Canadian Apartment Magazine

Apartment CANADIAN

VOLUME 14 / NUMBER 5 / NOVEMBER 2017

FROM DERELICT TO DYNAMIC REIMAGINING TORONTO’S WATERFRONT

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Our Business is to Make Yours Shine!

Whiterose is an Industry Leader with a long list of condos in the downtown and surrounding areas Whiterose Janitorial Services Ltd. believes in servicing its customers with professionalism, communication and appreciation. The Key to our success is service, quality and value. We clean beyond the surface!

Quality management begins behind the scenes prior to commencing a job all employees are evaluated and or training to the whiterose standard given special attention to health and safety policies.

Whiterose Janitorial Services is a full service company and a member of ACMO and CCI. Specializing in cleaning and live in & live out Superintendents for the past 30 years.

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EDITOR’S NOTE>>

Apartment CANADIAN

ERA OF RAPID CHANGE

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Virtual Reality. Artificial Intelligence. Fin Tech. Modular Construction.

Building Automation. With so many rapid advancements underway, the apartment industry is no longer a stagnant business of bricks, mortar and filling vacant spaces.

From the ground up, things are changing. Developers are envisioning complete communities in which resident needs are being prioritized to reflect societal changes that have long been overlooked. Cars are no longer at the forefront of infrastructure. Pedestrians and public spaces are edging out motorists to make room for a cleaner, safer existence.

Green technology and energy efficiency are top considerations among builders, owners and tenants alike.

Exemplifying this movement is Toronto’s waterfront, a space that has already seen massive revitalization since Sugar Beach opened in 2010.

But it’s a work in perpetual motion, and all eyes are currently on the city’s shoreline as it continues to transform into a hub of urban innovation. Read our cover story on page 20 for a glimpse at what’s in store for Quayside, the area’s newest and most buzzed-about community.

Also in this issue: Vancouver’s new passive towers; digital marketing solutions; ropeless elevators; mulit-residential taxes; and the importance of green space when it comes to our health. We hope you enjoy our technology issue and, as always, feel free to reach out via one of our social media channels if you have any comments or news you’d like to share.

Sincerely,

Editor

Erin Ruddy

Publisher

Mitchell Saltzman

Senior Designer

Annette Carlucci

Production Manager

Maria Siassina

Production Coordinator Elizabeth Nguyen Contributing Writers

arbara Carss B Paula Gasparro Chaim Rivlin Andy Schwartze

Director of Sales

Eric Harbottle

National Sales

Sean Foley Stephanie Philbin Melissa Valentini

Digital Media Director Steven Chester Circulation

Aashish Sharma For sales information call (416) 512-8186

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rent trends

Authors: Canadian Apartment Magazine accepts unsolicited query letters and article suggestions.

WHAT THE INDUSTRY IS TALKING ABOUT IN 2017

Manufacturers: Those wishing to have their products reviewed should contact the publisher or send information to the attention of the editor.

The opinions expressed are those of the authors of articles and do not necessarily reflect the views of Canadian Apartment Magazine. This information is general and is not a substitute for legal advice.

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.

ARTIFICIAL INTELLIGENCE

DIGITAL MARKETING

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VOLUME 14 / NUMBER 5 / NOVEMBER 2017

DoS

FEATURE DDoS

16 Maintenance Deemed a Portal to Innovation Senior real estate executives ponder rapid evolution of building FUDtechnology

By Barbara Carss

XSS

COLUMNS 10 Transactions Q3 2017 Apartment Market Highlights

By Erin Ruddy 12 CMHC Weathering Extreme Scenarios

By Paula Gasparro 26 Newsworthy Industry Hot Topics 30 Tax Cities Exhibit Divergent Property Tax Regimes 32 Marketing Real Estate in a Digital World

By Chaim Rivlin

COVER STORY

DEPARTMENTS

20 Complete Communities, By Design Introducing Quayside, the world’s first fully-connected, sustainable neighbourhood where walkability reigns

By Erin Ruddy

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Toronto’s waterfront district, image courtesy of Waterfront Toronto

Editor’s Note FROM DERELICT

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38 Smart Ideas

REIMAGINING TORONTO’S WATERFRONT

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SPONSORED CONTENT

CMHC’s policy changes are positive for borrowers

(Here’s why)

Here are some of the highlights: GUARANTEES More flexibility. CMHC will now entertain alternative factors when determining the need for personal guarantees, including corporate guarantees, equity retention, replacement reserves, collateral security, etc. Previous CMHC policy required personal guarantees for any financing with a loan to value above 75%.

Standardized guarantee percentage. For existing rental properties, CMHC now requires only 40% guarantee of the outstanding loan amount owing under the mortgage. For construction loans, the guarantee amount is 100% until the borrower achieves stabilized rents, at which time the guarantee decreases to 40% of the outstanding loan amount.

Non-recourse threshold: The limit for a nonrecourse loan has increased to 65% loan to value (up from 60%).

This summer, the CMHC (Canada Mortgage and Housing Corporation) rolled out a series of policy changes that have changed the game in regards to mortgage loan insurance for multi-unit residential properties.

Developed with a pragmatic approach, the changes are designed to make rental and affordable housing more accessible to more Canadians.

“Ultimately, CMHC amended their policy to generally come more in line with un-insured (conventional) mortgage industry standards,” explains Aaron Cameron, senior manager for Commercial Operations with First National.

Of course, he adds, changes of this magnitude are rarely straightforward and there is a lot of new information to digest: “The good news is that much of the policy transformation favours borrowers when it comes to both guarantees and underwriting.”

“Limiting the guarantee requirements means the borrowers have less risk,” says Cameron, adding, “In the event of default the borrower has less liability to cover the losses that could potentially be incurred by the lender in such a ‘worst case scenario’.”

UNDERWRITING Permitted non-residential space. The maximum threshold for permitted nonresidential space has been increased to 30% (up from 20%).

Consideration of bulk lease revenue. The revenue garnered as a result of a bulk lease for a portion of the residential units will now be considered, where such arrangement is directly in support of affordable housing, housing in the north, housing for students, or housing for vulnerable groups.

Consideration of furnished suites.

Furnished suites may now be considered, where the units are intended for long-term occupancy.

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Retirement Homes and Student Housing.

CMHC may now consider amortization periods of up to 40 years for these property types.

Premium Structure: This has been amended for new construction and affordable housing premiums. Slight changes have also been made for existing rental properties with loans between 70 – 75% loan to value.

“The underwriting changes increase CMHC flexibility to incorporate more complex situations,” explains Cameron.

“This flexibility is in line with their mandate to support the Canadian population and their housing needs. By including bulk leases or furnished suites, they are ultimately helping the individuals who reside in those types of units.”

In addition to these amendments,

“Ultimately, CMHC amended their policy to generally come more in line with un-insured (conventional) mortgage industry standards,” explains Aaron Cameron, senior manager for Commercial Operations with First National. the CMHC has also implemented additional policies for rental achievement requirements for new construction, second mortgage maturity requirements, as well as new policies to simplify its affordable housing requirements.

Still, while the policy changes are positive and have created new potential

opportunities for borrowers, there are a number of intricacies to dissect and understand. As such, Cameron notes, “As the largest CMHC lender in Canada, First National can help. We work closely with CMHC to ensure our borrowers get the best product and we can benchmark each submission against other similar CMHC insured financings we have done. Also, since we have offices across the country in the same cities as CMHC, so we have an appreciation for the intricacies and different approaches of each office.”

For more information and insurance expertise, visit www.firstnational.ca.

TRANSACTIONS >>

Q3 MULTI-RESIDENTIAL HIGHLIGHTS Canada’s Apartment Market Today Overall, the Canadian real estate industry continues to be performing well in the back half of 2017, with the apartment sector holding strong. According to the 2018 Emerging Trends in Real Estate report, published

by PwC Canada and the Urban Land Institute, one trend we’re seeing a lot of this year is the development of new mixed-use properties by major pension funds and large institutional investors (including REITs). These properties tend to be a combination of commercial, retail, service, and residential, creating brand new, mixed-use communities in all of Canada’s major cities.

Notable Q3 Apartment Transactions: Address

Total Price

Price per unit

Purchaser

Vendor

Redwood Properties – Realstar Group Portfolio

$121,950,500

$293,857

Realstar Group

Redwood Properties

Jamesview Ventures – Akelius Fastigheter Portfolio

$71,175,000

$359,470

Akelius Fastigheter AB

Jamesview Ventures ULC

3.

Lakeshore Place Retirement Residence

$38,814,000

$219,288

Chartwell Retirement Residences

Caregard Enterprises Inc.

4.

1450 Sheppard Ave. W.

$37,200,000

$185,525

SiteLine Group

Starlight Investments

5.

2354-2356 Eglinton Ave. E.

$22,750,000

$162,500

2585276 Ontario Ltd.

Egrose Apartments Inc.

1.

2.

10 | Canadian Apartment | Part of the REMI Network |

Rental properties in Montreal, Quebec City and Halifax are in high demand, according to the same report. Quebecers have long looked at rental favourably and the market is particularly strong for those properties that are centrally located where residents can embrace a “live-work-play” lifestyle.

Interest in Montreal rental property is so strong, in fact, that mid-sized players, as well as industrial and commercial developers, are beginning to take notice and move into the apartment market. In Halifax, a lot of the rental stock coming online is condo-quality.

In British Columbia, strong demand accompanied by even stronger pricing and highly compressed cap rates have convinced many long-term holders of multifamily properties in Metro Vancouver to cash out in the first half of 2017 amid a rising interest rate and bond yield environment that could move the market into a post-peak-pricing phase.

According to Avison Young’s Fall 2017 British Columbia Multifamily Investment Report, sales of multifamily assets in the first half of 2017 roared back with 47 transactions valued at $658 million. The second half of 2016 had recorded just 30 transactions valued at $262 million while the first half of 2016 registered 43 transactions valued at $472 million. Multifamily investment activity in 2017 is on pace to easily surpass the 73 transactions valued at $734 million set in 2016. The record was set in 2015 when 80 properties valued at $1.41 billion traded hands.

Meanwhile in the GTA, product continues to be at a shortage. In its report, Avison Young cited that multi-residential properties were the least-traded asset class in Q3, despite investment dollar volume rising 43% quarter-overquarter to $475 million. Nevertheless, year-to-date multi-residential sales are up 21% year-over-year to $1.1 billion.

Two portfolio trades helped drive the sector’s quarterly performance: Redwood Properties sold two high-rise buildings (415 units) in Brampton to Realstar Group for $122 million, while Akelius purchased three properties (191 units) in the City of Toronto from Jamesview Ventures for $71 million.

19 Duncan Street, Toronto Allied Properties REIT and Westbank Corp announced plans to proceed with the development of 19 Duncan Street. Designed by Hariri Pontarini Architects, the fivestorey heritage building will see the addition of a new tower, which will include: eight storeys of office space; 21,000 square feet of retail; and 462 rental-residential units on the 11th through 57th floors. Upon completion, Allied will manage the office and retail components and Westbank will manage the residential component. Occupancy is scheduled for early 2021.

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| www.REMInetwork.com | November 2017 | 11

CMHC REPORT >>

Weathering Extreme Scenarios CMHC Stress Testing Shows it is Well Capitalized to Withstand Catastrophe

by Paula Gasparro Canada Mortgage and Housing Corporation’s stress testing of its own capital levels confirms its ability to weather severe but extremely unlikely scenarios, according to 2017 results released in October.

“C

MHC has always been and continues to be a stabilizing force in Canada’s housing system,” said Romy Bowers Chief Risk Officer, Canada Mortgage and Housing Corporation. As a responsible risk manager, we seek out extreme, almost unimaginable situations and ask ourselves ‘what if?’ That’s the goal of our stress testing – to measure how we would stand up to these unlikely shocks. In all cases, this year’s stress testing shows we are well capitalized to handle these very severe situations.”

Stress testing is an essential part of CHMC’s risk management program. The Office of the Superintendent of Financial Institutions (OSFI) mandates that financial institutions run these simulations and verify that their business is able to withstand even the most extreme scenarios. In support of greater transparency

with respect to its risk management practices, CMHC began publicly releasing stress test results in 2015.

In 2017, CHMC tested its mortgage loan insurance and securitization businesses against several extreme scenarios including: Anti-globalization – A rapid increase in interest rates in the United States coupled with unsustainable debt levels in China cause large negative demand shocks globally. Downturns in the United States and China subsequently cause protectionism, widespread use of tariffs and euro-zone break-up.

Earthquake – Multiple scenarios of a highmagnitude earthquake that disrupts critical infrastructure and services in a major urban centre, including broader financial impacts as a result of its effects on homeowners and

businesses were run. Reporting reflects the most severe outcome of the simulations.

Steep oil price fall – Unexpected excess supply causes a sharp drop in the price of oil to below $20, followed by prices in the $20-$30 range for about 2 years prior to recovery.

U.S.-style housing correction – for mortgage loan insurance only, a 5 percentage point increase in the unemployment rate with a 30% decline in house prices.

In each case, testing confirms that CMHC’s capital holdings are sufficient to weather each of these extreme scenarios.

The results of each scenario on CMHC’s regulatory capital requirements (%MCT) are provided below, noting CMHC`s target operating capital level is 165% MCT:

Base Case

Antiglobalization

Earthquake

Steep oil price fall

U.S.-style housing correction

Cumulative net income/loss - Insurance

$7,340

$118

$6,572

$5,589

-$217

Lowest point of capital available (% MCT) – Insurance

172%

181%

181%

183%

182%

Cumulative net income/loss - Securitization

$2,559

$2,639

$1,212

$2,562

N.A.

Lowest capital available-to- capital required (%) Securitization

103%

103%

103%

103%

N.A.

Change in housing prices (peak-to-trough)

17.6%

-31.5%

-0.2%

-9.1%

-30.0%

Peak unemployment rate

6.9%

15.3%

8.2%

9.1%

12.0%

For the period 2017-2022

*In millions, unless indicated, Base Case is non-stressed situation according to CMHC’s Corporate Plan.

12 | Canadian Apartment | Part of the REMI Network |

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CMHC REPORT >>

THE FUTURE OF AFFORDABLE RENTAL HOUSING Putting Students to Work

A

s part of the federal government’s Affordable Rental Innovation Fund, CMHC launched the Student Challenge for Affordable Rental Housing. This challenge is an exciting opportunity for any student registered in an accredited post-secondary educational institution in Canada who has a new and fresh approach to creating affordable rental housing.

Students can work individually or create a team with the goal of rethinking and revolutionizing the affordable rental housing sector. Cash prizes of $10,000 will be awarded to winning submissions when the challenge ends on April 30, 2018.

In addition, winners may be eligible for funding to help transform their innovative concept into a tangible project.

“Our future rests in the hands of today’s youth so what better group of people to approach for this unique challenge,” said the

Quick facts: • The goal of the Affordable Rental Innovation Fund is to encourage new funding models and innovative building techniques in the rental housing sector.

• This Student Challenge is seeking affordable rental housing solutions that are new to Canada, with innovative building techniques and business or financing models that lower the costs and risks associated with rental housing.

• Projects submitted must also meet criteria related to: affordability, financial viability, energy efficiency and accessible features.

Honourable Jean-Yves Duclos, Minister of Families, Children and Social Development and Minister responsible for Canada Mortgage and Housing Corporation. The Student Challenge for Affordable Rental Housing is an inspirational initiative filled with promise and excitement for what is to come. I am eager to see how these dynamic contributors can change the face of affordable rental housing in Canada.”

All applications must be submitted to Canada Mortgage and Housing Corporation (CMHC) by 11:59 p.m. EST on April 30, 2018 in order to be eligible.

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14 | Canadian Apartment | Part of the REMI Network |

2017-10-04 12:39 PM

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FEATURE >>

Maintenance Deemed a Portal to Innovation Senior Real Estate Executives Ponder Rapid Evolution of Building Technology

by Barbara Carss Maintenance turned out to be a portal to innovation for one of Canada’s most prominent owners and managers of commercial real estate. That outcome wasn’t necessarily the driving objective when Oxford Properties Group introduced its 310-MAXX 24-hour tenant hotline in the 1990s, but both its instigator and inheritor retroactively tag it as a watershed in energy management, data analytics and building users’ expectations of service.

J

on Love, now the CEO of KingSett Capital, but formerly at Oxford’s helm, and Blake Hutcheson, current president and CEO at Oxford, were among a panel of senior executives reflecting on evolving building technology as part of the kick-off to BOMEX 2017, the national conference of the Building Owners and Managers Association (BOMA) of Canada, earlier this fall in Toronto.

“The thing that 310-MAXX did the most, in addition to getting our customer data, was it diagnosed our buildings,” Love recalled.

16 | Canadian Apartment | Part of the REMI Network |

A process designed to efficiently respond to tenants’ requests for temperature adjustments, replacement of burnt out lighting, cleaning, repairs and security also generated a trove of information about where those issues were occurring. Launched as a 20th century phone line, a platform for online requests was added in 2000.

Each subsequent iteration of technological advancement has been a step toward today’s on-demand interactive communications.

For example, shoppers on their way to one

of Oxford’s super-regional malls can now receive tips, via their smartphones or tablets, on available parking spaces closest to the stores they favour.

“Our customer isn’t necessarily just the tenant; it’s the people who frequent the tenant,” Hutcheson observed.

The green building movement was similarly embryonic when the forerunners to 21st century building automation systems and real-time monitoring hit the market.

Few property managers in the 1990s may

FEATURE >> have foreseen their future participation in programs like BOMA BEST, LEED or GRESB, or envisioned the key role that would be staked out for the buildings sector to meet Canada’s commitment to reduce greenhouse gas (GHG) emissions. However, the panellists are now very much focused on that national target for a 30 per cent reduction in emissions compared to 2005 levels by 2030.

“2030 is really problematic, I think, for everyone in this room,” acknowledged Toni

Rossi, president of Infrastructure Ontario’s real estate division. “Investment has to start today.”

She calls energy-use monitoring and the resulting data critical for identifying the best place to begin in the 5,000-building portfolio she oversees, particularly when the owner — the Ontario government — prioritizes services dispensed from the portfolio, such as health care, ahead of the state of the buildings.

“The luxury we do not have is funding,” she said. “We are in a pecking order.”

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Institutional owners/investors enjoy a little more manoeuvrability. “The bulk of challenging emitters are 25,000- to 30,000-square-foot buildings and there are a lot of them. With a million-square-foot complex, you can do a lot of things that others can’t do,” reflected Remco Daal, president, Canadian real estate, with QuadReal Property Group.

Perhaps closing the circle begun with 310MAXX, Love noted that tenant satisfaction is now a spinoff bonus of investment in sustainability.

“In addition to being the right thing to do, and most programs have an economic rationale, the customers want it,” he said.

Rapid innovations have made flexibility a priority and propelled migration to nonproprietary systems. Daal warned that customized software and systems can present a bottleneck for integrating new technology and/or bringing new properties with differing systems into a portfolio. “A lot of times, organizations customize to the point of redundancy,” he said.

That might be counted among the growing pains of his newcomer company, tasked with managing British Columbia Investment Management Corporation’s (bcIMC) previously outsourced real estate portfolio. However, the new conglomeration also provides opportunities to identify and promote best practices from its various component parts.

“Invariably, when you bring 500 people together from different organizations, there are challenges,” Daal reported. “We had the benefit of continuing to use legacy systems from our predecessor organizations.”

Part of forging the way forward also lies in stepping back to contemplate what direction to take. “Property managers can’t do this off the side of their desks. You need a lab; you need a think-tank around some of these issues,” he advised.

“The world is changing and nobody knows exactly where it’s going, but if you’re not trying to figure it out, you’ll be left behind,” concurred Adam Paul, president and CEO of First Capital Realty.

As a reminder of the rapid pace of change, Love held his smartphone aloft.

“How many people in this room have a smartphone on them today?” he asked. “Just reflect that this didn’t exist 10 years ago.”

Barbara Carss is editor-in-chief of Canadian Property Management.

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17-15161

COVER STORY >>

COMPLETE COM

BY DESIGN Waterfront Toronto and Sidewalk Labs tap into technology as they set out to develop Quayside, the world’s first fullyconnected, sustainable neighbourhood where walkability reigns

by Erin Ruddy

20 | Canadian Apartment | Part of the REMI Network |

COVER STORY >>

MMUNITIES,

| www.REMInetwork.com | November 2017 | 21

COVER STORY >>

Building on the region’s tech boom to create new economic opportunity, Sidewalk Labs and Waterfront Toronto have come together to launch a technological testbed, known as Sidewalk Toronto. Blending cutting-edge, digital technology with human-centred urban design, Sidewalk Toronto’s goal is to create modern, mixed-use communities that are connected, sustainable and affordable.

What began in March, 2017 with a Request for Proposals (RFP) by Waterfront Toronto seeking a partner for the new Quayside development district, has since blossomed into a progressive alliance with potential global impacts.

All eyes are on this new partnership as it forges the path to urban innovation and sets out to transform the city’s derelict, post-industrial waterfront into a leadingedge community where data captures all, and progressive

minds seek perpetual change for the better.

“Waterfront Toronto has already made remarkable strides in revitalizing the waterfront with forward-looking new neighbourhoods and reconnecting Torontonians to their waterfront,” said Will Fleissig, President and CEO of Waterfront Toronto, at the press announcement in October. “Today, we are expanding our know-how by partnering with Sidewalk

22 | Canadian Apartment | Part of the REMI Network |

Labs to create a progressive, innovative community; one that addresses significant challenges and sets new standards around sustainability, affordable housing and community engagement.”

On November 1st, a Town Hall meeting kicked off planning efforts with discussions centred on finding ways to improve infrastructure and transportation systems, create new models of affordable housing and

flexible retail uses, and establish clear governance policies related to data protection and privacy.

Ultimately, what’s gleaned from these year-long forums and public conversations will culminate in a Master Innovation and Development Plan that, if adopted, will form the basis for the Quayside development and any subsequent revitalization of City-owned lands in the eastern waterfront.

With public engagement

and stakeholder consultation at the heart of everything it does, Sidewalk Toronto’s mandate is to develop the eastern waterfront into a new type of community that combines the best in urban design with the latest in digital technology.

By learning from data and adapting from cumulative lessons learned, it will address some of the biggest challenges facing today’s cities, including: energy use, housing affordability and transportation. The high-tech neighbourhood will offer affordable residential and commercial developments, best-in-class technology infrastructure, and vibrant public and cultural spaces with amenities open to all.

Ultimately, it will be a place

where Toronto’s celebrated diversity and inclusiveness can thrive in narrow pedestrian streets and walkways reminiscent of old Europe.

Flex space One way Sidewalk Toronto hopes to address the city’s ongoing affordability crisis is by embracing adaptable buildings and new costeffective construction methods. According to Sidewalk Labs’ original vision laid out in its RFP, flexible lofts and modular housing will likely be the mainstay, as this approach allows for whole neighbourhoods of lower-cost, quicker-to-build housing while enabling the market to meet burgeoning demand. “If pilots around new construction methods, such

Sidewalk Toronto Key Objectives: • Establish a complete community that provides a superior quality of life for a diverse population of residents, workers, and visitors • Create a destination for people, companies, startups, and local organizations to advance solutions to the challenges facing cities, such as: energy use, housing affordability, and transportation options • Make Toronto a global hub in a rapidly rising new industry of urban innovation • Serve as a model for sustainable neighbourhoods throughout Toronto and cities around the world

| www.REMInetwork.com | November 2017 | 23

COVER STORY >>

as prefabricated modular or tall timber, show an ability to reduce building costs,” noted the RFP, “then developers and housing providers across Toronto will have another tool to help them meet market demand and improve affordability.”

On the mobility side, most of Quayside’s public realm will be made up of bike paths and pedestrian laneways, though the neighbourhood will likely see self-driving shuttle buses that provide point-to-point convenience

rather than traditional transit vehicles. Communitybuilding will be prioritized, with an adaptable mix of spaces and amenities that will stay active at all hours of the day. A thermal grid pilot might become the

foundation of a districtwide energy system that sets a global example for climatepositive living.

“We think the eastern waterfront can feel like no other place in the world,” expressed Dan Doctoroff, CEO of Sidewalk Labs and former Deputy Mayor of New York City. “Imagine Toronto before cars ruled the city. Streets bustled with a lively mix of residents and businesses all day and night.

An ever-changing array of shopkeepers peddled their wares. Kids played safely in the streets and parks. We can reclaim that hyper-dynamic sense of community—and we can do it in a way that puts people, not technology, frontand-centre.”

Modular Construction: The Way of the Future?

About 20 to 30 per cent of Quayside’s housing units will be “affordable” according to Sidewalk Labs’ current vision. To achieve this, the group plans to embrace flexible alternatives to traditional housing, like lofts, micro-units (apartments that are 250 to 350 square feet), co-housing, and modular housing.

Touted for its cost-effective, environmentally friendly and time-saving benefits, modular construction has seen a spike in popularity recently, with developers more readily embracing it as an affordable solution to widespread housing shortages. Here’s a look at some of the world’s most buzzed-about modular apartment projects currently underway:

In New York City… a nine-storey modular building in Kips Bay is the talk of town, featuring 55 units that are less than 370 square feet in size. This micro-apartment project was the winning proposal of a citysponsored competition seeking innovative housing solutions.

24 | Canadian Apartment | Part of the REMI Network |

In Downtown Atlanta… a 112-unit prefabricated apartment project will be the city’s first. The modular blocks will be assembled in a factory off-site, then trucked to the downtown lot and stacked into a building.

Because the method significantly lowers construction costs, a portion of the units will be offered at lower-than-market rates.

In Roskilde, Denmark… Danish firm Arkitema recently unveiled plans for a new apartment project made entirely of shipping containers. Comprised of 30 fully-equipped units, “The Beat Box” as it’s called, will feature all the modern comforts of home at a portion of the construction costs.

New global hub To help kick-start Sidewalk Toronto’s goal of making the eastern waterfront the global hub of urban innovation, Alphabet announced that it intends to move Google’s Canadian headquarters to Quayside, where it can tap into Toronto’s already-thriving tech scene and develop innovations that could benefit communities and neighbourhoods elsewhere.

“Successful cities around the world are wrestling with the same challenges of growth, from rising costs of living that price out the middle class, to congestion and ever-longer commutes, to the challenges of climate change,” said Doctoroff. “Sidewalk Labs scoured the globe for

“Just as Silicon Valley is the centre for digital technology and New York is the centre for finance, the eastern waterfront can help make Toronto the global hub for urban innovation.” the perfect place to create a district focused on solutions to these pressing challenges, and we found it on Toronto’s eastern waterfront. This will not be a place where we deploy technology for its own sake, but rather one where we use emerging digital tools and the latest in urban design to solve big urban challenges in ways that we hope will inspire cities around the world.”

And if the RFP provides a good indication of what Quayside might achieve, becoming a place where the physical and the digital

converge into a platform for urban innovation, then catalyzing an industry won’t be so far-fetched. “Just as Silicon Valley is the centre for digital technology and New York is the centre for finance, the eastern waterfront can help make Toronto the global hub for urban innovation.”

As a neighbourhood built from the internet up, Quayside will strive to combine the advantages of a global city with a close-knit community. It will leverage innovation to achieve the benefits of urban density and vibrancy without the negative

BEFORE

frictions that traditionally come with urban growth, (i.e. traffic congestion, elevated housing costs and environmental impacts). And best of all, in keeping with Toronto’s heritage, it will be a complete community: socially and economically diverse, radically mixed-use, yet empowered by technology in such a way that can only make the city better.

To find out more about Sidewalk Toronto and the new Quayside development, and to take part in the ongoing public conversation, please visit: sidewalktoronto.ca

AFTER

Building Science & Restoration Consultants ■

In Edmonton… Ladacor and Step Ahead Properties recently opened Westgate Manor, the city’s first modular apartment block constructed out of shipping containers. Featuring 20 affordable units of varying sizes, each with a private balcony or patio, more projects of this scale are being planned by the developers.

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| www.REMInetwork.com | November 2017 | 25

NEWSWORTHY >>

Industry Hot Topics Urban green space could prove a health asset

C

onvenient access to urban green space could improve resistance to diabetes, heart or respiratory diseases. Canadian researchers recently completed what’s believed to be the first large-scale study of links between residential proximity to greenery and mortality rates from those chronic illnesses, and concluded there’s evidence that municipal policy makers and land-use planners may want to consider.

“Increased amounts of residential greenness were associated with reduced risks of dying from several common causes of death among urban Canadians,” they state in their report, published in the international medical journal, Lancet Planetary Health, in October.

“The findings support the development of policies related to creating greener and healthier cities.”

Peer reviewers commend the work, led by Dr. Dan Crouse, an epidemiologist with the New Brunswick Institute for Research, Data and Training, for its expansive sample size of more than 1.26 million respondents to the 2001 Canadian census and follow up of 11 subsequent years of data. This measured exposure to greenery — derived from the study subjects’ postal codes and satellite images supplying what’s known as the normalized difference vegetation index (NDVI) — then linked it to Statistics Canada’s mortality database and factored in several socio-economic and ambient air quality variables.

“By linking the NDVI, which can be standardized across the world, to mortality data in a well-designed statistical study, Crouse and colleagues have contributed to further advancing the field, as it will now be possible to replicate their study in various geographical regions with different socioeconomic and cultural conditions,” Dr. Matilda van den Bosch of University of British Columbia’s School of Population and Public Health, observed in an accompanying Lancet commentary.

The Canadian research team derived average 10-year values for the impact of green space within 500 metres and 250 metres of each study subject’s residence. Risks of mortality were found to be lower in all cases for residents living within 500 metres of green space, with best result exhibited in fewer deaths from non-malignant respiratory disease and the most minimal benefit seen in deaths from cerebrovascular disease.

Various cohorts within the overall sample, which was drawn from 30 Canadian cities, also appear to enjoy greater protective benefits.

Notably, men aged 35 to 74 with higher incomes who were married or in common law relationships had the most markedly better health outcomes compared to similar subjects who lived at a greater distance from green space.

“Middle age might be an etiologically important window during which living close to greenness might yield the largest benefits to health,” the researchers hypothesize.

Income-related results also proved intriguing since other studies of the links between access to green space and emotional and physiological 26 | Canadian Apartment | Part of the REMI Network |

well-being have found lower-income groups generally record the most distinctive health gains. In those cases, restorative natural environments are deemed to have incrementally less influence on stress and other physical conditions for research subjects who typically begin with a better base level of health.

In this case, Canadian researchers postulate subjects with higher incomes may have more leisure time to enjoy the outdoors and/or superior choices. “The quality of the green space around the homes of more affluent populations might be different from those around people in more deprived populations, which is a factor that we were unable to assess or describe with our existing datasets,” they acknowledge.

Subjects who lived within 500 or 250 metres of green space were benchmarked only within their own urban communities to ensure that other potential variables — climate, access to health care, etc. — matched closely. van den Bosch calls the research findings particularly telling when accounting for air pollutants.

“Crouse and colleagues were able to adjust for several environmental covariates, including PM2.5 (fine particulate matter), ozone and nitrogen dioxide, but noted these only had a small confounding effect on the green space hazard risks. Thus, in this case, it seems as if greenness has a protective effect that is independent of air quality,” she notes.

However, researchers do underline a few intangibles. The NDVI describes the presence and amount of vegetation at a given location, but not whether it is publicly accessible and/or easily navigable.

Nor does the research focus, which is solely on place of residence, contemplate subjects’ possible exposure to greenery in their daily travels and workplace or school settings.

Self-selection among the research subjects could also colour results if, for example, it can be shown that people who have healthy lifestyles are more predisposed to choose homes with convenient access to green space. Both the research team and peer reviewers concur that further exploration is warranted.

“Future studies should build on the approaches of Crouse and colleagues to assess the potential of urban green spaces as inherently health-promoting assets in cities,” van den Bosch maintains.

including 129 rental units and a 10,000 square foot daycare. The anticipated completion date is by 2022.

The City of Vancouver is aiming to have all new buildings produce zero emissions by 2030 and the province is aiming to have all new buildings be net-zero by 2032. While Passive House is the norm in some cities and countries around the world, it’s relatively new to North America, with Metro Vancouver being the home to most of them, including single-family homes, duplexes and low-rise multi-family residential.

“There will be tremendous value for the trades, manufacturers, designers, builders and developers to learn and find innovative solutions to see these towers built to the Passive House standard. And those solutions will translate into better and healthier homes for the families who will occupy them,” says Gil Kelley, general manager of Planning, Urban Design and Sustainability for the City of Vancouver.

World’s tallest passive towers set for Vancouver

A

new proposed project at 1400 Alberni Street will make Vancouver home to the world’s tallest passive house towers. The joint venture development by Landa Global Properties and Asia Standard Americas will feature two condo towers at 48 and 43 storeys. The tallest Passive House in the world is currently a 31-storey high-rise residential building in Bilbao, Spain.

“These types of buildings are the future and we want to be at the cutting edge of that shift,“ says Kevin Cheung, CEO of Landa Global Properties. “While they are more complicated to build, we are looking forward to being pioneers and creating prototypes for a lot of equipment that doesn’t yet exist. We believe we can be leaders in zero emission building development and design and pave the way for other projects like this in future.”

Passive House is a rigorous building standard developed in Germany that significantly improves energy efficiency and comfort, and it reduces a building’s ecological footprint. This standard can be applied to any building type and reduces the amount of energy needed to heat and cool it by almost 90 per cent. As a result they produce very little carbon pollution. It’s why both Vancouver and the Province of B.C. are supportive of these buildings.

“Vancouver is famous for its concrete glass towers but what’s exciting about this announcement is that the city can show the world how to build a high-performance Passive House tower,” says Passive House consultant, Eesmyal Santos-Brault. “If we can build a tower that still makes money and is good for the environment and doesn’t consume much energy or carbon, that’s a winwin for everybody.”

Designed by New York-based Robert A.M. Stern Architects and Vancouver firm MCM Partnership, the project will feature 450 homes

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NEWSWORTHY >>

IREE certification for retrofits coming to Canada

T

he Canada Green Building Council (CaGBC), Green Business Certification Inc. (GBCI), and the Advanced Energy Centre at MaRS Discovery District (MaRS) are working together to bring the Investor Confidence (ICP) Project and its Investor Ready Energy Efficiency (IREE) certification to Canada.

In the Pan-Canadian Framework, the Canadian federal government recognized the role that retrofitting buildings will play in reaching Canada’s targeted emissions reductions. Additionally, CaGBC’s A Roadmap for Retrofits in Canada report found that existing buildings could potentially reduce overall emissions by up to 51 per cent by 2030. ICP will help facilitate the

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* Sales Representative This disclaimer shall apply to CBRE Limited, Real Estate Brokerage, and to all other divisions of the Corporation; to include all employees and independent contractors (“CBRE”). The information set out herein, including, without limitation, any projections, images, opinions, assumptions and estimates obtained from third parties (the “Information”) has not been verified by CBRE, and CBRE does not represent, warrant or guarantee the accuracy, correctness and completeness of the Information. CBRE does not accept or assume any responsibility or liability, direct or consequential, for the Information or the recipient’s reliance upon the Information. The recipient of the Information should take such steps as the recipient may deem necessary to verify the Information prior to placing any reliance upon the Information. The Information may change and any property described in the Information may be withdrawn from the market at any time without notice or obligation to the recipient from CBRE. CBRE and the CBRE logo are the service marks of CBRE Limited and/or its affiliated or related companies in other countries. All other marks displayed on this document are the property of their respective owners. All Rights Reserved.

28 | Canadian Apartment | Part of the REMI Network |

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mass retrofits required to achieve these goals, while the IREE-certified projects will provide clarity on the long-term performance of energy efficiency technologies and help create greater access to competitive financing, which will be necessary to achieve retrofits on a large scale.

ICP is a global underwriting standard for developing and measuring energy efficiency retrofits and is administered by GBCI. Its IREE certification signals to investors that a project has adopted best practices that can help reduce transaction costs and increase savings. The protocols offer investors a consistent roadmap for assessing risk and expected outcomes from deep retrofits.

“The Advanced Energy Centre is pleased to play a role in introducing the Investor Confidence Project and supporting the IREE Certification’s launch in Canada,” says Shawn Peterson, senior associate of the Advanced Energy Centre at MaRS. “Our cities need innovative financing mechanisms for improving building performance at scale.

Ontario’s large concentration of institutional real estate, financial capital and support to invest in low-carbon building solutions makes it an ideal market for investors.”

The IREE certification is currently being used by project owners, investors, engineers and insurance companies in North America and Europe.

“We believe that the ICP can play a critical role in the acceleration of Canada’s retrofit economy by instilling investor confidence in green retrofits and by providing a tested, ready-made tool that government and industry can leverage to accelerate uptake across the country,” adds CaGBC President and CEO Thomas Mueller.

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| www.REMInetwork.com | November 2017 | 29

TAX >>

Cities exhibit divergent property tax regimes Commercial-to-Residential Gap Stretches most Notably in Vancouver and Calgary

The gap between Toronto’s commercial and residential property tax rates narrowed slightly in 2017, but there is still a lot of space to bridge to meet the City’s target for a commercial-to-residential tax ratio of 2.5 to 1 by 2023. For this tax year, the ratio stands at 3.81 to 1 — compared to 3.84 to 1 in 2016 — meaning the city’s commercial ratepayers still face one of the most divergent property tax regimes anywhere in Canada.

O

nly Vancouver registered a more onerous split — with a commercial-to-residential ratio of 4.87 to 1 — among the 10 major Canadian cities surveyed in the 2017 Altus Group/ REALPAC report on property tax rates. Vancouver, Toronto and Montreal were the three cities with commercial-to-residential ratios above the national average of 2:85 to 1, while Saskatoon and Regina recorded the two lowest ratios of 1.72 to 1 and 1.75 to 1.

This annual look at the apportionment of the tax burden, released last week, gives a more complete picture of the pressures on the commercial and multi-residential sectors than simply referencing tax rates. Notably, Vancouver’s 2017 commercial property tax rate was actually more than 10 per cent lower than the 2016 rate, but that largely reflects the city’s soaring property values during a tax period when the residential rate also dropped a startling 19.29 per cent from the previous year.

“With the increase in property values, tax rates should trend lower as municipalities are able to collect the same amount of tax revenue given that the higher property values create a larger assessment base,” says Terry Bishop, president, property tax, Canada, with Altus Group.

The reverse is true in Calgary and Edmonton. Commercial and residential property tax rates rose in 2017, reflecting a decrease in the value of assessment base in those cities. Calgary’s commercial tax rate jumped 11.36 per cent from 2016, equating to an extra $1.81 per $1,000 of assessed value. Edmonton’s commercial tax rate rose 8.54 per cent, or an additional $1.63 per $1,000 of assessment.

Across the 10 cities, commercial property taxes range from $12.44 per $1,000 of assessed value in Vancouver to $37.23 per $1,000 of 30 | Canadian Apartment | Part of the REMI Network |

assessed value in Montreal. Rates in Montreal, Halifax, Ottawa, Toronto and Winnipeg are above the national average of $23.02 per $1,000 of assessment, while those in Edmonton, Calgary, Regina, Saskatoon and Vancouver are below.

Small gains in Toronto and Montreal, larger in Saskatoon and Regina Vancouver homeowners likewise pay the lowest amount per $1,000 of assessed value, at $2.55, while Winnipeg residential ratepayers top the scale, paying $12.15 per $1,000 of assessment. Toronto’s commercial tax rate dropped 4.53 per cent compared to a 3.83 per cent decline in the residential tax rate — thus translating into this year’s fractionally shrinking tax gap.

Montreal also reversed a 10-year trend of apportioning an everincreasing share of the tax burden to the commercial sector, as its commercial to residential tax ratio tightened to 3.77 to 1 from last year’s 3.82 to 1. “While representing only a 1.21 per cent decline in its ratio, this is a positive step toward bringing commercial taxes down to a level more in line with the rest of the country,” the report maintains.

Ottawa was unique in lowering the commercial tax rate, which dropped by 0.38 per cent, and increasing the residential tax, which rose 1.48 per cent. This tightened the commercial to residential tax ratio to 2.67 to 1 from last year’s 2.72 to 1.

Halifax did the opposite, raising the commercial tax rate by 0.82 per cent and lowering the residential tax rate by 0.83 per cent. That stretched the commercial to residential ratio to 2.77 to 1.

Winnipeg’s residential rate increase — up 3.12 per cent from 2016 — surpassed the increase in the commercial tax rate, which rose by 1.12

per cent. However, the report suggests the commercial-to-residential tax ratio of 2.01 to 1 isn’t necessarily the complete picture. “Winnipeg’s business tax, which commercial owners consider to be a subset of the property tax, would push the City’s ratio closer to the (national) average,” it states.

Commercial ratepayers in Regina and Saskatoon enjoyed the steepest decline in property tax rates. A 27.56 per cent decrease in Regina pegged this year’s taxes at $16.16 per $1,000 of assessed value — a drop of $6.15 per $1,000 of assessment from 2016. Saskatoon’s commercial tax rate fell more than 21 per cent from 2016, resulting in taxes of $14.57 per $1,000 of assessed value. Residential tax rates also dropped in the two cities — by 8.73 per cent in Saskatoon and 7.59 per cent in Regina.

Multi-residential inequities Meanwhile, multi-residential ratepayers in the Ontario cities, Toronto and Ottawa, are taxed at a much higher rate than their peers elsewhere in country. Toronto’s multi-residential levy is 2.21 times greater than the residential rate; Ottawa’s is 1.38 times greater.

Residential landlords and their tenants pay property tax equivalent to $14.63 per $1,000 of assessed value in Toronto, while homeowners pay $6.62 per $1,000 of assessment. In Ottawa, the multi-residential tax rate is $14.70 per $1,000 of assessed value versus the residential rate of $10.68 per $1,000 of assessment.

This is despite the fact the Ontario government froze multiresidential taxes for 2017, largely in response to the spikes in assessed value arising from the 2016 reassessment. There are also major tax anomalies within the multi-residential asset class itself since Toronto

and Ottawa were early adopters of Ontario’s “new multi-residential” property tax class.

This previously optional, but now mandatory tax class for newly constructed rental residential buildings ensures that new purposebuilt rental properties are taxed on par with the residential property tax rate for a period of up to 35 years. Although aimed at encouraging new rental housing supply, the policy also conveys an operating cost advantage to the further detriment of older competition.

“The higher levels of taxation on older multi-residential buildings makes it more challenging to direct funds to needed repairs, maintenance and building infrastructure upgrades,” the Altus/ REALPAC report states.

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| www.REMInetwork.com | November 2017 | 31

MARKETING >>

Real Estate in a Digital World How the Industry has Evolved, and What the Future Holds

by Chaim Rivlin

The Canadian real estate industry has undergone significant changes in recent years. Not only have several new laws been introduced, but the fundamental way in which real estate deals are done has shifted dramatically too.

T

he population of the GTA is just under 6.5 million, and with nearly 100,000 people moving in annually, the real estate market is much more competitive, with naturally, more at stake.

One can argue that this competitive nature of the industry has created the perfect breeding ground for new technology.

The real estate industry wasn’t always as technologically evolved as it today.

Theoretically, perspective buyers or renters can now find their next home 32 | Canadian Apartment | Part of the REMI Network |

or apartment without ever physically visiting it. They can tour it on a website and get all the information they need from the digital listing. Then, when they’re ready to make a commitment, the agent or potential landlord can send them the digital documents to sign using their device. Simply put, the real estate industry uses some of the most cuttingedge technology available today, and the following examples showcase just how much, as an industry, we’ve changed.

Apps & websites The real estate industry has always been at the forefront of the internet revolution, offering cohesive, digital listings that once were exclusive to realtors. Today vacant units and properties are listed on public websites and apps with sophisticated search functions.

While digital listings offer high-quality images, virtual reality tours give plenty of

CONDITION > BUILDING ASSESSMENTS

information about the property, all presented in a tidy digital format that is easy to view and track. There are numerous apps for renters and buyers to find new properties, and some include GPS technology that enables users to scout neighbourhoods of interest.

DocuSign technology, which allows all parties to legally sign important documents with mobile devices. The time-saving implications of this are huge, as the ability to get documents signed quickly can make all the difference when the market is tight.

Digital listings In today’s competitive market, digital listings are much more important than ever before.

And instead of offering one decent shot, property owners need several quality images to attract clients. Where once upon a time, ‘curb appeal’ was the selling force, now digital listings are key to attracting buyers and tenants. In today’s fastpaced world of digital real estate, properties can be snatched up on the same day they’re listed, while owners deal with multiple offers.

This is especially true for rental properties in a city with a vacancy rate below 1.5%.

Photography Technology The combination of hitechnology being readily available in everyday devices combined with the ever-increasing integration of social media into society, has led to the photography revolution. Digital listings require professional quality photos to really stand out.

Quality photos are also important in ensuring that images of your property translate well across multiple devices. 3D virtual reality tours are becoming increasingly realistic, and perhaps it won’t be long until they replace traditional showings altogether. For now, they can be extremely helpful for those looking for a place to rent in a foreign city.

Paper is a thing of the past The real estate industry used to consume endless quantities of paper. From printed listings to legal documents, many of the old processes have been updated to reflect the modern paperless office. One of the biggest changes in the purchasing process is the use of

Cryptocurrency Last but not least, no technology article would be complete without a cryptocurrency reference—and yes, the real estate industry is already embracing it. Believe it or not, today it is possible to buy a property with Bitcoin. Of course, before doing so, buyers

Artificial Intelligence Marketing When it comes to how a building functions, there’s a lot of hype around what artificial intelligence can do. But beyond predictive maintenance and “the Internet of Things” buildings that think for themselves are still a little ways off.

Where AI is making prominent strides, however, is in the area of digital marketing. Legitimate AI-powered solutions are now widely available from tech providers and online publishing companies to increase the effectiveness of advertising using user web-browsing behaviour information. Essentially, it employs information collected from an individual’s web-browsing behaviour to select advertisements to display.

So, looking to fill that two-bedroom condo-quality apartment to the right tenant? Using an AI marketing solution, the right tenant will find you every time.

Strategic Planning and Your Reserve Fund Studies Understanding an asset’s condition and future expenditures is critical. When done right, Building Condition Assessments (BCAs) save stakeholders both money and future stress. Get the most from a BCA by considering the following: Timing is Key Snow coverage and bad weather make it difficult to determine the true conditions of roofs, pavements, landscapes, and other systems. If possible, wait until an unobstructed BCA can be conducted.

Define Your Goal BCAs are performed for various reasons, and each require different considerations and expertise. Do market research, define your objective, and seek a BCA provider that will meet your objectives.

Specialist or Non-Specialist?

Specialist reviews are done by a team of service providers who examine property elements specifically related to their field of expertise, thereby bringing a high level of expertise and details to the final report.

Non-specialists reviews are conducted by a single industry professional who completes a more generalized assessment of all aspects of the building.

Specialist reviews cost more than non-specialist reviews; however, the gap does not indicate a difference in professionalism. Instead, it indicates a substantial difference in the level of detail and specialization between the two assessments.

Learn more about RJC’s Building Science practice at rjc.ca.

| www.REMInetwork.com | November 2017 | 33

MARKETING >>

One of the biggest changes in the purchasing process is the use of DocuSign technology, which allows all parties to legally sign important documents with mobile devices. would be wise to consult a real estate lawyer. Still, whether you believe in the future of cryptocurrency or not, it’s likely that these types of deals will become more common. For instance, currently there’s a real estate development in Dubai priced exclusively in Bitcoin.

Though in Canada, it’s a safe bet that no one is paying their monthly rent this way that may change in the not-so-distant future.

As the Canadian real estate industry continues to become more and more competitive, it’s natural that renters and buyers would seek out innovative ways

to gain a competitive edge. Technology enables you to find listings faster than before while completing deals from wherever you may be. It’s true that the early bird gets the worm, and perhaps the most technological advanced renters and buyers get the property.

RentSeeker.ca is an Award Winning leading Canadian Real Estate Search and Real Estate Marketing website. For more information, visit www.RentSeeker.ca and follow @RentSeeker on Twitter and Facebook.

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34 | Canadian Apartment | Part of the REMI Network |

Virtual Reality Set to Change the Rental Industry Winnipeg-based Gryd.com is changing the way local residents are viewing apartments online, and founder Jordan Billinkoff says it won’t be too long before his company expands into cities all across Canada.

Recognized at WebCon 2016 as the biggest innovator in the apartment rental marketing industry, Gryd offers a thoroughly modern approach to residential property marketing and listings management. Optimized for the mobile experience, users can teleport around vacant apartments using their smart phones and a headset in order to see 360-degree views of listed spaces.

Full-colour 3D views and virtual tours of real estate eliminate the guesswork and make it easy for users searching for apartments to find what they’re looking for. On the flipside?

Property owners get a wireframe of their buildings’ interior using 360 degree panoramic HDR photography that looks as good as real. Gryd then gathers the number of page views and other pertinent details about the users of each listing, and presents those findings in an intuitive dashboard for property owners.

Visit gryd.com to learn more about this up-and-coming technology.

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ALL DECKED OUT Hollyburn Properties shares innovative ways to boost building performance

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INSURANCE >>

Privacy in the Age of Online Hacking Taking a Closer Look at Cyber Insurance

DoS

by Andy Schwartze

XSS

E

ver since the recent Equifax hacking, there has been a lot of talk about the need for cyber insurance. The general message put forth by risk managers and insurers has clearly been intended to convince all business owners who maintain a sensitive customer database, to consider buying this relatively new type of coverage. Over the past few years, a small number of property/ casualty insurers have timidly stepped on to this new terrain, and like any “new” insurance initiative, the amounts of insurance offered have been relatively modest, and the wording on policies vague.

But what’s different about cyber insurance is that we are dealing with a crime: a “break-in” that has resulted in a theft. The responsibility for the hack is that of the criminals and not

36 | Canadian Apartment | Part of the REMI Network |

DDoS

D U F necessarily of the victim from whom this information was stolen. Of course, there is a responsibility on the part of the possessor of the information to be prudent with how records are being protected. But the standard that needs to be met is increasingly being pushed higher. As some point even the courts will have to agree all reasonable steps were taken.

What then? The company whose records were hacked and compromised having been adjudged to have taken all reasonable steps, should then be relieved of any liability. But, the information is still out there where it does not belong, and if the data taken is significant enough, it could be “mined” by the criminals for years to come. It could be resold many times over, and victims of that fraudulent activity may never determine who was behind it.

For insurers, this poses a real problem, and a few important things should be addressed: 1. Policy wordings are new. This is not a wellentrenched insurance niche and thus the wordings have not matured over time so as to capture the true intent of what kind of claims are to be covered.

2. Claims adjusting skillsets are still in their infancy. Unlike more traditional insurance products we do not yet have a deep pool of real life insurance experience in this field.

3.

This means that premium costs are arbitrarily established and do not reflect a yet well-established body of claims activities from which insurers can draw on to build a good cyber-focused insurance system.

4. The quantifying of a claim remains a very open issue and a very real problem. How does one come to a conclusion as to what the true financial damage is following a cyber “attack”? Insurance policies require that a claims payable amount be determined. How this can be arrived at is still not entirely clear, nor is the question of coverage duration, where information that is now “out there” is out there forever. At some point, every insurer wants to know that a claim has come to an end so that the file can be closed.

The decision to purchase some form of cyber insurance protection should be made with these considerations in mind. There is little doubt that policies will pay for the overtime efforts needed to put a system back together; to notify those who have been compromised and to cover any other related hard costs that have been incurred as a result of the theft.

The real problem relates to the establishment of the damage.

Customers may just decide to take their business elsewhere. This happens all the time and for many reasons. Losing customers is not something that is an insurable loss in the eyes of any underwriter. If it can be determined that there has been a financial impact on the business, or even a responsibility to those whose data was compromised, how does one determine the extent to which revenues have been negatively affected?

Insurers retain the statutory right to demand that we “prove” our loss.

In the case of cyber-related claims this will be a huge roadblock that insurers can only grapple and struggle with until such time as they have

The Equifax Breach Equifax Canada says approximately 100,000 Canadian consumers may have had their personal information compromised in the massive cyberattack on the credit data company made public in early September. Though the investigation is ongoing, it appears that the breached data may have included names, addresses, social insurance numbers and in some cases credit card numbers.

Equifax, which collects data about consumers’ credit histories and provides credit checks to a variety of companies, announced it would be sending mailed notices directly to Canadians who were impacted in the cyberhack. It is also offering those put at risk free credit monitoring and identity theft protection for the next 12 months.

So far at least two proposed class actions have been filed in Canada, and many more in the U.S. against Equifax in connection with the data breach. According to reports, the cyberattack occurred through a vulnerability in an open-source application framework it uses, called Apache Struts.

been able to figure out what they can insure, how they can price the cost of that insurance and, toughest of all, how to deal with claims in a sensible, timely and finite manner. Not an easy niche to be in.

Andy Schwartze, BSc., MBA, CIP, is an insurance broker specializing in property management and real estate. He can be reached at andy@takecover.ca.

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Smart Ideas

GOING UP, DOWN AND SIDEWAYS With taller skyscrapers and new legislation proposing stricter rules, elevator technology is poised to change…

Image: maglev Multi Elevator, by Thyssenkrupp

According to a recent study from the New Jersey Institute of Technology, a lone elevator with traditional steel rope carrying twenty-four passengers consumes 130,000 KWh of energy per year and weighs up to 27,000 kilograms. The ropes are subjected to severe strains, and on windy days, the entire building may shake and put steel-cabled elevators temporarily out of service.

What’s more, people have to wait for a long time just to ride them. A 2010 study found that New York City office workers spent a total of 16.6 years waiting for the next lift.

In order to solve these problems, elevator manufacturers are working hard to build the next generation of elevators— ropeless ones that can even move sideways. The new design uses magnets and linear motor technology, requiring smaller shafts than conventional elevators. Going ropeless can increase a building’s usable area by as much as 25 per cent.

This future elevator will be made from carbon composite materials, which are known to be strong yet lightweight. The switch to lighter materials could bring the total weight down to just 50 kg, or about one-sixth of the original. This of course, means huge reductions in energy consumption.

The shaft transport capacity could also increase by almost 50 per cent, which means that elevators will be able to fit in twice as many people per trip. Waiting lines will be minimized and people will be able to get where they are going, faster. With less trips required, the carbon footprint could decrease by half.

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