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 9 / N UMBER 5 / Septem ber/october 2012
www.canadianapartmentmagazine.ca
PM#40063056
A positive outlook for Vancouver landlords
Hollyburn Properties Ltd. offers affordable luxury See page 14
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Editor’s Note
Congratulations to Vancouver Vancouver was recently named the city with the world’s best reputation by Reputation Institute, an organization that looks at how much people trust, admire, respect and have an affinity for worldwide destinations. The yearly study ranks the world’s 100 most reputable cities by polling more than 18,000 people from the G8 countries. “We have found that a person’s perceived reputation of a city is a key factor when deciding where to visit, or in terms of business, to invest. Our modeling demonstrates that effective management of these reputation drivers translates directly into increased tourism receipts, investment, and stakeholder support,” writes Nicolas Georges Trad, Executive Partner of Reputation Institute, in the organization’s press release. The study refers to a city’s beauty, safety, cultural offerings, infrastructure, business environment and schools as some of the reputation drivers polled in the study. It also credits Vancouver with effectively shaping a constructive and trustworthy dialogue with the media. Rick Antonson, President and CEO of Tourism Vancouver, credits the city’s immigrants and their contribution to the community in terms of new ideas, wonderful foods, festivals, music and fashion. He also credits the city’s deep-seated culture of respect for religions and its multi-lingual schools for propping up the city’s reputation. Congratulations to Vancouver residents and landlords for your roles in making it reputedly the greatest place in the world to live and work. See the cover story on page 30 for details on the rental market in Vancouver. You’ll also notice as you flip through the magazine that we’re drawing attention to our online content at the website: www. canadianapartmentmagazine.ca. Visitors to our website, Facebook page and Twitter account will see that we are active in the online communities: providing up to date information and articles that landlords will find useful both in your day to day operations and as you aspire to improve your businesses and grow. Visit our website regularly, like us on Facebook or follow us on Twitter to participate in this online community and to be notified of new content including industry news, profiles, articles and videos. As you build your online presence, we can help. If you have any concerns or topics you’d like us to research, email me at the address below or through our Facebook page. Amie Silverwood, amies@mediaedge.ca Editor-in-Chief
Quoteworthy “Google takes cues from social media votes of confidence, meaning that the more people share content from your website, the more your search engine ranking will improve.”
-- Jessica Green
– page 28 4 www.canadianapartmentmagazine.ca
Publisher
Paul Murphy paulm@mediaedge.ca (416) 512-8186 ext. 264
Editor-in-Chief
Amie Silverwood
Senior Designer
Annette Carlucci
Designer
Jennifer Carter
Production Manager
Rachel Selbie
Contributing Writers Peter Cook, Robert Fleet, Paula Gasparro, Carissa Drohan-Jennings, Andy Schwartze, Derek Lobo, Barbara Carss and Jessica Green Lina Trunina
Circulation
For sales information call (416) 512-8186 ext. 262 Canadian Apartment Magazine is published six times a year by:
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Tel: (416) 512-8186 Fax: (416) 512-8344 President Kevin Brown Copyright 2012 Canada Post Canadian Publications Mail Sales Product Agreement No. 40063056 ISSN 1712-140X Circulation ext. 232 Subscription Rates: Canada: 1 year, $50* 2 years, $90* US $75 International $100 Single Copy Sales: Canada: $12* * Plus applicable taxes Reprints: Requests for permission to reprint any portion of this magazine should be sent to Paul Murphy 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. 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
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contents Cover Story 30
The city with the world’s best reputation
By Amie Silverwood
columns 8 Regulations Multi-residential largely untested territory for benchmarking By Barbara Carss
Corporate Profile 15
Hollyburn offers affordable luxury
Cover image suite view at The Flamingo, 2061 Beach Ave in Vancouver
10 Marketing Marketing your rental unit By Paula Gasparro
28 Social media Social media is for grown-ups By Jessica Green
36 Technology A secret to increasing your marketing productivity By Carissa Drohan-Jennings
40 Insurance The new reality By Andy Schwartze
42 Finance Choosing the right mortgage By Peter Cook and Robert Fleet
47 Portfolio Strategy How to finance new apartments By Derek Lobo
Departments 4
Editor’s Note
50
Smart apartments
Columnists Peter Cook, Robert Fleet, Carissa Drohan-Jennings, Paula Gasparro, Derek Lobo, Andy Schwartze
PAINT | ELECTRICAL | PLUMBING | FLOORS | KITCHEN | BATHROOM | WELDING REPAIRS | FIRE PROOFING | GARBAGE REMOVA L
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Regulations
Multi-residential largely untested territory for benchmarking By Barbara Carss
Go online for more articles www.canadianapartmentmagazine.ca 8 www.canadianapartmentmagazine.ca
BOMA Canada is the first entrant to the Canadian market with an assessment and benchmarking tool for sustainable operations in the multi-residential sector, but the momentum may lie elsewhere. The Federation of Rental-housing Providers of Ontario (FRPO) also has plans to introduce 14 new green standards later this year to augment its Certified Rental Building (CRB) program and has favourable prospects to sign up 75,000 suites by the fall of 2013. “About 75 per cent of the buildings currently in the CRB program will have to recertify in the next 18 months and, once the green standards are in place, participants will have to comply with them,” says Ted Whitehead, FRPO’s Director of Certification. Meanwhile, BOMA Canada also anticipates an influx of rental housing properties to its BOMA BESt program. GWL Realty Advisors has pledged to certify its rental housing portfolio, which was
Regulations reported at 13.5-million square feet in Canadian Property Management’s 2012 Who’s Who in Canadian Real Estate survey. The multi-residential module was introduced in the fall of 2011 in tandem with other programwide updates and revisions in the new BOMA BESt version 2. This establishes a fifth propertyspecific assessment module in addition to those already in place for offices, light industrial, openair retail and enclosed shopping centres. Rental housing and residential condominiums are assessed in six categories: energy; water; waste reduction/diversion; emissions and effluents; indoor environment; and environmental management systems. These are also weighted according to operational prominence so that energy accounts for 35 per cent of available points, for example, while water represents just eight per cent. Program criteria were tested and modified through a pilot project involving eleven buildings located across Canada. “The pilot phase taught us a lot,” Meirav Even-Har, who was BOMA Canada’s Project Manager for Sustainability Initiatives at the time, told seminar attendees at the recent Green Real Estate conference in Toronto. “Residential is nothing like commercial.” That’s precisely FRPO’s position. “We think a green program in the multi-residential sector looks very different than it does in a commercial building,” Whitehead observes. In large part, that’s because much of a building’s energy expenditure, water consumption and waste generation happens within tenants’ units and is outside the landlord’s control. So, too, are many activities that can compromise indoor air quality or release hazardous substances and chemicals to the environment. Reflective of those challenges, the marketdominant ENERGY STAR Portfolio Manager benchmarking program covers 15 different categories of buildings in the United States – including hotels, dormitories and seniors’ care facilities – but does not yet convey scores for multi-residential buildings. “We’re working on one for multi-family,” Michael Zatz, Chief of the Market Sectors Group in the U.S. ENERGY STAR Commercial and Industrial Branch, reported at the Green Real Estate conference.
operators from participating buildings must also complete an eight-hour training course on the program’s standards of practice. These include a range of obligations related to health and safety, privacy and human rights, customer service, preventative maintenance, record keeping, accounting procedures and labour relations. The pending green standards were already foreseen when the program was launched in 2008 and are considered an extension of the CRB continuous improvement philosophy and the program’s commitment to ongoing evaluation of how standards can support the industry’s needs. “FRPO’s intentions are to establish a set of green standards that are meaningful and hold members accountable to best practices in the day-to-day environmental management of multi-residential apartment buildings,” Whitehead says. For example, standards will address management and purchasing policies, including the practices and environmental performance records of the contractors hired to work in the building. They’ll also focus on the operational aspects of the building that are within the landlord’s control. “We’ll be looking at how they’re capturing the low-hanging fruit,” Whitehead notes.
“That’s things like water-efficient toilets and showerheads, energy-efficient lighting, replacement of old appliances.” FRPO has a long-standing presence in Ontario’s rental housing industry, with a wide membership of large, mid-sized and smaller owners and a recognized profile with the provincial and municipal governments, while the CRB program is gaining notice from tenants and the public at large due to its associated branding and signage strategy. This arguably gives it something of an inside advantage that could also be a platform for promoting wider sustainability strategies. “We have commenced discussions with BOMA to determine how we can work together to provide the industry with the best possible opportunity to succeed,” Whitehead reports. For more information about BOMA BESt, see the website at www.bomabest.com. For more information about the Certified Rental Building program, see the website at www.crbprogram.org. The preceding article is reprinted from Canadian Property Management, May 2012.
Industry-tailored requirements FRPO’s CRB program is an audited program that requires participants to comply with designated management practices in five categories: legislation/regulatory requirements, resident management, human resources, building operations and finance. Building managers and September/October 2012 9
Marketing
Marketing your rental unit By Paula Gasparro
Go online for more articles www.canadianapartmentmagazine.ca 10 www.canadianapartmentmagazine.ca
Every landlord wants to find the ideal tenant — the person who always pays rent on time, never disturbs others, doesn’t complain or cause conflicts and keeps the premises in better condition than when he or she moved in. While this theoretical ideal may be unattainable, the way a landlord maintains and markets a property will affect what type of tenants are attracted to it. Effective marketing involves differentiating a property from others. In a tight rental market, advertising may not be as critical, but when renters have many places to choose from, let them know why your place is better than others. Is it newer, bigger, cheaper, cleaner or safer than comparable units in the area? Does it have better appliances and amenities for the price? Effective marketing will increase a landlord’s chance of attracting the ideal tenant. The more clearly you state the benefits of your premises, the greater the odds of attracting appropriate prospects. Finding tenants Someone offering a tiny bachelor apartment will have a different market than someone
Marketing renting a spacious penthouse with extra features, such as a fireplace and a fantastic view. Consider the profile of the people you are trying to reach and then advertise in the places where they would be likely to look for a rental premises. If you are renting a fairly basic basement apartment, you have a good chance of attracting people willing to live in a basement for the benefit of a lower monthly rent. University campuses, postings in local supermarkets or “accommodations available” advertisements in community newspapers might be the best place to advertise this type of rental. If you have an expensive condo to rent, advertise where people with the appropriate income might search. The local condo news, business-focused newspaper classifieds, or working with a rental locator at a real estate agent’s office might work best. If you are not sure where people look for rentals, ask! Talk to several people in the same demographic as prospective tenants. Evaluating prospective tenants Every landlord wants to find good tenants — ones who pay the rent on time and take care of their rental property. Finding the best tenant can be offset by the need to have the premises rented within a narrow timeframe. While time to show the unit, accept and review applications and do background checks may be limited, a hasty decision could cost you money in the long run. If the wrong tenant moves in, you may end up losing money due to damages or disputes.
Where to advertise a rental Place a for rent/lease sign at the rental property; Advertise in newspaper classifieds and specialty publications that list rental accommodations. Remember community newspapers; If you are interested in attracting students, campus housing offices often provide a free listing service; Post a flyer on bulletin boards at libraries, community centres, grocery stores and places of worship; Talk to friends and family members, letting them know that you are looking for tenants.
Advertising online Internet mail lists; Electronic bulletin boards;
Choose wisely If you can afford a possible rent loss while waiting to fill the unit, take the extra time to make the right choice of tenant. Thoroughly research a prospective tenant before making a final decision. Getting candidates to fill in a rental application and properly screening for applicant suitability before accepting a new tenant are vital. If you accept tenants without screening and verifying their information, terminating the rental agreement may be difficult even if you discover that they provided false information. You will want to find out as much as you can legally about prospective tenants. Check their financial suitability through a credit bureau report. To access a credit report on a prospective tenant you must be a member of a credit bureau. Changing times In many areas information beyond basic financial data was previously available in a credit bureau report. However, in many areas this information is no longer being collected. Rent Check Credit Bureau is a Canada-wide tenant screening service that will provide information that can be used to assess potential tenants that goes beyond the basic financial data. The company collects information on rental payment habits and judicial decisions from landlords, non-profit housing corporations and collection agencies and have developed their own scoring tool, RentScore, to help landlords evaluate tenants. Since there is no national legislation for rent bureaus, they have been licensed as a credit bureau in several provinces. Beyond credit information, try to discover what kind of tenant will be living in your unit. Ask former landlords about the tenant’s character and past rent-payment patterns. Consider talking to even the last two or three landlords to get a clear idea. In some provinces, landlords can easily access information compiled by order registries and landlord advocacy groups. A landlord unsure about a tenant’s suitability can turn to these groups for more information. These registries include information about unlawful tenants and help landlords when they face difficult tenant situations. Provincial offices can also offer assistance to landlords who are experiencing tenant problems. They may also be able to pass along information on registers and advocacy groups in your region, if these organizations exist.
Specialized Canadian apartment listing websites; Websites of community newspapers (classifieds section); Central community websites, typically in a classifieds section. Caution: When paying for an online ad, don’t get tricked by a report of thousands or millions of “hits.” Webpage hits can be an inflated, misleading reporting method. Instead, ask how many unique users visit the relevant section of the website each day. Also, ask how many pageviews — entire scrollable pages — the site gets each month.
Checks for screening tenants Check the applicant’s credit bureau history and banking history; Confirm the applicant’s employment situation; Check the applicant’s tenancy history/evictions, if available; Check court records, if available; Check the applicant’s references and consider contacting previous landlords going back two or three tenancies.
September/October 2012 11
Marketing Human rights considerations While you will want to know as much about a rental applicant as possible, provincial and territorial human rights legislation prohibits certain factors from being considered by a landlord when choosing who he or she will rent to. These factors include race, ancestry, place of origin, colour, ethnic origin, citizenship, creed, sex, age, marital status, family status, handicap, or the receipt of public assistance. Each province and territory upholds its own human rights legislation that spells out what landlords are allowed to ask prospective tenants and what they are not permitted to ask. You might think it is acceptable to ask personal questions to determine a tenant’s suitability, but demanding answers as a condition of renting may contravene human rights. You cannot refuse to rent an apartment based on these conditions.
As a landlord you cannot ask You cannot ask questions that infringe on the rights of the tenant under the Human Rights Code for your province. For example, you cannot ask a prospective tenant:
As a landlord you can ask You can ask questions that will help you assess the suitability of a tenant, as long as you do not infringe on his/her rights. For example, you can ask a prospective tenant: What is your income? Where do you work? How many people will be living with you and what are their names? Do you have pets? Do you smoke? Could you provide written permission for a credit check? May I see your references and their current contact information?
Do you plan to have (more) children? What is your ethnic background, religion, or sexual preference? Will your family be visiting? What is your social insurance number? If you don’t provide your SIN, I won’t rent to you. Are you married, single, or divorced?
12Untitled-4 www.canadianapartmentmagazine.ca 1
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Corporate Profile
Hollyburn offers affordable luxury
Corporate Profile
September/October 2012 15
Cover StoryProfile Corporate
20 Prince Arthur, Toronto
16 www.canadianapartmentmagazine.ca Untitled-8 1
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Corporate Profile
Providing exceptional service with high-end product, Hollyburn Properties Ltd. operates in some of the best neighbourhoods in the Canadian rental market. With almost 40 years of experience in acquiring and managing some of Canada’s finest residential addresses, Hollyburn Properties offers a uniquely different approach to the rental housing business. It finds that there is a demographic of Canadians who are after the upscale urban living that exists in affluent neighbourhoods. Without the burdens of carrying a traditional mortgage, many renters are willing to spend a little bit more monthly on homes that look and feel like a condo but are managed like rental communities: with 24/7 on-site caretakers to look after any issues that arise in their suite. Condo living has a reputation for being carefree but convenience can be costly when potential homebuyers add up the cost of their mortgage payments, condo fees and other associated costs of homeownership. The added cost of maintaining both the suite and the building itself will eventually add up, leaving homebuyers with fewer funds to splurge on the lifestyle they want. “Instead of having your money tied up in your mortgage and fixed expenses, you can rent a Hollyburn suite that allows you to have the lifestyle you want to lead,” explains Dan Sander, Director and VP at Hollyburn Properties Ltd, “and the best part is you can have that lifestyle today.” The result is hassle-free living as a fraction of the cost of homeownership.
“
Condo living has a reputation for being carefree but convenience can be costly when potential homebuyers add up the cost of their mortgage payments, condo fees and other associated costs of homeownership.”
Renovated Lobby 20 Prince Arthur, Toronto
September/October 2012 17
Corporate Profile View from apartment 20 Prince Arthur, Toronto
Fountain 20 Prince Arthur, Toronto
18 www.canadianapartmentmagazine.ca
Location By targeting the most desirable and upscale neighborhoods, Hollyburn invests in older, poorly managed buildings. It renovates and upgrade the buildings’ infrastructure and transforms the suites into high-end rental suites, making them desirable for the upscale urban demographic. “We’ll target the most inefficiently managed building in the best neighbourhoods and convert them to meet the highest quality standards. Our goal is to buy in exclusive neighbourhoods only. Our focus is on great areas that have access to great schools and within proximity to even greater amenities,” says Sander. Success has not come without the support and loyalty of its staff. “We have the best staff that provides the best service and we feel we have the best product in the rental housing industry,” adds Sander. “Our resident managers are some of the most extraordinary and diverse people. We prepare them, we train them and we provide them with the resources they need to think creatively.” Hollyburn currently has a growing team of 167 employees and approximately 200 non-direct employees who work with companies in supportive roles. With in-house staff training and comprehensive management training models, the resident managers are prepared for any challenges they encounter in their line of work. Hollyburn built its reputation in Vancouver, where it maintains around 60 per cent of its portfolio. All its buildings are in walkable communities surrounded by mountains and sandy beaches and within walking distance to parks, schools, shops, busses and other amenities. “We invest heavily in the capital infrastructure of our buildings, more so than most of our competitors,” explains Sander. “Our investment horizon is basically forever, just like Warren Buffet.” From new hardwood floors and granite countertops, to upgrading the elevators, roofs and installing new energy efficient boilers; the goal is to attract residents who are willing to spend a little bit more on rent to live a more comfortable lifestyle in a premium location. “Because we are putting those condo quality finishes in, we’re giving the suites a modern appeal, with energy efficient retrofits. We’re removing those galley kitchens, installing new appliances and opening the walls into the living area to give the suite an overall modern charm.” In an industry where many landlords are trying to manage growing expenses largely due to rent control, renters often go from one shabby apartment to another, while looking for a place they can settle in. Finding an attractive living space can be a frustrating process in this competitive market. It is this kind of renter Hollyburn is looking to appeal to by offering them a higher end product with better service and better amenities.
Corporate Profile
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File: Ad_CAM_MediaEdge_7.125x4.75_Aug2012-BM.indd Untitled-8 1
Client: Brighter Mechanical
design one Congratulations to Hollyburn Properties for being recognized as a leader in the apartment rental industry. Size: 7.125” x 4.75
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Corporate Profile
Renovated lobby (Before and After) at Bellevue West in West Vancouver, 195 21st Street.
“
Hollyburn has found that there is a very healthy demographic of wealthy individuals in Toronto who prefer luxury rentals if the building is in the right location.”
20 www.canadianapartmentmagazine.ca
Green spaces For decades, Hollyburn has always made a conscious effort to improve the energy efficiency of its buildings. The company has carried out a series of retrofits including roof insulation, upgrading parkades, plumbing and electrical systems. Other noteworthy improvements include major mechanical upgrades on improving boilers and piping throughout the building and installing elevator retrofits using variable frequency drives (VFDs). These are non-suite improvements that prolong the life of the rental housing stock. By improving-energy efficiency, Hollyburn provides residents with quality rental housing in the communities they love, while reducing the impact on the environment. Moving forward Being very successful in Vancouver for decades in a very small and very tight market, Hollyburn expanded in the Toronto, Calgary and Ottawa markets for growth; where management has identified more sizable and attractive opportunities. According to Sander, Vancouver is unique in that 85 per cent of the rental housing stock is in small buildings comprising of 30 units or less. “It’s very difficult to grow, get critical mass and to operate in this market with any efficiency and that’s primarily why you won’t see many other larger institutions. Product is very tough and prices are steep.”
Corporate Profile
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September/October 2012 21
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Corporate Profile
Renovated bathroom
The business model that has been successful in Vancouver has also proven successful in Toronto. With a flagship location on 20 Prince Arthur, Hollyburn has since acquired over 17 properties in luxury locations including Yorkville, Forest Hill and the Annex. Hollyburn has found that there is a very healthy demographic of wealthy individuals in Toronto who prefer luxury rentals if the building is in the right location. They may have a second home or enjoy the flexibility and freedom of this lifestyle option. Many of the flagship properties in Vancouver have an income per door over $70,000 per annum. Demographics from upscale neighborhoods it’s invested in Toronto have shown similar results. Serving residents’ needs Beyond location, Hollyburn residents are looking for great service. Though condominium apartments in the rental market offer many amenities, they don’t generally offer premium services since the property managers are usually off site. As a result, management becomes fractionalized. But service goes much further than day-to-day life at Hollyburn. Residents can have peace of mind knowing they can reach their onsite resident managers anytime. “We make a huge effort to try and keep laundry rooms well lit, well serviced and above ground. It’s part of our safety initiatives. All these small things tie into the same philosophy of service and excellence,” says Sander. With 24-hour onsite caretakers and a full team to back them up, residents are confident that they won’t have to wrestle with ad hock repairs or duct tape remedies. If an appliance breaks down in a condo, it can be difficult to get in touch with the landlord. Getting them to do repairs can be another thing altogether. But Hollyburn has a system for voluntary upgrades that allows for tenants who are tired with their kitchen cabinets to have their suites renovated at a convenient time for them. “Our Smart Suite program offers our residents different packages that we can roll out for them,” explains Sander. “Whatever condition of the suite, we’ll sit down, look at it and make it work for them and make it work for us. Obviously the rent’s not going to
22 www.canadianapartmentmagazine.ca
Corporate Profile
Building Science & Restoration Consultants
Alumni Restorations Ltd. has worked with Hollyburn Properties Ltd. for over 13 years, and congratulate them on their incredible growth and success.
Proud to be Hollyburn Properties Ltd. consultant of choice in markets throughout Canada.
Alumni Restorations Ltd. specialize in concrete restoration work on exterior hi-rise buildings, remedial recaulking, and specialty membrane applications. Alumni Restorations Ltd. have been in business since 1999, and have successfully worked with most of the engineering companies dealing with exterior building maintenance with great success.
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Alumni_2012.indd 1
20 PRINCE ARTHUR; Toronto, ON
rjc.ca
12-10-04 3:32 PM
Wespac would like to congratulate Hollyburn Properties on all of their success. We are proud to provide quality service and value to their local properties.
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September/October 2012 23 Wespec_2012.indd 1
12-10-11 Addmore_2012.indd 2:53 PM 1
12-10-11 2:56 PM
Corporate Profile
stay the same but a small adjustment in rent can often pay for significant upgrades for that tenant.” Striving to build a close-knit community in its rental apartment buildings, managers create seasonal events for their residents. “We have competitions every year for different seasonal decorations; it’s part of our philosophy to create communities in the buildings we have. That’s something we’ve tried to foster through our annual resident summer barbeques and annual holiday events,” explains Sander. The company’s service philosophy goes beyond the front doors with partnerships with businesses that provide residents with exclusive deals on their services. Discounts on services offered by retail, cable and car sharing co-ops are valuable rewards for building residents and offer retailers access to an affluent group of clientele while helping residents save on their day to day expenses. Outside of the individual apartments, Hollyburn provides free Wi-Fi in the lobby and in some common areas. When a new property is bought, it polls the residents to ask them what kind of amenities they enjoy. If the pool is tired and unused, management may fill it in to use the space for a more sought after gym. But if residents enjoy the use of the pool, it may be updated with landscaping and seating in areas that are underutilized. All these efforts add up to a more comfortable lifestyle in great locations at a fraction of the cost of homeownership.
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Social Media
By Jessica Green
Social media is for grown-ups By Jessica Green
Go online for more articles www.canadianapartmentmagazine.ca
In 2011 alone, YouTube reported more than one trillion views. That’s 140 views for every person on the planet. Facebook’s following of 750 million users is nothing to scoff at either. Having more than doubled its number of Canadian users from six to 14 per cent since 2009, LinkedIn is no slouch. And you know that networking site that forces you to craft a thoughtful statement in 140 characters or less? It’s called Twitter and it hit more than 140 million users last year, so stop pretending that you don’t know how to pronounce it and start getting chatty. Social media by numbers According to Ipsos’ most recent Canadian Interactive Reid Report special feature on Social Networking, half of Canada’s population (17 million people) is involved in some form of social networking. Since 2010, the number of Canadians who visited a social media site at least once a week has climbed from 35 to 50 per cent. And it’s not just pimply teenagers getting their kicks while mom and dad are out: the majority of 35 to 54 year olds and more than 40 per cent of those over the age of 55 are pinning, posting, liking and re-tweeting Honey Boo Boo lines in real time. That number is only expected to increase—dramatically.
September/October 2012 27
Social Media
Step it up Steve Mossop, President of Ipsos Reid’s Western Canada practice, explains that social media users have spent the last several years building brand awareness. Now, it’s time to commercialize this awareness by engaging consumers. But there’s a right way to do it. The first step is determining whether social media is right for your business. Let’s rephrase that: are you a B2C company that wants to expand your reach, bring people to your website and nurture leads into sales? If you answered yes, then you’ve completed the first step. Do: due diligence Next, take some time to research what other companies are doing. What platforms are larger developers using? Are boutique firms doing it better? How are they engaging potential buyers? Whether they’re running contests, microblogging or posting basic building updates, the competition is already ahead of you. So find out what they’re doing, read some tutorials and do it better. Just make sure that the platform fits the purpose, which is to reach your intended audience with frequent, practical, relevant information that initiates conversation. Put in some face time Build a Facebook business page by using the step-by-step instructions and user support provided right on the site. In addition to built-in statistics, which help you monitor the efficacy of your campaign, Facebook is a great way to connect with current and prospective buyers for several reasons. For one, it builds community. Feature a site super; post photos of residents who have lived in the building for many years; launch a balcony garden contest and showcase images of the winner and runners up. Remember, Google takes cues from social media votes of confidence, meaning that the more people share content from your website, the more your search engine ranking will improve. Find your voice After Facebook, Twitter is the ultimate social tool. With its own vernacular – hashtags, DMs, re-tweets – it’s daunting on first click. But perhaps it’s the forum’s simplicity that’s throwing us off. What’s so difficult about crafting one or two targeted sentences a couple of times a day? Not much, if you have a plan. That is, what you want to say and who you want to listen will determine your tweets, so mix it up by striking a balance between promotional content and general interest content. The more you tweet, the more your account will be viewed, thereby increasing the probability of more followers. Once you have created your account, promote it via newsletters, email signatures, corporate website, property website, Facebook—everywhere. Get reel Does your property have a video? If not, it should. Online marketing firms like Rentseeker.ca can produce a film for about the same price as one print ad. The difference? “Video is a one-time investment and the second it’s online, it’s there to stay,” says Chaim Rivlin, Rentseeker’s CEO. Once you have the video, make sure it’s hosted on YouTube. “Every video posted on YouTube can be optimized with titles, descriptions, keywords and tags,” Rivlin adds. “The payoff can be immense, particularly when it comes to driving traffic to your website and increasing your brand’s search engine visibility.” While traditional corporate videos are informative, light and entertaining behind-the-scenes videos can be particularly influential. Creating videos on topics
28 www.canadianapartmentmagazine.ca
Social Media
like amenities, pride of ownership, financing options and price ranges is a relatively easy undertaking. Uploading the videos to YouTube is even easier, so have fun with the process. Interview residents and staff who are willing to be spokespeople for your property. Just ensure the message is clear: you must live here. Connect more Like many people, you probably think LinkedIn is only for promoting yourself. However, LinkedIn now has Company Pages, which are becoming increasingly popular marketing tools. The fastest growing demographic on LinkedIn is recent graduates, many of whom are looking for places to live. Try engaging them by encouraging the participation of residents, who can talk about the buildings, community and amenities available. LinkedIn also has a useful feature that allows users to recommend a product or service, which is then sent out to all of their connections. Talk about an organic and efficient way to promote your company! Among its many benefits, LinkedIn
functions as its own search engine for finding companies and jobs. As an added bonus, all information posted publicly shows up in search engines. Final answer Finding your niche, stimulating conversation and converting leads to web traffic and, ultimately, sales can take up to a year. It’s time consuming and utterly demoralizing when you can’t find that “thing” that bridges the gap between your brand and your market. However, with time, persistence and some trial/error, you’ll start making friends. You might even start using social media to provide online property tours and schedule showings—through an app. In the meantime, don’t retire those glossy print ads, towering storyboards and backlit signs just yet. They’re all a part of today’s marketing matrix and each piece is just as important as the next. And those once-pimply teenagers? They make up the 48 per cent of the population that checks Facebook the second they wake up. They’re also the ones in suits looking to buy.
Jessica is the owner of Cursive PR, a Toronto-based communications consulting firm. For more information, email Jessica@CursivePR.ca. For practical, relevant information that is updated daily, find Canadian Apartment Magazine on Facebook, Twitter and on our website at www.canadianapartmentmagazine.ca.
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Tourism BC/Albert Normandin
Insurance Cover Story
The city with the world’s best reputation By Amie Silverwood
30 www.canadianapartmentmagazine.ca
Vancouver, the largest city in BC and the third largest in Canada, is often credited as one of the best places to live and this reputation has made it a popular destination for immigrants. It is one of the most ethnically and linguistically diverse cities in Canada with 52 per cent of the population speaking a first language other than English. Vancouver is now the most densely populated city in Canada with urban planners preferring high-rise residential towers and mixed-use developments while preserving green space and views. City planners began to encourage the building of high-rise residential towers in Vancouver’s West End in the 1950s with strict requirements for setbacks and open space to protect sight lines and preserve green space. Their vision resulted in dense neighbourhoods in a compact urban core that has gained international recognition. In an effort to continue to build the city’s reputation as a liveable city, the city’s new goal is to make it the greenest city on earth by 2020. The goal is to reduce its eco footprint by targeting zero carbon, zero waste and healthy ecosystems.
Tourism BC/Albert Normandin
Cover Insurance Story
Vancouver landlords are benefiting from the city’s international reputation as a great place to live. They enjoy the tightest rental market in Canada with vacancy rates over the last three years averaging below one per cent. Even though they have the highest rents in Canada, apartments rarely sit empty, according to Carly Ludwar-Jellis, Member Serivce Manager for ROMS BC. “Usually someone moves out on the 31st and someone moves in on the first. A regular landlord can expect to have one month empty every now and again but Vancouver landlords didn’t ever really have to experience that prior to a few years ago anyway.” Rents are high but the cost of housing is even higher for firsttime buyers with the average monthly condo mortgage payment being estimated by CMHC at $773 more than rent for a similar sized apartment. CMHC credits the combination of growing employment, an increasing population fuelled by migration and this gap between the cost of homeownership and the cost of renting as the main factors influencing the low vacancy rates. Vancouver added 35,300 new jobs since the first quarter of 2011 and 28,958 immigrants moved to the city on a permanent or temporary basis. The new residents, immigrants and those attracted by employment opportunities, all
need places to live and most of them are looking to rent for the first few years in the city. The need for rental apartments is so high that one of Vancouver landlords’ biggest problems, according to Ludwar-Jellis, is that they often find extra people living in their apartments in order to make their rent more affordable. “You rent out a two bedroom apartment to a couple who say they want a spare room and then you find three, four or five people living there down the road. It’s not every tenancy by any means but that’s a commonly occurring problem in Vancouver.” Ludwar-Jellis believes renters in all demographics around the more popular neighbourhoods of Vancouver are trying to find ways to reduce the cost of rent. Adding extra roommates is one solution becoming increasingly popular with renters but micro units is another. The city has recently adopted programs to encourage developers to build rental units and one of the incentives is to allow developers to build apartments that are 320 square feet. These tiny apartments have proven to be very popular among residents who want to live in more expensive locals. “People are going crazy over them because they’re more affordable, they’re usually in a better location as well,” explains September/October 2012 31
32 www.canadianapartmentmagazine.ca
Ron Fehling
Cover Story
Cover Story
Ludwar-Jellis. “If you’re the type of person who is only home to shower and sleep and you’re out the rest of the time, it’s a very wise way for you to spend your living money to pay less rent to be closer to town. Generally these smaller units don’t have parking but if you’re close to where you need to be so you can walk or you can take the bus, I think it’s wonderful.” Rob Greer, Avison Young Principal and multi-family specialist, thinks the small units are a great solution for new immigrants looking for affordable apartments in a central location. “Just like other cities like Paris or New York, Vancouver’s finally getting their heads around smaller unit sizes and that’s a trend we’re going to see continue – especially with new construction.” With the low vacancy rates and high rents, these small units are a great answer for Vancouver landlords who are looking to build new apartments. “From an investment standpoint, it makes more sense. Because your rent per square foot is so much higher.” Of course, not everyone is interested in living in an apartment that is less than 400 square feet. These units appeal to a specific demographic. “It’s a little bit more of a transient tenant. It’s someone who is new to the city, they want that good location, they want to be close to everything but, I think about a year from now, they’re probably going to be looking for something that’s a little bit bigger. But if you’re new to the city and you want that great
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location, you want new construction; people are definitely paying for it. There’s huge demand for those units.” The City of Vancouver is bending over backwards to convince developers to build rental housing. They’ve come up with a range of incentives which include these smaller units, less parking and lower development fees in their efforts to make purpose built rental housing more affordable for landlords. But the competition for land in prime areas has driven up the cost making it a challenging investment for anyone wanting to build anything other than condos.
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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 Calgary Dennis Aitken or Daniel Stewart Phone: 403-237-8975 Fax: 403-266-5002 Email: calgary@peoplestrust.com Toronto Michael Lombard or Ady Steen Phone: 416-368-3266 Fax: 416-368-3328 Email: toronto@peoplestrust.com ™
www.peoplestrust.com September/October 2012 33 Untitled-1 1
12-01-24 9:59 AM
Tourism BC/Albert Normandin
Cover Story
“
The bad news for landlords in Vancouver is that the rental stock is aging and along with the rising expenses come the eventual need for major improvements in buildings that are on average 40 years old.”
34 www.canadianapartmentmagazine.ca
Though vacancy rates are low and rents are high, landlords are finding their profit margins pinched thanks to the high price of land and the age of the city’s rental stock. Rent control has been tight over the last few years, which doesn’t allow the building owners much money to invest in much needed repairs. “Owners are faced with rising expenses: property, property taxes, gas, electricity, repairs and maintenance and it’s really tough to offset that when you can only increase rents by 4.3 per cent. Keep in mind, in previous years, that max rental amount was only about 2.3 to 2.5 per cent so they’re just starting to catch up from all those years where it was in the 2 per cent range.” The bad news for landlords in Vancouver is that the rental stock is aging and along with the rising expenses come the eventual need for major improvements in buildings that are on average 40 years old. Rental apartment in Vancouver, however, remain a solid investment, according to Greer. “Our cap rates are some of the lowest in the country. Rents are high and they’re going to continue to increase – especially in those good areas. And I look at our market as one of the safest as far as parking capital. But with that, your returns are some of the lowest too. The purchaser profile is existing, local private buyers that already own rental units here and understand the market. Or we see a lot of foreign capital coming into the market as well too, specifically from mainland China. They’re very interested but time and time again, we’re seeing the private, local buyer outbid the institutional buyer, the REITs, pension funds, etc. when a really prime asset comes to the market here.” Greer explains that the institutions aren’t willing to invest in a market where the cap rate is in the low three per cent when they can achieve higher yields if they go to Alberta or Ontario. He gives the Olympic athletes’ village as an example. The developer, Millenium, had to add purpose built rental housing to the condominium village in order to increase density and these apartments are up for sale at the time of writing. “They’ve been very well received by the market. It’s like moving into a brand new condo. And a local, private buyer, would be my guess, will end up buying them,” Greer predicts.
Healthy Competition or Bad for Business? The Impact of Condo Rental Stock on the Apartment Market Toronto is experiencing a surge in condominium rentals as a result of investors parking capital in condo developments. What does this mean for the traditional apartment sector? Now available online, this V-Report addresses whether the condo rental market is a threat to purpose-built multi-family rental apartments. Learn from the experts about the rapid increase in rental condo activity, the lure of condo rentals and what apartment building landlords can do to remain competitive in this new marketplace.
Ben Myers
Janice Cracknell
Executive Vice-President Urbanation Inc.
Partner N. Barry Lyon Consultants Ltd.
Not getting our V-Reports? Sign up at vreports@mediaedge.ca for direct delivery to your e-mail inbox. To sponsor or participate in a V-Report, contact Clare Tattersall at claret@mediaedge.ca.
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Technology
A secret to increasing your marketing productivity By Carissa Drohan-Jennings
36 www.canadianapartmentmagazine.ca
A well known proverb says it all: A penny saved is a penny earned. In the business world, time is money. The productivity of employees has a significant impact on businesses’ bottom lines; however, ensuring that your business is achieving maximum productivity is not solely about working harder. Working smarter is also essential in order to reach the greatest level of efficiency and productivity. In order for landlords to maximize leads and leases, it is vital to ensure that the marketing department is at full productive capacity. There is a new technology making inroads in the rental and housing market that holds great potential for improving productivity by lowering advertising administration time and improving overall marketing performance. This technology is called data syndication.
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Data syndication is a tool that can help make internet advertising easier and more efficient for landlords.” What is data syndication? Data syndication is the practice of sharing data between two websites through a data feed. A data feed is essentially a program that lays out a roadmap detailing how each website will communicate with one another. The syndication programming describes the content to be distributed between the websites, which variables on each website are equivalent to each other, how often the information should be updated across the websites and any other rules that govern how the information is to be handled. Once the data feed is prepared, the websites are able to seamlessly share the information. So how can data syndication help improve productivity in the Canadian rental industry? The Canadian housing industry has already been using syndication to improve productivity. Many Real Estate Agents are now syndicating Multiple Listing System (MLS) listings with their own personal marketing websites. Because the information is pulled directly from MLS, each agent can save time otherwise spent updating personal websites, while being assured that their data is the most current and accurate available. Using a model similar to that employed by the housing industry, landlords can also begin thinking about syncing their data with their Internet Listing Providers (ILSs). Gottarent.com is one such ILS that is currently working with landlords to seamlessly integrate building listings that appear on corporate rental sites with that of the online advertising listings. The result of using data syndication is of direct benefit to landlords in three ways: 1. Increased advertising accuracy – Data syndication ensures increased accuracy in advertising because all changes to a building’s information are made only
once, on the landlord’s rental website, and these changes are then automatically pushed out to all the syndicated websites. For example, the landlord’s advertising data may be distributed directly to thirdparty listing sites ensuring all advertising listings remain accurate and up-to-date. 2. Cost savings – Because advertising and building data changes need only be made once, data syndication decreases the amount of time required for staff to maintain advertising across multiple listing sites. The labour costs associated with advertising are thereby reduced. 3. Improved productivity – In addition to reducing labour costs, now that administrators are taking less time to update advertisements they can spend more time focusing on what really matters: lowering vacancy and implementing new marketing initiatives. In the United States, data syndication is already improving advertising efficiencies. At Landlord Web Con 2011, Brock McLean, the Vice President of Operations at ForRent.com, spoke about how his company has a syndication partnership with Oodle.com, an online classified listing service based out of the US, which allows them to push their apartment listings to the Facebook marketplace. Beyond a doubt data syndication is a tool that can help make internet advertising easier and more efficient for landlords. Syndication models are already appearing in many other industries, including the Canadian housing industry and the US apartment industry. It’s time for Canadian landlords to consider how adding a data feed could help them decrease labour costs, improve their advertising reach and increase the accuracy of their ads.
Carissa Drohan-Jennings is an Account Manager at Gottarent.com. If you’re interested in learning more about data syndication with Gottarent, please contact Carissa at cdrohan@gottarent.com or follow her on Twitter @CarissaDrohan. 38 www.canadianapartmentmagazine.ca
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Insurance
The new reality By Andy Schwartze They say that every generation must cope with at least one serious road bump along its way through life. For some generations it’s an armed conflict and for others it might be an economic disaster. In each case, people have to figure out what impact the road bump will have on them and, of course, how they are going to deal with it and survive. Some will profit immensely, when it happens, and others will suffer enormously. Most will stumble through somehow, hoping not to be too badly impacted. After all, one can hardly expect to go through 80 years of life without some serious challenges along the way. The foibles of human behaviour virtually guarantee it. For the baby boom generation of North America, the serious struggles probably lie ahead. It’s been quite a charmed life these past decades. Middle class lifestyles have allowed for dual residences, club memberships, low cost travel and better quality food and medical treatment than ever before. Yet, this enormous population bulge, the highest taxed generation in history, has helped governments bloat to unheard of levels, built still growing levels of debt unheard of in past generations and spent happily in the hopes that all will turn around again. “Retiring with debt” is a phrase that one hears more often. The reality is that an aging population does not build an economy, but rather drains it. Healthcare resources will become a major priority in the coming decades as this generation lives to ages never before seen. In the process, and while demands for government support to the seniors increase to a new crescendo, taxable incomes will stagnate. Yet, at this very early stage of the game already, with the first baby boomers having turned 65, just last year, we are seeing large national debts at all government levels. This time around, the snap back recovery that so typically follows a recession will probably simply not happen. Should that really turn out to be the case, governments’ revenues will stay stagnant and our elected officials will find themselves in a serious bind, as has already happened in a few cities in the U.S., not to mention a couple of EU countries.
Where does this all go? If national, provincial or municipal debt cannot be paid off by the increased revenue activity generated by a recovery, then higher taxation is the next alternative. For municipal and provincial governments (or their equivalents in the U.S.) this is a serious nightmare. For federal governments, the solution is one that is much more palatable: inflation. There’s nothing easier than inflating debt away by rolling the presses. It is already happening, according to experts who follow the money supply. The last serious inflation that we experienced here in Canada was in the 70s. Ten per cent was not uncommon. Inflation, of course, devalues currency and, at some point, pushes interest rates. This latter result puts serious brakes on the real estate market and on hiring activity. It pushes productivity as employees take on more work instead of hiring others. Inflation is a tough solution to this problem but it is the civil equivalent of an armed conflict that brings everything back to a sensible level so that the cycle can start again, of course. For the life insurance industry, already reeling from the attacks on their capital by guaranteed insurance policies (where the policy’s interest rate has been set for the life of the contract), an additional hit would come from the world of commercial real estate loans. But for the property/casualty crowd there would be rejoicing in the bleachers. These insurers have the benefit of readjusting premiums once a year to reflect claims demands that would, no doubt, go up in a tougher economy. In addition, they would be able to benefit from higher rates on their deposits. For, you see, the p&c folks are statutorily mandated to keep their liquidity levels very high. They roll over a mixed portfolio of fixed paper, generally in 30 day increments. After all, one nasty claim and this crowd has to scramble to get the repair cash lined up and ready to go. No long term investments for that sector; the regulators won’t allow it. I suppose the upside for consumers is that high interest rates, as long as claims remain stable and don’t skew the numbers, will put pressure on reducing the costs of property/casualty insurance.
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. For any comments, you can go to www.takecover.ca and post them on their new blog. 40 www.canadianapartmentmagazine.ca
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Finance
Choosing the right mortgage By Peter Cook and Robert Fleet
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With an infinite amount of information found on the internet these days, borrowers have a wealth of information at their fingertips. There are various mortgage product types: closed term, variable rate, conventional or CMHC insured mortgages just to name a few. Borrowers also have many choices to consider when choosing the type of lending institution to borrow from such as chartered banks, credit unions, life insurance companies or non-bank financial lending institutions. Sometimes having too much information can make a decision overwhelming and the process can become extremely frustrating. There are some basic factors that can reduce this list of considerations to the most important items and will guide you to make the best decision for you. Whether you are planning to refinance, renew, unlock equity or acquire a new apartment building be sure that these critical elements are met by your lender. Terms and conditions Ensure that locking in your interest rate is on your terms. Many lenders have limitations on your ability to lock your rate prior to funding. A CMHC-insured mortgage typically takes between eight to ten weeks from initiation to funding. A lot can change in the marketplace during this time period. Your initial rate quote (which is usually spread based) at the beginning of the process may change significantly when it comes time to fund your mortgage. Your lender should allow you to lock your interest rate up to 60 days prior to funding. It is very important to
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ask your lender upfront how far in advance they will let you lock your rate and if there are any fees associated with locking early. If minimizing your down payment or unlocking maximum equity is important to you then you may want to consider financing up to 85 per cent of the property value (as determined by CMHC) with a CMHC mortgage. In this market, a conventional mortgage will only allow up to 75 per cent of the value. These extra funds can go a long way when you are expanding or improving your buildings. Another benefit of a CMHC mortgage is your monthly cash flow can be improved by opting for a longer amortization. CMHC multi-residential mortgages can be extended up to 35 year amortizations. Closing costs and personal guarantees You need to consider each lender’s closing costs when choosing a financial institution. The difference between lenders closing costs may be equivalent to adding several basis points to your interest rate quote. In today’s commercial mortgage industry the borrower is responsible for the lender’s closing and other associated expenses. It is also important to determine which third party firms are approved by your lender. A typical conventional mortgage requires an appraisal,
an environmental report, and an engineering/structural report. Each report can cost thousands of dollars and if your lender only accepts certain reports from certain firms, you should be aware of how these particular quotes will impact your overall financing costs. The type of mortgage you choose will also affect which reports are required. Picking the right mortgage product can save thousands in third party report costs. A CMHC-insured mortgage normally only requires an environmental report. Legal costs are another significant expense when it comes to finalizing your mortgage. We highly recommend your lender supplies you with at least three quotes so you can decide which firm they choose. Legal fees on a $3 million plus mortgage can cost several thousand dollars so it is imperative that you have a choice in which legal firm you would like them to use. A mortgage of $3 million or less is considered a small mortgage by most lenders’ standards. Some lenders will permit you to close on these smaller mortgages with title insurance and allow your lawyer to close both sides of the transaction, saving thousands in legal fees (this may not be available in all provinces). Other fees that are commonly overlooked when evaluating a lender are insurance review fees and processing fees. Property insurance requirements and higher liability minimums can easily
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Finance add hundreds of dollars to your annual premiums and reduce your bottom line. Lenders processing fees can range from 0.10 to 0.50 per cent depending on the financial institution. This is money directly out of our pocket on closing so make sure you are not paying more than you have to. An understanding of how lenders determine interest rates is useful information. In most cases it is a spread-based quote over several different funds or bonds. Government of Canada Bond yields or Canada Mortgage Bond yields are commonly used bonds which can be found online. Some lenders quote spreads over their internal cost of funds. These funds are up to the discretion of the lender leaving the borrower in the dark and powerless over what their final interest rate will be. It is important that you demand from your lender daily interest rates so you can track how the bond market is changing and there are no surprises when it comes time to lock your rate. Insist on a one level approval process The convenience of a one level approval process can prove highly beneficial saving you thousands of dollars over the financing process. It is no great secret that there is a severe shortage of apartment building inventory at this time. When a property hits
the market there is a short window to respond. Borrowers will feel confident negotiating their purchase when they know the maximum loan amount available and the quoted rate prior to finalizing their offer to purchase. Ensure that your lender can produce a term sheet within 12 hours of receiving all of the necessary property and personal information. Your commitment letter should not require layer upon layer of management signatures delaying your ability to sign and commit to the loan and lock rate immediately should you wish to do so. Commitment letters should be presented to the borrower within 12 hours of CMHC issuing their certificate of insurance. The lowest quoted interest rate might look like the best decision when you begin your search for the right mortgage. Our suggestion is that you look for an experienced lender that specializes in apartment building financing. Share your short and long term business goals and discover all of the ways that your lender can bring value when choosing the right mortgage for you. Take the time to evaluate your total cost of borrowing including all closing fees, legal, insurance cost and non monetary advantages like limited liability. A few basis points saved on your mortgage rate can cost you significantly if coupled with the wrong advice.
Follow us on Twitter @Robert_Fleet and on LinkedIn. Peter Cook and Robert Fleet are committed to helping borrowers strategize the best loan structure possible. They are available for one-on-one consultation for any CAM reader requiring multi-residential financing. As “Apartment Financing Specialists” with First National Financial LP they have originated over $4 Billion of mortgages. Their combined 35 years experience in the financial industry has lead to frequent speaking engagements across the country. They freely share their knowledge and techniques with audiences, clients and prospective clients. 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
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Subject to additional terms and conditions found at saveonenergy.ca. Subject to change without notice. A mark of the Province of Ontario protected under Canadian trade-mark law. Used under licence. OM Official Marks of the Ontario Power Authority.
Portfolio Strategy
How to finance new apartments By Derek Lobo
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In the past five years, purpose-built rental apartments have led the real estate sector in terms of return on investment. The demographics have shifted, vacancy rates are dropping and average rents are rising. With demand outpacing supply, the incentives to build new apartments increase. Already, in cities like London and Halifax, cranes are rising to bring new apartment developments about. Financing is one aspect of developing new apartments that tends to be overlooked. In the wake of the 2008 recession, lenders are more conservative, and they need more information about a proposed development before they back it. Without a broker with experience in this field to help, financing can become a time consuming process that ties up considerable equity.
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Portfolio Strategy
Building confidence with your lender The key to getting your project financed is confidence. You have to exude it, it has to rub off on the lender, and you can’t fake it. As my colleague, Sandy Harrington of IC Funding says, “the biggest challenge for a builder is to gather enough information to show with a high confidence that a project is economically viable before a lender will lend.” Information is what is needed. Lenders like to assess risk based on history. This is a challenge for new apartments since, by definition, they have no history. It’s important to come to the lender with a good and impartial feasibility study for your project. A feasibility study adds certainty from the beginning and will carefully assess the marketplace to suggest the right
Are you contemplating the sale of your apartment property? Consider the following: • Who will represent your best interests? • Who will give your property maximum exposure? • Who will deliver the highest value for your property? With over 20 years experience, tens of thousands of units sold, and hundreds of clients represented, we have consistently delivered superior results. Through our local and national coverage, we create maximum exposure, ensuring maximum value for your property. Please visit our website at www.cbre.ca/nag-toronto or contact us at 416.815.2332 to learn more about how we can help you.
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Lenders looking over your shoulder Be prepared to be in constant contact with your lender, as they’re lending up to 75 per cent of the building’s construction costs. The lender will distribute this money in stages so that he or she doesn’t end up in a position where they’re forced to either put up more money or be left with an uncompleted building. A quantity surveyor or project monitor will keep an eye on these funds – a cost that is borne by the developer. Once the project is largely complete, construction financing will transition to permanent financing. This will usually happen when rental income is three quarters of the projected gross revenue. At this stage, the developer will have to decide whether it’s better to keep working with the construction lender, or find an alternate lender who would be more suitable. The importance of good advice In all stages of the project, having an experienced commercial mortgage broker to assess your market options can dramatically reduce your final equity requirements, as well as your rate of return. Be sure to contact a broker who can help you build the feasibility studies you need to have confidence in your project, and to help navigate you through the tricky waters of financing new apartments.
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unit mix, the right market to focus on and the right location to build. It is important that a third party do the feasibility study, since developers tend to be optimistic when gathering data about their own projects, and lenders know this. As Sandy Harrington says, “As soon as you start to hire and get quotes on builders, then the lenders are trying to see who can do it, and if they can deliver on those prices, and if those prices are reasonable. A prospective developer has to be confident that the market has a sustainable number of people who would be able to pay the rents that justify the building.” Getting an impartial observer to assess your development helps you, and your lender, be sure of your numbers.
CBRE Limited - National Apartment Group
: : David Montressor*, Executive Vice President 416.815.2332 david.montressor@cbre.com * Sales Representative CBRE Limited Brokerage
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Derek Lobo is the CEO of ROCK Advisors Inc. To learn more about the services that ROCK offers, visit their website at http://rockaptadvisors.ca/.
Smart Apartments
Bug off!
Chapelview Apartment Project
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A joint venture amongst the governments of Canada, Ontario, Peel Region, the City of Brampton and Martinway Contracting Ltd. is the first affordable housing project to be certified LEED Platinum. All of the participants contributed by either in-kind service or through donation of products. John D’Angelo of Martinway Contracting explains, “we typically use Benjamin Moore standard eggshell paint. A gallon might cost, let’s say $35. The LEED Requirement was for zero VOC paint so we used the top of the line Benjamin Moore “Aura” paint which is let’s say $65 a gallon. Benjamin Moore would sell us the Aura paint for the same price of the eggshell paint and
the difference would be their corporate contribution. “This is one example of how I would do a deal. With each participant the deal would vary but I would be as creative as possible and stay completely away from actual cash donations. If the sponsor was a non-construction related company like TD Canada Trust, then it would be a cash donation. TD contributed $75,000. In this case the money would go directly to the Region of Peel and then worked back into the project as a change order for a very specific prescribed item. This item could be grab bars for the modified units for people with disabilities.”
Quick closings with competitive LTV. That’s our commitment to you. First National is committed to working together to provide the ideal customized mortgage solution to meet your needs. We offer a wide variety of mortgage products, competitive loan to value, and one of the quickest closings in the industry. You can often receive your commitment documents in as little as seven days. Trust us to find the best financing solution for your property.
Make First National your first call. Contact us today.
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