked on or recognized for in the search engines. Google will search the text of your site to see how often certain words appear. Take for example the sentences, “Apartments for rent in London. You’ll love renting these apartments.” The words that appear most often are “apartments” and “rent”. Google would read those and determine what your keywords or content is about
“apartments” and “rent”. Keyword Phrases are a series of keywords that your website displays. For example, “We have an apartment for rent in London, Ontario. So if you’re looking for a luxury apartment for rent, look no further.” The keyword phrase “apartment for rent” appears in both sentences. The Google bots will read those strings of words and index the site as having an “apartment for rent”. Keyword Links are also important with SEO. They are hyperlinks that contain your keywords. The “bots” read these links and follow them to additional pages. They place value on the text of the link. So when placing links try to place them on important keywords as opposed to the classic “click here”.
Warning About Flash-based Websites Flash-based websites are always neat to look at but they don’t rank well with search engines. It’s because the “bots” cannot crawl the flash content of the site. My suggestion is to use flash sparingly on your website and use it only for visual stimulation. Well, I believe I’ve covered the basics of search engine optimization. Let me be the first to say that it’s not something to be feared, it’s something to be embraced. The more I’ve learned about SEO over the years, the more I’ve come to love it. It’s a race to the top and it’s a journey that lasts a lifetime. CA M Carissa Drohan-Jennings is the Marketing Coordinator at Skyline Apartment REIT. You can contact her at cdrohan@ skylineonline.ca or call 519-826-0439. 16 www.canadianapartmentmagazine.ca
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technology
Accurate Measurements The essential premise underlying apartment building profitability By Michael Laurie
Owners ensure that properties are measured and surveyed before they purchase them, while overlooking the fundamental importance of precise building measurements. But measurements and unit configurations fuel the financial engine of the apartment industry. Whether the property portfolio includes hundreds of properties and millions of square feet—or a single apartment building or complex—critical financial decisionmaking is significantly influenced by measurements. Actual square footage, the fundamentals of floor plans, and various architectural unit configurations all contribute to apartment building value. Taxes, insurance premiums, heating and cooling system capacities, maintenance contracts, leasing revenues, and flooring or general unit upgrades are all directly correlated to finance but are based on building measurements. In terms of insurance coverage, for instance, if the size of an apartment building is overestimated it can result 18 www.canadianapartmentmagazine.ca
in higher premiums. Conversely, if measurements are underestimated it can mean that the building has in inadequate insurance to pay for repairs or replacement in the event of a catastrophic event. But while painstaking due diligence occurs before the purchase of property, the same effort is seldom applied to measuring buildings to record and chart physically measurable assets.
Lost in Translation from Blueprints to “As-Builts” Frequently building owners will, for example, join two units to create a larger one. Or they will divide an apartment or other space into smaller units. In the process, assumptions are routinely made regarding configurations and sizes, without reliable visual references that clearly and accurately show how the units fit into the floor plate. The fact that various other building conditions also exist—such as venting,
technology
Minor measurement tolerances in apartment buildings may pose no great problems at first, but over time they can actually cut into profits. ductwork, mechanical rooms, or stairways—is often overlooked. But those components can substantially alter the size of a unit and its practical, functional potential. So apartment owners may later discover that the actual configuration is not what they had planned on paper. Most baseline measurements are taken from builder blueprints, but actual “as-builts” often differ from the original plans. Practical changes and adjustments are an integral part of day-to-day construction practices. People on the ground doing the actual nuts and bolts work encounter unforeseen conditions, and they have to improvise solutions that may not be reflected in the architectural blueprints. Owners, designers, potential tenants, and other interested parties also contribute their creative or practical input after construction is underway, and those changes may become a reality that is not necessarily represented on the blueprints. That kind of leeway goes with the territory in the apartment building industry. Measurements can even be altered through the simple act of copying or otherwise reproducing a blueprint or floor plan. Make a photocopy of plans, scan them into a computer, or fax them to another department or office and the scale of the original may shift as much as two percent each time it is copied. Over time measurements can be skewed substantially—along with the financial data that is based on those all-important measurements. Eventually those lost inches and square feet become misplaced dollars and cents, so financial oversight begins and ends with precise measurement of apartment building assets. But the biggest culprit and the weakest link in the chain of measurement data transference arises during unavoidable transfers that are prone to human error. When plans or drawing board sketches are moved from pencil and paper representations in the field to computers or CAD software in the office, measurement accuracy suffers. No matter how careful architects, builders, and engineers are, it is virtually impossible to get a flawless transfer. Most of the industry still depends upon measuring with handheld tapes and lasers, and upon the skillful transfer of critical field measurements to a more sophisticated environment such as computer software. But just as blueprints and “as-builts” lose important meaning in translation, major measurement shifts can and do occur between the construction site or apartment building drawings and calculations and the laptop or desktop computer.
relationship to printed currency. Cash value is generally perceived as what the money is actually worth in terms of buying power. But the face value approach does not take into account important fluctuations due to monetary forces like inflation and deflation. Make too many financial projections and investments without taking those powerful influences into account and it can lead to serious problems down the road. Similarly, minor measurement tolerances in apartment buildings may pose no great problems at first, but over time they can actually cut into profits. Those who have a realistic understanding of this principal also have a keen appreciation for fresh data in the form of revised measurements. By perennially upgrading their benchmark data they avoid pitfalls that arise from inaccurate or obsolete measurements. Technological progress is also being made to help bulletproof the process of measuring with greater flexibility and integrity. There are systems already in use, for example, that are a hybrid between the most advanced laser measurement technologies and sophisticated CAD software programs. These can be used with a portable laptop or smaller format PC device, so they can be taken into the field where measurements are first made. That means that they work without the inherent risks that occur when measurements undergo transfers from one form or format to another. Because of their digital versatility and CAD capability, they can also serve as a platform for a variety of other tools and resources. The most recent innovations in measurement technology, for example, can generate three-dimensional digital format floor plans—both efficiently and affordably. These can, in turn, be used to produce comprehensive fire plans, Green Building energy use studies, and even convenient and engaging virtual tours deployed over the Internet for marketing purposes. In the wake of a global economic crisis, government regulators are demanding greater transparency and visibility of financial assets. But those who invest in apartment buildings also need greater insight into their investments through clear and accurate reports and precise measures. Fortunately, as innovations emerge, the world of apartment building finance will no longer have to rely upon the accounting department equivalent of the abacus to do financial calculations. Apartment owners now have access to cutting edge state-of-the-art resources that are appropriately designed for the new millennium. CAM
Technological Advancements and Solutions
Michael Laurie, P.Eng. is President of PLANiT Measuring which provides onsite building measuring and BIM services. He can be reached at mike@planitmeasuring.com or 1-800-933-5136.
Reliance on apartment building measurements for financial decisions can be compared to the perception of value in
December 2009 / January 2010 19
association
Apartment Living is Green Living Promoting higher density development would provide a significant step toward greater sustainability By John Dickie
Across
Canada
and
Total Waste Generation: Multi-family households
around
Total waste per household/year (tonnes)
Besides extending the life of landfills, the vs. Single family households 1.2 less waste means fewer trucks to collect the world, people are concerned about 1.0 waste, less fuel to truck the waste and less the environment, climate change and 0.8 exhaust fumes to poison the air. pollution. The Copenhagen Conference 0.6 0.4 According to the 2006 Census, rental attempted to address the need for 0.2 households have shorter commutes than sustainability, sometimes with grand 0.0 home owners. On average, the commute to plans that may cost a great deal. More costToronto Ottawa work of a home owner is 10.2 kilometres, effective solutions are available through Single-family households Multi-family households versus between 5.7 and 6.5 kilometres for encouraging the expansion of the rental renters, a saving of 36 to 44 percent. housing sector. Higher density rental housing also enables more people to live Rental housing has a smaller environmental footprint than single family homes. Rental housing uses less electricity, uses near public transit stops and corridors. For example, in Toronto less water, produces less waste and makes the use of public and Ottawa two thirds of centrally located high-rise apartment units are within one kilometre of a rapid transit station, compared transit more achievable. For example, in 2006, the Ontario Power Authority found to only seven and 18 percent of detached housing in the inner that the average single family home in Ontario consumed suburbs. The figures for the outer suburbs are even worse. The examples given could be multiplied many times over for 9,600 Kilowatt hours of electricity per year, while average lowrise residential home consumed 7,000 Kwh/year, a saving of other cities in Canada and around the world. If people want more sustainable development a good way to 27 percent. In 2008, the Tampa Bay Water Authority found that the achieve it would be to encourage the higher densities which average single family home consumed 800 cubic feet of water come with apartment and rental living. While protecting the per month, while the average apartment consumed 520 cubic environment may not be as simple as just promoting apartment feet per month, a saving of 35 percent. The US Environmental construction and apartment living, promoting higher density Protection Agency found that higher density development development would provide a significant step toward greater generates less storm water runoff per home, largely because sustainability. CA M apartments require a smaller area of pavement than single family homes. John Dickie is President of the Canadian Federation Numerous comparisons show that apartment households of Apartment Associations. You can contact him at generate much less garbage than single family homes. As president@cfaa-fcapi.org. The CFAA (www.cfaa-fcapi. shown in the chart, the difference in Toronto is 1.1 tonnes org) represents the owners and managers of close to per year for single family homes versus 0.4 tonnes per year one million residential rental suites in Canada, through for multi-family households a saving of 64 percent, while in 17 associations across Canada. In existence since 1995, Ottawa the difference is very similar. Less recycling is done CFAA-FCAPI is the sole national organization representing the interests in apartments, but the amount of waste is much less to start of Canada’s $40 billion private rental housing industry, which provides with. quality rental homes for more than seven million Canadians. 20 www.canadianapartmentmagazine.ca
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portfoliostrategy
Is Your Property Everything You Think it is? Studying the market with objectivity will enable you to better understand your position in the marketplace By Derek Lobo
Leaving money on the table by setting rents too low is the last thing any apartment property owner wants to do, but pricing yourself out of the market can lead to vacancy problems and bottom-line issues. So what is the market position of your property? How do you know if your rents are set right? How do you measure and test rents? Knowing your market position enables you to make many key decisions about your property, from making improvements to setting rents. The best tool to identify your market position is the market survey.
Market Survey Goals Market surveys have the following goals: 1. Determine the market position of your property relative to competitors. 22 www.canadianapartmentmagazine.ca
2. Identify and understand the positives and negatives of your property. 3. Identify demographic or geographical factors affecting your property. 4. Determine ways for your property to achieve improved market position. 5. Determine appropriate market pricing for your property.
Collecting Data in the Field Just as every parent imagines their child will blossom into the next great hockey star, property owners often don’t see their properties as a renter sees them. Conducting a market survey is best done by an objective third-party company employing data collectors who do not know or work for the property owner. Data collectors should gather data in the field, posing
portfoliostrategy as renters, which provides a renter’s perspective on your property and is more useful than raw data gathered via telephone, on-line, or real estate listings. This approach allows data collectors to make observations which generate assessments and recommendations aimed at improving the overall appeal of a property in the eyes of renters. When surveying a building, data collectors should keep the following rules in mind to ensure data is consistent: • Make observations which a typical renter would make, without special inside knowledge. • Collect information a typical renter would be able to gather, without inside access (do not collect information for which a typical renter would not have access, assuming a basic level of questioning and inquisitiveness). • Information not available to a typical renter includes vacancy data, resident rent rolls, staff commissions, overhead costs, etc.
Conducting a Market Survey—Questions to Ask When conducting a market survey, data collectors and property owners should answer the following questions: • Location—What is good or bad about your location? What local amenities benefit your renters? Is your property located in a good neighbourhood? • Curb Appeal—What sort of street presence and visibility does a property have? Is the property attractive to renters? Will renters be encouraged to enter the property? • Signage—Does signage attract the attention of renters and encourage them to enter the property? Does signage promote the best features of a property? Does signage reinforce the property owner or manager’s brand? • Marketing—What types of advertising and support documents are used to promote the property? Are these effective? How can they be improved? • Leasing Agents—Do leasing agents have professional sales skills? Where do they fall short? Do they need training? Which competitors have the best leasing agents in the market? How do your leasing agents compare? • Amenities—What sort of amenities are offered? Are they in good condition? Do they match the needs of target renters? How do competitors in the market compare? • Apartment Units—Are units in good condition and do they appeal to renters? Would renters want to make this their new home? How do your units compare to competitors in the market? Are your units priced appropriately for the market?
three-bedroom townhouses down the street—these appeal to different markets. Another way to select competitors is to restrict yourself to a defined geographic area. For example, don’t compare your property in Etobicoke with a property in Richmond Hill, since the two cities have completely different markets with different renter profiles. Ultimately, data collectors and property owners must use their best judgement when selecting competitors and keep in the mind the renter’s perspective.
Data Analysis Once data has been collected, it is time to start data analysis. At this stage comparisons between your property and competitors are made to identify the market position of your property (compared to competitors) and to determine how your market position can be improved and rents adjusted for the market. The focus of data analysis should be on comparing rents and amenities, although other factors such as unit sizes, utilities, and parking fees should be included. Data should be tabulated for ease of use. From this analysis, you should be able to answer the following questions: • Which is the “best” building in the market? • Which is the “worst” building in the market? • How does my property rank compared to the above? • What improvements can I make to increase my property’s rank (if possible)? • What are the appropriate rents for each unit type in my property? • What are the appropriate utilities and parking fees for my property? In addition to analyzing your property in relation to your competitors, you should also analyze the following market factors (where appropriate): • What is the impact of “specials” and rental incentives on the market and the competitiveness of your property in the market? • What is the impact of condominium rentals on the market and the pool of renters available to your property? • What is the profile of the target renter in this market? (use demographic and economic data, subject to availability) • What future market trends are expected? (use CMHC reports) Studying the market with objectivity will enable you to better understand your position in the marketplace. This will lead to rents that are reflective of market conditions, lower vacancy rates and an overall improved NOI. CA M
Selecting Competitors Competitors should be selected based on the comparability of a given property with your property. In other words, your property should only be compared with properties and units that are roughly similar in quality, appeal, and configuration. For example, there is no point in comparing your B-Class building with the D-Class building across the street, nor is there any point in comparing your one-bedroom units with
Derek Lobo is the CEO of Rock Apartment Advisors Inc., a boutique apartment brokerage firm and Derek A. Lobo & Associates Inc., a performance-based consulting firm with its sole focus on the apartment industry. If you would like to learn more about conducting market studies, please contact us: info@rockaptadvisors.ca.
December 2009 / January 2010 23
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24 www.canadianapartmentmagazine.ca 24 www.canadianapartmentmagazine.ca
(L to R) Scott Ullrich, CEO; Debbie Johnson, Director of Marketing; Branko Cvoric, Senior Property Manager and Environmental Officer; Silvia Hoogstins, Director Property Management Lower Mainland; Maureen McMahon, Director Human Resources.
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Family Matters
For over 45 years Gateway Property Management has treated its employees and clients like members of the family By John Tenpenny
December 2009 / January 2010 25
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Leslie Bessey, Chief Operating Officer
26 www.canadianapartmentmagazine.ca
For a company that has nearly 600 employees and is spread out across the country, Gateway Property Management still manages to maintain a family atmosphere—and that’s no accident. Founded in 1964 by Bert and Irene Ullrich as a small company managing multi-family apartment buildings for one client, Gateway has evolved into one of Canada’s largest privately owned residential property management companies. With more than 130 corporate employees in Vancouver, Victoria, Kelowna, Kamloops, Calgary, Edmonton, London, Kitchener and Montreal and 500 on-site employees in 40 communities across Canada, Gateway manages 32,000 multi-family residential units and 2.5 million square feet of commercial space. Since joining his parents at Gateway in 1983, Scott Ullrich has worked his way up from Property Manager to President and C.E.O. “We started as a three-person office managing a 305-unit apartment building and over time and by word of mouth we had other people ask us if we’d manage their building, so we got into fee for service management. Then we moved into managing condominiums and slowly we got into managing commercial,” explains Ullrich. “We started as a family operation and although the company is significantly larger today we still try to keep that family philosophy,” he says. “In today’s world we need policies and procedures, but we still very much treat our staff as family rather than employees. “We try our best to take care of them and treat them well and they in turn represent the company exceptionally well.” And it’s not just the boss who feels that way. “Gateway is a team across the country, whether it is corporate or on-site and it really is one big family,” says Shelley Wittal, Director, Property Management, Eastern Region, who has been with the company for four
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years. “It’s the best company I’ve ever worked for and I’m proud to be a member of the Gateway team.” That Gateway team consists of a high number of Certified Property Managers (CPM), according to Chief Operating Officer Leslie Bessey, who has over 25 years of experience in the real estate industry and has spent the last 16 years in several roles at Gateway, most recently as Director Property Operations. He was promoted to the newly-created COO position in May, 2009. “We’re education driven. We probably have the most CPMs in the business. “Experience and education give you knowledge and I think we’re a cut above some of the other companies. Some companies overload their Property Managers to try to make profit, but to us it’s a profession. We focus on making the job enjoyable and as a result we have very low employee turnover.” Gateway continues to attract clients as well because they ensure occupancy and rent levels remain as high as possible, two key factors that 28 www.canadianapartmentmagazine.ca
property owners look for management companies to achieve, says Ullrich. “We manage across Canada in several different markets and those markets can differ, but we’ve always had single-digit vacancy.” He points to the fact that Gateway has increased occupancy while actually reducing expenses. How is that possible? For Gateway it was achieved through their improved website, which was the recipient of an award from the Federation of Rentalhousing Providers of Ontario. “Five years ago we were spending close to a million dollars in newspaper advertising across Canada,” says Ullrich. “After improving our website and putting all of our properties on that site, we now find that 35 to 40 percent of the inquiries for rentals come from the website and so we’ve dropped our newspaper spending to around $400,000.” In addition, Gateway also added what they term a “vacancy tracker” to the site, which enables prospective tenants to go online and look at all the properties and determine if there is a
either a location or a building they’re interested in. By entering their email address into the vacancy tracker they will be notified by email when a vacancy occurs at their preferred location or building. All of this is done in real time, according to Ullrich. “All of our staff has computers so when a tenant gives notice the website is used to relay that information to head office and that automatically updates our website.” The final piece of the puzzle was video. “We’ve also found that it is relatively inexpensive to create a YouTube-type video for our website,” says Ullrich. “Now tenants can experience virtual tours of a number of our properties and get a feel for the amenities and the views and the condition of the suites.” The condition of the suites and buildings that Gateway manages is also another important factor to the company’s success. In Ontario, where Wittal oversees operations, renovations are helping with leasing and tenant retention.
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The Social Room at the Grosvenor Gate Apartments.
“The intention at all of our properties is that we are trying to make it a home for our residents and a place where they want to stay for a long time.” Among other things, they’ve updated exercise rooms and added them to buildings that didn’t previously have them. Another amenity being added to properties are barbeque areas for the residents. “In most cities in Ontario tenants aren’t allowed to have barbeques on their balconies,” says Wittal. “With older buildings our goal is to keep them in excellent condition,” she says. And to that end some buildings including Martha Terrace in Burlington have undergone exterior renovations. In the case of Martha Terrace, the building was painted to
blend in better with the surrounding newly-built condominium buildings. “We’re always trying new initiatives and different innovative ideas that align us better with what’s going on in the marketplace,” says Wittal. When it comes to tenant relations, Gateway is attempting to lead the way as well. Many buildings offer resident referral programs and monthly resident seminars on relevant topics, such as H1NI and fire safety, that originate from surveys done with the residents. Even simple things like monthly coffee and tea mornings where tenants can meet each other and building staff aren’t overlooked by Gateway.
“Little things make a difference,” says Wittal. “These kinds of things really make people feel part of their own little community. “The biggest thing with tenant retention in our buildings is customer service and we are very customer service oriented.” Gateway is also technology oriented, and not just online. “Corporately, we are very committed to technology and using it to make everyone’s life a little bit easier,” says Ullrich. “In today’s world where compliance issues are more prevalent and documenting how you’re being compliant is required from government agencies, it’s no longer sufficient to say ‘Yes, we’re doing what
“Little things make a difference. These kinds of things really make people feel part of their own little community.” – Shelley Wittal. 30 www.canadianapartmentmagazine.ca
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coverstory we are supposed to do,’ we also have to document that we’ve done it.” How Gateway does that is through the use of a compliance tool, which is available on the company Intranet and available to all staff. Whether it is a building compliance issue or an individual compliance issue, the company can create that requirement on the compliance tool says Ullrich. As an example, he points to the requirement that all buildings built before 1990 go through an asbestos survey. “Using our compliance tool we can tag all of our buildings that were built pre-1990 and send out to the people responsible for those buildings the request and requirement that they have that asbestos survey done,” says Ullrich. And when those surveys are complete the person who is responsible for completing the request uploads the survey on the website and the compliance officer can then review the results and record whether the building is compliant or not. And if the building is not compliant the next step, according to Ullrich, would be to get an asbestos management plan done and this can be again done on the compliance tool by issuing those instructions to the appropriate building sites. “We’ve done it for asbestos; we’ve done it for occupational health and safety issues, environmental issues and in some provinces for licensing requirements,” says Ullrich. “We have 500 site staff and 130 corporate staff and every one of them have to have occupational health and safety training and it would take a small army to ensure that is happening, but with our compliance tool it takes one person to make sure that it’s all happening.” That size and agility that Gateway possesses as a company helps give it an edge over the competition in other areas, according to Bessey. “Some things are done differently across the country, so we get to see things like different legislation and some of the changing trends. If we see something in Ontario, we can apply that to our practice here in BC. “We have some of the most stringent legislation here in BC, so we’re applying that across the country as well. We are doing things that aren’t required by legislation in some regions, but soon will be in others, such as our asbestos management program.” Another program that Gateway has committed to is the management of their properties in an environmentally-friendly manner. “Across our portfolio, we’d like to think we’re doing our part in ensuring our world is a little greener,” says Ullrich. “It’s good for the environment, but it’s also good for business. “Gateway is committed to conducting operations in a manner that protects clients’ assets, the environment and the health and safety of our employees, site staff, 32 www.canadianapartmentmagazine.ca
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Lobby at Grosvenor Gate Apartments.
building occupants and the communities in which we do business,” says Branko Cvoric, Gateway’s Environmental Officer and Senior Property Manager. “We have a large client base that includes single building owners, private corporations, institutional clients, such as pension funds and insurance companies,” says Ullrich. “And initially some of those institutional clients approached us to see what we were doing on green initiatives and a lot of what we do starts out as a request from a client. But once we got involved, we found that there was a strong business case for doing it. Not just for a better environment, but going energy efficient also helps the bottom line and the additional costs of purchasing green products is marginal when compared to purchasing non energy-efficient products. Going green was not a difficult decision to make.” The decision to become a part of the BOMA BESt certification program has also led to some recognition for Gateway as its Metropolitan Towers property in Vancouver was the first multi-residential property in Canada to receive BOMA BESt Level 1 Certification under BOMA Canada’s Go Green program. Since then, five more Gateway properties in BC have achieved Level 1 Certification and these six properties remain the only multi-residential properties to have achieved BOMA BESt certification in Canada. The first level of achievement—BOMA BESt Level 1, indicates that a building has met all of the BOMA Go Green best practices. Level 1 demonstrates compliance with BOMA Go Green Best Practices, which include performing an energy audit and a water audit, continually monitoring resource consumption and having a preventative maintenance program. 34 www.canadianapartmentmagazine.ca
“It’s easy to put it on paper, but implementation is a different story,” says Cvoric. “We pay special attention to building staff, which are the main component of our operations, and train them to make sure they fully understand our programs and policies. As part of the training we have developed on-line training programs for health and safety, environmental management and hazardous materials. “Another part of the program is passing along information to building occupants and making sure they understand what we’re doing and how they can help.” Cvoric says Gateway provides information on the environmental programs when tenants move in as well as through regular newsletters that provide tips to help conserve energy, such as not using the dishwasher unless it’s full. Gateway’s plate of business isn’t full and according to Bessey, new developments are handled by the company in a unique way as well. “We like to get involved early in the process, sometimes two years before it’s built, and do the operating budgets,” he says. “We’ve been educating [developers/owners] that the property manager shouldn’t be the last one in, but involved much earlier in the project. “We like to get into a new building 60 days before it’s completed and have the property manager walk around and see the building, otherwise it’s just something else on a list,” he says. “And 30 days before we’ll do a walkthrough with the plumbing and electrical team so our Property Managers get direction from the people that installed the equipment in the building. “There’s a whole bunch of things you want to do and they sound simple, but if they don’t get done they create havoc for everybody.
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View from Grosvenor Gate Apartments in London, ON.
“People are starting to realize the value of property management and the services we provide.” At the end of the day though, that service is the result of Gateway employees and that’s why the company’s focus remains on making sure they’re happy and satisfied, and that includes Ullrich. One of the reasons why the Chief Operating Officer role was created at Gateway was as a direct result of Ullrich looking at himself as he would any other employee. “We like our employees to have a good work-life balance and with the growth of the company my work-life balance was not where it should have been and so we created the COO position.” Now, Ullrich says he has the time to focus on two important aspects of the company’s mission, new business opportunities and innovation—two things he’s passionate about and looks forward to developing over the next 45 years. C A M
36 www.canadianapartmentmagazine.ca
Growth and Community Support Go Hand in Hand at Gateway • According to Debbie Johnson, Marketing Director at Gateway, the company anticipates growth in their residential portfolio of about three percent for 2010, in terms of units. The majority of that growth will be in BC and Ontario with some in Alberta bringing their portfolio to around 35,000 units. • As the company grows, so does their support. “We make a point of contributing to and supporting the communities where we do business. From community hockey and gymnastic teams to organizations like Habitat for Humanity and the Juvenile Diabetes Foundation, our employees get involved to help out where they can.” • Most recently, their community support took hold in the realm of education where they created a five-year scholarship award towards the accounting program at Kwantlen Polytechnic University. Johnson says, “The scholarship not only recognizes the hard work of the students but it also introduces them to Gateway where they may not have considered the excellent career choices we have to offer.”
multifacts National Rental Vacancy Rate Increases in October 2009 The average rental apartment vacancy rate in Canada’s 35 major centres increased to 2.8 per cent in October 2009 from 2.2 per cent in October 2008, according to the Rental Market Survey released by Canada Mortgage and Housing Corporation (CMHC). “Demand for rental housing in Canada decreased due to slower growth in youth employment and improved affordability of homeownership options,” said Bob Dugan, Chief Economist at CMHC’s Market Analysis Centre. “Rental construction and competition from the condominium market also added upward pressure on vacancy rates.” Between October 2008 and September 2009, 15,657 rental units and 45,655 condominium units were completed in Canada’s 35 major centres. Condominiums are a relatively inexpensive type of housing for renters moving to home ownership. Also, some condominium apartments are owned by investors who rent them out. Provincial vacancy rates in October 2009 increased in eight out of ten provinces. The largest increases were in Alberta where the vacancy rate increased by 3 percentage points to 5.5 per cent and British Columbia where the vacancy rate rose by 1.8 percentage points to 2.8 per cent. Vacancy rates decreased by 0.1 of a percentage point in Newfoundland and Labrador to 1.0 per cent, and by 0.4 of a percentage point in Nova Scotia to 3.1 per cent. The centres with the highest vacancy rates in 2009 were Windsor (13 per cent), Abbotsford (6.1 per cent), Peterborough (6.0 per cent), Calgary (5.3 per cent), and London (5.0 per cent). On the other hand, the major urban centres with the lowest vacancy rates were Regina (0.6 per cent), Québec (0.6 per cent), St. John’s (0.9 per cent),
CMHC & Conventional Mortgages for: Multi-Family Rental Properties Senior’s Housing Projects Commercial Properties Construction Projects Vancouver Brian D. Kennedy or Jonathan Wong Phone: 604-685-1068 Fax: 604-683-2787 Email: vancouver@peoplestrust.com
The highest average monthly rents for two-bedroom apartments in new and existing structures were in Vancouver ($1,169), Calgary ($1,099), Toronto ($1,096), and Ottawa ($1,028). The lowest average monthly rents for two-bedroom apartments in new and existing structures were in Saguenay ($518), Trois-Rivières ($520), and Sherbrooke ($553). Year-over-year comparison of rents in new and existing structures can be slightly misleading because rents in newly-built structures tend to be higher than in existing buildings. However, by excluding new structures, we can get a better indication of actual rent increases paid by most tenants. The average rent for two-bedroom apartments in existing structures increased in all major centres. The largest rent increases in existing structures were recorded in Regina (10.2 per cent), Saskatoon (8.3 per cent), Victoria (5.0 per cent), and St. John’s (4.9 per cent). Overall, the average rent for two-bedroom apartments in existing structures across Canada’s 35 major centres increased by 2.3 per cent between October 2008 and October 2009. CMHC’s October 2009 Rental Market Survey also covers condominium apartments offered for rent in Calgary, Edmonton, Montréal, Ottawa, Québec, Regina, Saskatoon, Toronto, Vancouver, and Victoria. In 2009, vacancy rates for rental condominium apartments were below two per cent in seven of the 10 centres surveyed. Rental condominium vacancy rates were the lowest in Toronto, Saskatoon, and Ottawa. However, Regina and Edmonton registered the highest vacancy rates for condominium apartments at 3.0 per cent and 3.1 per cent in 2009, respectively. The survey showed that vacancy rates for rental condominium apartments in 2009 were lower than vacancy rates in the conventional rental market in Ottawa, Saskatoon, Vancouver, Toronto, Edmonton, and Calgary. The highest average monthly rents for two-bedroom condominium apartments were in Toronto ($1,487), Vancouver ($1,448), Calgary ($1,310), and Victoria ($1,223). All surveyed centres posted average monthly rents for two-bedroom condominium apartments that were higher than average monthly rents for two-bedroom private apartments in the conventional rental market in 2009. CMHC’s Rental Market Survey also gathers information on monthly rents in types of dwellings other than private apartments and condominium apartments, such as duplexes, and accessory apartments for 15 major centres. Certified Rental Building Program adds to portfolio
Calgary Dennis Aitken or Doug Eveneshen Phone: 403-237-8975 Fax: 403-266-5002 Email: calgary@peoplestrust.com
The Federation of Rental-housing Providers of Ontario (FRPO) continues to award the Certified Rental Building Program (CRBP) for rental housing in Toronto, with the recent addition of four new portfolios: Greenwin Property Management Inc.’s 88 Erskine Avenue in Toronto, along with Park Property Management’s buildings 30 Aurora Court in Scarborough, 22 Greenwood Drive in Stratford and 600-620 Lolita Gardens in Mississauga
Toronto Michael Lombard Phone: 416-368-3266 Fax: 416-368-3328 Email: toronto@peoplestrust.com ™
www.peoplestrust.com 38 www.canadianapartmentmagazine.ca
Winnipeg (1.1 per cent), Kingston (1.3 per cent), and Victoria (1.4 per cent).
This residential rental housing initiative is the first quality assurance Program of its kind, in North America, designed specifically for tenants (consumers). In 15 months, since the Program’s inaugural launch in Toronto, FRPO members have enrolled over 91,000 suites, in 1,200+ buildings, throughout Ontario. As of the end of October, over 500 multi-residential apartment buildings have received official “certification status” across Ontario.
multifacts Said FRPO President & CEO Vince Brescia, “FRPO’s goals with this Program are to promote professionalism in our industry, and provide tenants with a quality assurance alternative when selecting their rental home.” Greenwin Property Management CEO Michael Bolahood said, “88 Erskine has set the highest standards in customer service for its residents. Five years ago, we introduced a 24-hour maintenance guarantee, on-line maintenance requests, on-site programs and events and a quarterly
apartment building to be accredited in the CRB Program,” said Park Property Management Inc.’s President, Gerd Wengler. “The certification confirms Park’s commitment to the highest standards of professionalism and assures existing and new renters that they will receive quality accommodation and service,” he added. “The Federation of Rental-housing Providers of Ontario is to be commended for launching the Certified Rental Building Program in Mississauga and providing tenants with a much valued peace of mind when selecting their rental unit, knowing their unit meets the rigorous requirements of the program,” said City of Mississauga Mayor, Hazel McCallion.
Tony Mihok
FRPO’S Director of Certification Ted Whitehead said, “FRPO’s Accreditation Program provides its members with a consistent set of standards that represent good value in rental housing for Ontario consumers. The Program’s seal of approval communicates to consumers a symbol of quality-assurance that helps tenants easily recognize well-run, well-managed buildings.”
Tony Mihok
Park Property Management’s Vice-President Margaret Herd; FRPO Chair David Horwood; Mayor Hazel McCallion; FRPO’s Director of Certification Ted Whitehead and Park Property Management’s President Gerd Wengler at 600-620 Lolita Gardens in Mississauga.
Greenwin Principals Kevin Green and Carey Green flank long-term resident Jennie who has lived at 88 Erskine Ave. for 39 years. newsletter. Today’s Certification by FRPO reinforces Greenwin’s commitment to customer service, good housekeeping and exceptional property maintenance, all of which benefit residents.” “Park Property Management has been a market leader in the residential rental industry and is proud to have the first 40 www.canadianapartmentmagazine.ca
GTAA: City of Toronto-imposed waste levy offsets rent reductions Any savings for tenants through the rent reductions announced by the City of Toronto will be offset by the unreasonable fees imposed by the City on building owners resulting from the waste levy, according to the Greater Toronto Apartment Association (GTAA). The City of Toronto recently issued notification letters to nearly 130,000 apartment rental tenants advising them of a reduction in their rent effective December 31, 2009, as a result of a decrease of multi- residential property taxes. The GTAA worked with City staff to make the tenant notices as clear as possible and to advise tenants that some apartment owners may apply to vary the rent decrease, as a result of the significant impact of the City’s waste levy program. “Tenants are entitled to have the property tax reduction passed on to them, but the City’s waste levy fees will inevitably nullify the rent decrease,” said Brad Butt, President & CEO, The Greater Toronto Apartment Association. “The GTAA brought the fact that that the waste levy costs would offset any rent reductions to the attention of the City in April 2009; however, our ongoing efforts to address this issue have been
dismissed. Unfortunately building owners are simply not in a position to absorb the significant costs associated with the waste levy.” Under the waste levy, as of July 1, 2008, property owners of multi-unit residential buildings pay a fee based on how much garbage the building generates during the billing period and the number of units in the building. They also receive a per unit rebate of municipal property taxes to offset the waste levy. Yet most buildings operated by GTAA members are incurring costs in excess of the rebate—many paying more than double the City’s estimated per unit cost—despite concerted efforts by GTAA member building owners to promote the City’s goal of diversion. The GTAA announced in September 2009 that on behalf of more than 240 apartment building owners across the city, it has filed an application with the Ontario Superior Court of Justice to quash portions of the bylaw pertaining to the City of Toronto’s waste levy, by-law No. 506-2008. “We would prefer to reach a solution with the City without having to pursue this application further, but to date we have not been successful in our efforts,” said Butt. Apartment building owners are in a legal position to avoid the waste levy by opting out of the City’s garbage and recycling collection service by paying private collectors. However, the effect of by-law 506 is that an owner who opts out not only pays the full cost of its garbage collection service, but receives no rebate and is still required to pay its property tax bill as if the City was collecting its waste. This is discriminatory. It is also an additional cost amounting to a penalty imposed on an owner who relieves the City from the cost of waste collection from the owner’s property. The GTAA shares the City of Toronto’s commitment to reduce Toronto’s waste and minimize its impact on the environment, and collaborates with the City on programs that reap environmental benefits. However, the GTAA does not support the way in which the City has chosen to meet this goal—specifically the waste collection levy. “Our member buildings have adopted stringent recycling practices and conduct awareness campaigns to encourage residents to participate in the available recycling programs,” said Butt. “At the end of the day, we can only influence the
multifacts actions of residents to a certain extent and it is ultimately their decision whether or not they choose to participate in recycling programs. The municipal charges for waste pick up based on volume will ultimately be passed on to residents counteracting the City’s announced rent reductions. This is a situation that is costly both to the City of Toronto and apartment owners.” 2009 FRPO MAC Award Winners The Federation of Rental-housing Providers of Ontario (FRPO) presented the 2009 FRPO MAC (Marketing, Achievement and Construction) Awards at its recent Awards Gala Dinner in Toronto.
Lobby Renovation of the Year Award: GWL Realty Advisors (Bretton Place)
Oxford Properties
Suite Renovation Award – Under $5000: Morguard Residential (1477 Mississauga Valley)
Outstanding Community Service: Skyline Leasing Professional of the Year: Kelly Brazeau (Greenwin Property Management)
Suite Renovation Award – Over $5000: CAPREIT (355 St. Clair West)
Property Manager of the Year: Marc Monette (McArthur Properties)
Rental Development Award – High Rise: Concert Properties Ltd. (Tapestry Village Gate West)
Resident Manager of the Year: Rhodora Dorado (CAPREIT)
Environmental Award of Excellence:
Customer Service Award of Excellence: Realstar Management Partnership
Dr. Arthur Weisz first recipient of FRPO’s Lifetime Achievement Award The Effort Trust Chairman was recognized for significant contributions to the betterment of the housing industry and community. Weisz was born in Hungary and survived World War II and the Holocaust to escape post-war Communist rule by fleeing to an Austrian Displaced Persons camp with his wife and young son. He immigrated to Canada in 1951 and for the first two years found work as a labourer, a brick layer, and a salesman. Arthur began his career in real estate, founding his own company within two years of arriving in Canada. That business grew rapidly and was the foundation for a successful application to government to open a banking enterprise. Today, The Effort Trust Company, based in Hamilton, Ont., encompasses real estate brokerage, asset management, property development and financial services and is one of the largest property managers in Ontario with over 10,000 residential apartment suites and over six million sq. ft. of commercial real estate in its portfolio. Other MAC award winners included: Curb Appeal Award: Greenrock (45 & 57-93 Balliol St.) Property Management Advertisement – Single Project: Greenwin Property Management (88 Erskine) Property Management Advertisement – Corporate Branding: Skyline Property Management Website Award – Corporate Branding: CAPREIT Property Management Website Award – Specific Property: Vertica Resident Services (10 Lisa)
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December 2009 / January 2010 41
4/22/2009 4:37:58 PM
advertisingfeature
Landlord’s Biggest Challenge In Rent Collections The number one objective for most landlords in this industry is to make a profit. In most cases landlords have polices and procedures in place to help minimize losses. One will argue that the Residential Tenancy Act (RTA) and the Landlord and Tenant Board (LTB) system is favorable to tenants. So what do you do? One thing for certain is that you cannot change the system but we can certainly try to beat it. Suite Collections Canada Inc. (Suite Collections) is one of the only collections agencies, in Canada, devoted entirely to the collections of residential debts. With a combined experience of over 20 years in rent collections for both current and past residents Suite Collections is your choice for loss prevention. Over the years we realized a common theme with the majority of files that were assigned to us for collections. Some of the most common ones include: No Rental Agreement No Lease Agreement No proof of employment No guarantors Poor Credit Score All of the above is equally important when considering a tenant to rent your unit and plays a significant part in any debt recovery process after the tenancy is over. Another common mistake made by many landlords is the “do it myself philosophy”. We agree that in some cases it’s cost effective to do a lot of things in-house, but you have to remember while you may be an expert in finance you’re not an expert in rent collections and evicting nonpaying or trouble tenants. The (LTB) Eviction Notices and Applications may look simple but they are actually very technical and can be fatal if not completed correctly. A defective notice will result in your application being dismissed by the Board Member at the LTB and also showing up at the hearing without a representative could end up costing you a lot more than it should. In June of 2009 Joe (Suite Collections client) a small landlord called our office very frustrated, looking for help to evict his tenant who had not paid rent for eight months. He explained that Rick (his tenant) had a history of paying his rent late, but eventually he would pay. After the second month of not receiving rent, Joe contacted Rick who promised to have everything paid up by the end of 42 www.canadianapartmentmagazine.ca
COLLECTIONS
the month. The end of the month came and Joe still hadn’t received any payment. Joe realized something was different this time around when Rick stopped taking his calls, so he contacted the LTB to find out what his options were. He started the eviction process by completing and serving the tenant with a Form N4 (Notice to Terminate Early for Non- Payment of Rent). The form he explained, looked simple and being a young smart professional he was confident that it was something he could do himself. He confirmed that he had delivered the notice to the tenant personally. The termination date on the notice came and went and Joe did not receive any money. He put in another call to Rick but once again his call was ignored. The next eviction step was to complete an L1 Applications (to terminate a tenancy) with the LTB and so he did. He received a Notice of Hearing and served the tenant with his copy pursuant to the rules and waited for his hearing date. Finally, the hearing date arrived. Joe was thankful as the entire process had taken him two and a half months. Now he could have his day in court. The Member called his case, he stood up and went forward together with the tenant. Joe explained to me that his hearing was over in less then a minute. The unthinkable happened. His application was dismissed without prejudice as his N4 Notice was flawed/defective. Joe explained to me that he walked out of the hearing feeling very deflated, frustrated, mad and angry with himself and the LTB’s process. “It should be simple,” he said. “He owes me the money.” He took another stab at the Notice, making sure it was done to perfection and it was. The hearing was in May 2009 (Joe’s second attempt) and Rick’s unpaid rent balance was now $12,000, the monthly rent was $1,700. Joe attended the hearing and was relieved that his paperwork was in order, but there was another disappointment. The tenant showed up with a lawyer who alleged that he did not speak English and so he requested a French hearing. The Board was not prepared to accommodate this request and had no choice but to adjourn the hearing. Joe had had enough and decided to contact a professional: Suite Collections Canada Inc. After our initial consultation and hearing about what had transpired, Suite Collections was happy to assist Joe in getting the matter resolved. The case was put over to June 4, 2009 (Joe’s third attempt)
advertisingfeature and one of our Licensed Paralegals represented Joe at the hearing. The case was called and before our Agent could present her preliminary argument, the Member advised that the matter would have to be adjourned again as there was no bilingual interpreter. Our Agent vigorously argued that Joe’s case was being prejudiced and requested that the Member issue an Interim Order for two months rent to be paid to Joe immediately or bring the matter back before the end of June. The hearing was rescheduled for June 29, 2009 (Joe’s fourth attempt). Once again our client Joe and the Suite Collections Paralegal attended not knowing what was going to happen. The case was called and only Joe and our Agent walked forward. The tenant did not show up. An order was issued granting termination of the tenancy and ordering Rick the tenant to pay $10,000, even though his balance was $15,000, which included sheriff’s evictions fees. Six weeks later, Rick was evicted for non-payment of rent and his file is now being handled by one of Suite Collections 12 Collection Officers. In preparation for this article I had a discussion with one of my senior Collection Officers assigned to this file to get a first-hand report on the challenges she faced while working the file. One of my questions to her was, “If Joe had done a credit report on Rick, having seen his report now, should he have rented his house to him?” The Officer immediately told me “No. His credit report had a number of R9s, he was self-employed and did not have a steady address for the last five years–big red flag,” she explained. The lessons I hope you take away from this article is: As a landlord it’s your obligation to have a “Leasing Criteria” for leasing tenants your unit. Simply put, “do your homework”. A collection file starts with your Rental Application - all the information that we need to collect an account successfully should be requested from the tenant on your Rental Application. Get a guarantor. If you have a tenant that is self-employed it’s in your best interest to get someone that is credit-
worthy to guarantee the unit. Serve your Notice (Form N4) within the first five days of not receiving your rent. Do not enter into any payment without the assistant of a mediator from the LTB. Suite Collections also encourages our clients to conduct annual suite inspections and in most cases we will recommend that one be done before any hearings at the LTB.
CONTACT: Surana Baptiste, Collections Manager 260 Richmond St. East, Suite 300 Toronto, Ontario M5A 1P4 Phone: (416) 642-0291 Fax: (416) 340-0855 Email: For landlords: debtcollection@ suitecollections.com For tenants with outstanding debt: debtpayments@suitecollections.com
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December 2009 / January 2010 43
regulations
Toronto Green Standard Sets Bar for Development Approval High-Performance Buildings to Qualify for Incentives By Barbara Carss
Future multi-residential, commercial, industrial, and institutional projects in Toronto will have to comply with 44 minimum performance measures to secure development approval. The Toronto Green Standard (TGS) will apply to all planning applications beginning January 31, 2010. It establishes requirements for: air quality; emissions reductions and energy efficiency; water quality, quantity and efficiency; ecological protection and enhancement; and solid waste reduction and diversion. Most of the measures relate to site orientation, design features and amenities rather than building systems and technology, but all new development is mandated to deliver at least 25 percent better performance than the standards of the Model National Energy Code for Buildings (MNECB). Green standards with different but comparable measures will apply to low-rise residential and low-rise nonresidential projects. Developers can also voluntarily aim to meet more rigorous conditions set out in a Tier 2 of the Toronto Green Standard to qualify for a 20 percent refund of development charges. To be eligible, buildings must achieve at least 35 percent better performance than the MNECB and six additional mandatory Tier 2 requirements along with three of the 10 other optional Tier 2 measures. The refund program will cover Site Plan applications submitted after April 30, 2009. “We set up specific targets. This is all measurable stuff,” observes Joe D’Abramo, Director of Zoning By-law and Environmental Planning for the City of Toronto. “Really, what we care about is how the building and site interact with our infrastructure and our environment.” Through an agreement with the Canada Green Building Council (CaGBC), Toronto-based LEED registrants will be able to document attainment of TGS requirements at the same time as LEED prerequisites and credits, thus avoiding duplication of processes. The two programs are not interchangeable, however. The TGS has more mandatory elements and requirements that are specifically tailored to Toronto’s natural features, environmental and 44 www.canadianapartmentmagazine.ca
infrastructure pressures, and design and development ambitions. “LEED is very optional and it’s too optional in terms of what we want to achieve,” D’Abramo explains. Other observers suggest the TGS might be too ambiguous. “It would have been preferable for the City to adopt a more popular rating system like LEED or similar type program
that would give us a clear basis to know how to deliver what they’re looking for,” says Andrew Pride, Vice President of the Minto Green Team, which has overseen development of three LEED projects in Toronto, including a 148-unit LEED Gold rental apartment building and a two-tower, 876-unit LEED Gold condominium complex. “We are running into issues of people not knowing how to implement what the City is asking for. There is a lack of experience in the design and engineering community and we are running into issues of implementation onsite with the trades as well,” concurs Darius Rybak, Vice President of Operations with Aspen Ridge Homes, which is seeking to secure LEED Silver certification for a 500-unit condominium project now nearing completion in downtown Toronto.
Costs & Complications Many of the required measures – such as bicycle parking and associated facilities, or dedicated areas for collection and storage of recycling and organics—are straightforward to interpret and implement in new construction, but may increase capital costs. Others—such as requirements to select native plant species – shouldn’t necessarily create any extra costs. However, stipulations for green roofs, storm water retention and managing the quality of storm water runoff could present design challenges, as well as extra capital costs. Although Toronto’s new Green Roof By-law exempts multi-residential buildings with fewer than six storeys or tower roofs with floor plates of less than 8,100 square feet, those buildings will have meet the TGS requirement for reduction of urban heat island effect. That calls for a green roof on 50 percent of roof area, high-albedo or cool roofing on 100 percent of the roof, or a combination of a green roof and cool roofing on 75 percent of the roof surface. This could also require some new skill sets for condominium boards of directors, and create new maintenance costs and considerations for reserve fund planning. “We are required to build it, but I’m not sure what happens after we’re gone and the condo corporation is operating the building,” Rybak notes. The undifferentiated energy performance standard for all building sectors could in fact favour commercial, industrial and institutional buildings since energy savings are typically more difficult to achieve in multi-residential buildings with a more diverse range of occupants who are more likely to behave in ways that undermine the effectiveness of energy-efficient systems and technology. Both City officials and developers suggest the requirement to outperform the MNECB by 35 percent could be the most difficult of all Tier 2 criteria. “Our buildings are built quite efficiently and we’re just hitting that 35 percent mark in the multi-residential side of things, whereas in commercial it’s no problem,” Pride
reports. “In multi-residential, 35 percent is going to be a challenge for most developers.” However, he applauds the philosophy of the Tier 2 standards. “I’m very pleased to see the City moving in the right direction in providing incentives for builders that go above and beyond Code,” he adds.
Incentive Criteria Other measures required to meet Tier 2 standards and qualify for the development charge refund include commissioning, reducing heat island effect on non-roof areas, lighting controls and water-efficiency features. Among the 10 choices of optional Tier 2 measures, Pride predicts Minto will not be incorporating salvaged, refurbished or reused building materials equivalent to 5 percent of a project’s value. “That’s a significant task in a retail environment like a condominium,” he maintains. “As a standard, I’m not sure how well the market will accept that level of refurbished content in the units.” Rybak suggests buyers’ interest in energy-efficient and sustainable features is still rather superficial anyway. “There is a small group of purchasers who will seek out green elements and features, but the majority of purchasers really are not going out of their way to look for those features in a building,” he says. “Buyers would like to have environmentally friendly elements in their buildings, but there is a very, very small percentage that is willing to pay extra for it.” Ultimately, added capital costs get passed through to homebuyers, residential and commercial tenants, but a 20 percent refund of development charges will go a long way toward balancing that. “It’s very substantial and very attractive. From a financial standpoint it does make sense to pursue Tier 2,” Rybak acknowledges. “What I would be wary of before committing to this is being really able to deliver it. But we are getting so much more experience each day on these issues. Maybe I will become much more comfortable.” Fostering developers’ learning curve is one of the City’s goals for the program. Planning officials project that a maximum of 20 percent of applicants will meet Tier 2 standards and qualify for the development charge rebate although they anticipate the number will be closer to 10 percent at least initially. “In preparing this, we looked at buildings that have been built to this level,” D’Abramo says. “There are several examples. That’s how we know it’s possible.” For more information about the Toronto Green Standard, see the web site at www.toronto.ca/planning/ greendevelopment.htm. CA M This article was excerpted from the November 2009 issue of Property Management Report. December 2009 / January 2010 45
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