CPM June 2015

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VOL. 30 NO. 3 • JUNE 2015

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editor’snote THE CONSPIRACY THEORY of social media holds that it is yet another space in which extroverts can live large – sharing their thoughts, profound and superficial, with untold numbers of readers/listeners/ viewers, and defining and dictating the new norms of interpersonal communications.

Haven't heard this theory before? That's probably because introverts haven't felt compelled to proclaim it to all and sundry.

Visions of the future smart workplace tend to similarly presuppose constant connection and collaborative processes with multiple team members providing real-time feedback and directives on the task underway. That's progress?

Really? My response is: Go away and let me concentrate and then we'll talk about the finished product.

Here's a thought in an era in which diversity is celebrated and championed: perhaps quiet, independent work is neither antiquated, nor antisocial. Maybe it's just a different way of working that is the most productive approach for some people (a sizable minority at least) who are equally valuable contributors.

Yet, even for those who feel relieved that they'll be retired by then, predictions about the workplace of 2040 make for interesting, thought-provoking reading. Clearly, real estate providers will have to adapt and respond as the Digirati, as contemplated in our Facilities Management feature, rises.

In the more immediate future, many urban dwellers can expect construction. Or, more accurately: prolonged construction. As KPMG's 2015 Global Construction Survey reveals, 90% of surveyed public sector construction projects ran over budget and/or beyond the originally allotted time – an outcome that is not so surprising for people living in a prominent Canadian city beginning with the letter "T". Our focus on Capital Projects includes an overview of the survey findings.

Also looking to the future, Gina Cody outlines the role of condition assessments in reserve fund and capital planning, while Bill Roth explains how the past can help to inform the present and future through data mining. Meanwhile, a recent B.C. Supreme Court ruling could open the way for brownfield redevelopment projects to tap into upfront remediation funds from polluters rather than waiting to recover costs after the cleanup.

Cheryl Mah profiles Vancouver's newest downtown mixed-use development, and we look at the challenges of maintaining and finding new relevant uses for heritage properties.

Barbara Carss barbc@mediaedge.ca

VOL. 30 NO. 3

JUNE 2015

Editor-in-Chief Barbara Carss barbc@mediaedge.ca Publisher Sean Foley seanf@mediaedge.ca Contributing Writers Nardia Chernawsky, Gina Cody, Tony Crossman, Kjetil Kristensen, Cheryl Mah, Marie Puybaraud, William Roth, Janice Walton Senior Designer Annette Carlucci Wong annettec@mediaedge.ca Designer Jennifer Carter jenc@mediaedge.ca Production Manager Rachel Selbie Ricca rachels@mediaedge.ca Production Coordinator Karlee Roy karleer@mediaedge.ca National Sales Sean Foley seanf@mediaedge.ca

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contents

Focus: Capital Planning, Investment & Upgrades 10 Data Mining: Many companies have a cache of engineering assessments and reports that contain untapped strategic information.

12 Construction Project Management: Findings from its 2015 global survey has KPMG concluding that project management information systems could be better deployed.

16 Endangered Landmarks: Threats to heritage buildings take various guises, but preservation typically relies on an injection of funding.

20 Condition Assessments: Professional expertise is required for a comprehensive look at building components and systems.

24 Vancouver's Telus Garden: The $750-million mixeduse development introduces the first new Class AAA space to the market since 2007.

34 Site Cleanup: B.C. Supreme court ruling could factor into remediation and redevelopment pro formas.

Articles: 19 Anti-terrorism Act, 2015: New legislation has implications for landlords 30 Future Workspaces: A vision document paints a picture of the Digirati's hive, campus and interspersed locations of productivity.

Departments 4 Editor’s note

6 June 2015 | Canadian Property Management

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capitalprojects

DATA MINING TAPS VALUE IN ENGINEERING REPORTS Understand Existing Information to Avoid Redundant Consulting Assignments

By William (Bill) Roth

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10 June 2015 | Canadian Property Management

EACH YEAR, OWNERS AND MANAGERS of real estate portfolios spend tens of millions of dollars on various engineering assessments and reports.

Whether for due diligence, financing, prepurchase, disposition or ongoing asset management and capital planning, most of these reports are immediately filed away at project close-out and rarely see the light of day again. The costs are spent to address a near-term need while ignoring the ongoing and long-term value the data can provide an organization.

As buildings continue to age, regulatory requirements get stricter, tenant/investor expectations grow ever higher and asset/ facility managers must increase their focus on maintaining and improving their existing buildings. Today’s expectations have never been higher and available capital has never had more things competing for it. Institutions

and governments will often start from scratch and undertake a portfolio-wide program of assessments, whether it be for condition, environmental, regulatory, sustainability or energy efficiency.

For private sector clients, however, it is difficult to justify such a large capital outlay in a single fiscal year. In many cases, budgets are created through a bottom-up process with staff in individual buildings creating the capital project list for their building.

Many different staff members working individually in many different locations does not provide the basis for consistent data. Simultaneously, organizations are missing opportunities for multi-building programs and bulk procurement.

How can an organization maintain the autonomy that exists for staff at each individual building, while also ensuring that

capitalprojects

engineers are sent out to a building to do a study with no background information to support their work.

Companies pay thousands of dollars for experienced engineers to inventory systems rather than applying their experience and expertise to assess condition, performance, adequacy etc. If a company could provide a team of engineers with accurate information on the building, the overall cost of the future studies would be reduced significantly.

Once organizations get a sense of the information available for their portfolio, and identify the gaps to be filled, engineering teams can proceed from there without redundantly collecting the same information.

it is identifying opportunities to allocate its capital more efficiently and effectively?

Providing all team members with consistent and defensible building data is critical.

With information gathered over many years, by many different consultants, how can an organization develop a consistent and defensible dataset without spending millions of dollars redoing what they have already done? This is the question that data mining can answer for an organization.

RESOURCE REPOSITORY Every real estate firm has a huge library of reports that it has contracted or inherited through acquisition of buildings and companies. Experience demonstrates that regardless of the nature of the data, there can be considerable value in it. The cost associated with undertaking a data mining project are relatively minor when compared

with the cost of recollecting all the portfolio data. Not to mention, the lost opportunity costs associated with improper budgeting and planning.

Let’s say that a company has paid $2 million in the last five years on engineering reports and studies. If only 10% of the data in the reports remains valid (a very conservative estimate), then the inherent value of that data is $200,000 when compared to the costs of recollecting the same information. In fact, the costs associated with mining the data would typically be considerably less than $200,000.

Leaving these reports to just sit is like having a six-figure cheque in your wallet but never cashing it.

Even if the data is out-of-date, just knowing what systems and components are within a building has tremendous value to an organization. Many times,

DATA INTEGRATION In cases where organizations are not using a Capital Asset Management System (CAMS) to support their capital planning process, the data that is mined can be integrated into a consolidated spreadsheet or database to allow for more efficient and effective analysis. These tools streamline the budget process (typically not the favourite part of a facility or property manager’s job) for the on-site staff, and provide regional or corporate leadership with an efficient way to look across their portfolio for opportunities to leverage the company’s size and buying power, thereby saving even more money.

By mandating a data standard, the company can control the data gathering process for future studies and assessments.

Telling consultants what specific data is required and the format in which it should be reported, will drive how the work is done – rather than leaving it to consultants to decide. This will also make it easier to integrate new reports into the existing database, and provide far greater value than simply adding a report to a filing cabinet or saving a PDF to a server. zz William (Bill) Roth is the Managing Partner and Founder of Roth Integrated Asset Management Strategies Ltd. (Roth IAMS) and a Partner and Founder of Facility Condition Assessment Portfolio Experts (FCAPX). For more information, see the websites at www.rothiams.com and www.fcapx.com.

Canadian Property Management | June 2015 11

capitalprojects

PROJECT OVERRUNS COMMON DESPITE CONTROLS

Contingencies Often Fail to Match Risks

KPMG’s Global Construction Survey draws on the views of more than 100 senior executives from both private and public organizations whose annual capital expenditure ranges from a few million dollars (US$) to well over $5 billion. Findings show that project owners are continually striving for a balance between power, responsibility and control. They have the power that comes from control over the budget, yet are ultimately responsible to their corporate Boards and Chief Executive Officers. They bear the responsibility for huge projects worth billions of dollars, along with the associated commercial and reputational costs of failure. Yet, project owners have to cede much of the project execution risk and control to industry-experienced engineers and contractors. The following is an excerpt.

12 June 2015 | Canadian Property Management

DESPITE SOME CONCERNS about a lack of flexibility, the traditional designbid-build approach remains one of the two most popular project delivery strategies, enabling the owner to work with various suppliers for different aspects of the project. Sharing the top spot is engineer, procure, construct (ePC), which leaves the contractor in control of design, procurement and construction, giving the owner a single point of contact from start

capitalprojects

Over the past three years, fewer than one-third of all respondents’ projects managed to come within 10% of the planned budget. to finish. Both these delivery strategies shift the project risk firmly into the hands of the contractor and suggest either a high level of trust in contractors – or a desire by construction owners to defer the risk and responsibility of project execution to contractors.

Most owners appear to have a formal ranking process for prioritizing potential projects using pre-established criteria such as operational safety, environmental, legal and regulatory factors, and overall return on investment. A substantial proportion also augments this with more ad hoc analyses. More than 80% of owners state that the majority of their capital projects are planned (i.e. are within the annual capital plan), and a similar percentage claims that planned and unplanned initiatives must go through the same rigorous approval process.

Although more than half of those taking part in the 2015 survey plan projects at least five years ahead, executives from the larger companies are more likely to have a shorter timeframe. Fifty percent of those from organizations with annual turnover greater than US$5 billion say that they only plan ahead for three or fewer years. This could reflect the need to respond quickly to changes in demand, backed by a more sophisticated forecasting capability and an internal project development and management team that can mobilize at short notice.

A strong sense of optimism pervades the responses to this year’s survey, with 64% stating that their management controls are either ‘optimized’ or ‘monitored,’ meaning that they are documented and integrated, with either real-time or periodic testing and reporting, and frequent or occasional training.

However, almost a third of respondents feel their controls are merely ‘standardized,’ with no testing or reporting to management and only limited training of staff. These organizations may need to consider how they can upgrade this approach to introduce a best practice.

SOFTWARE & REPORTING Over the past decade, owners have paid considerable attention to introducing cutting-edge software to improve their project controls. This appears to have brought positive results. When asked about the return on investment in project management tools and training, 55% indicate that they are either ‘satisfied’ or ‘mostly satisfied,’ while just a handful (13%) say they are not satisfied. It is a similar story when it comes to assessing the benefits of investment in risk management tools and project cost reduction.

The respondents also believe that the money spent on project governance and controls has paid off. More than threequarters say that they have ‘definitely’, ‘mostly’ or ‘somewhat’ reduced costs.

However, a significant minority of executives (30%) from larger organizations in the survey believe that these investments have either not resulted in lower costs, or are unsure of their benefits. It is possible that the scale and complexity of the organization, along with disparate systems, have restricted the impact of new software, which may not be fully integrated.

The optimism continues when the subject of reporting is raised. A large majority of 73% are confident about the accuracy and timeliness of the project level reports they get from their project managers and contractors. Once again, however, respondents from the bigger companies or institutions are slightly more cautious, with a third not convinced of the quality of reports, which could reflect the dearth of skilled personnel among their substantial project management workforces. Most respondents (86%) say that their capital construction projects are tracked and reported on a portfolio basis.

Project management information system (PMIS) use is still not widespread. A PMIS is designed to improve project planning, scheduling, monitoring and controlling in order to raise the quality of decision-making in each phase of the project life cycle. It enables engineers and project

Key survey findings include: • 30% of respondents say their organization uses the design-bidbuild approach and 32% favour engineer-procure-construct (ePC) • 74% complete a formal project delivery and contract strategy analysis, prior to approval • 84% utilize financial and risk analysis to screen projects • 80% say the majority of capital projects are planned • 44% struggle to attract qualified craft labour and 45% lack planners and project managers • organizations with fewer fulltime project staff spend more on capital expenditures per employee • 69% hire external resources equivalent to more than 5% of the total workforce on a per project basis • 74% feel investment in controls and governance has reduced costs • 73% are comfortable with the accuracy and timeliness of project level reports • 50% use project management information systems (PMIS); of those that don’t, 41% plan to introduce this within two years • 32% of those that use PMIS have yet to integrate it with their accounting and procurement software • 53% suffered one or more underperforming projects in the previous year. For energy and natural resources and public sector respondents the figures were 71% and 90% respectively • only 31% of all respondents’ projects came within 10% of budget in the past three years • Just 25% of projects came within 10% of their original deadlines in the past three years • 30% perform quantitative risk analysis to calculate contingencies • 49% use both a project-level contingency and a management reserve • Just 32% have a high level of trust in their contractors • 69% say poor contractor performance is the single biggest reason for project underperformance

Canadian Property Management | June 2015 13

capitalprojects managers to communicate project status swiftly and accurately with functional departments, while also keeping senior management up to speed on all the projects in the organization’s portfolio.

The respondents to this year’s survey are divided exactly 50:50 in their use of such systems, suggesting there is considerable room for improvement.

Although 41% of those without a PMIS

say that they plan to acquire one within two years, of those who have embraced PMIS, a third have yet to integrate it with their accounting and procurement software, and are consequently failing to realize the full benefits of this technology. This figure leaps to 47% among the bigger organizations where, arguably, the potential upside is even greater given the scale of their engineering and construction projects.

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ENDEMIC UNDERPERFORMANCE The significant investment in project controls – and the high levels of confidence that many owners have in these controls – have not halted the run of underperforming projects. More than half of all the respondents state that they suffered one or more underperforming projects in the previous financial year. For larger organizations, this rose to 61%, while executives from the energy and natural resources and public sectors experienced even higher levels of project failure, at 71% and 90% respectively. Looking back over the past three years, fewer than one-third of all respondents’ projects managed to come within 10% of the planned budget – with the energy and natural resources, and especially the public sector, performing considerably worse than other industries.

In the same time period, just a quarter of construction projects came within 10% of their original deadlines, and only one in ten public sector organizations managed to hit this target. Interestingly, businesses with turnover between US$1 billion and US$5 billion report the best results – 45% say they met, or were very close to meeting their budget, and 34% managed to achieve similar high standards for delivery times.

These findings suggest that, while controls may bring many benefits, they have yet to be fully and effectively embedded. The results also raise questions on the skills of those working with the various controls, either within PMIS or otherwise.

According to one of the survey participants, one of the biggest concerns is “accurate estimating of anticipated costs prior to committing to the project. Projects are moving so fast they have limited time to develop the scope and accurately estimate costs. This results in issues where the standard contingency used [10%] is not enough to cover the project risks.”

The survey findings indicate that bigger organizations (which tend to have larger and more complex projects) are more likely to take a conservative view of contingency levels. More than half of the respondents from this segment report that the typical range of contingency is greater than 10% of the total estimated cost.

Arguably, the size and scale of their project portfolios have led to a cautious attitude, tempered by past project cost overruns. zz The complete text of KPMG's Global Construction Survey 2015 can be found at http://www.kpmg. com/global/en/issuesandinsights/ articlespublications/global-construction-survey/ pages/default.aspx

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capitalprojects Abandoned Barber Paper Mill, Georgetown, Ontario

AGING DANGEROUSLY Economic and Social Trends Factor into Building Durability

By Barbara Carss HERITAGE CANADA'S annual list of endangered places is both an inventory of landmarks at risk and a commentary on social trends and economic dilemmas that undermine efforts to productively preserve significant buildings, engineering and natural features. This year's top 10, chosen through public nominations, exemplify the challenges of maintaining aging structures and/or undeveloped sites in changing times.

Threats take various guises – loss of original purpose; encroaching urbanization; regulatory compliance pressures – but preservation typically depends on finding funds to counter competing land uses and to ensure buildings can function as modern standards dictate. Almost by definition, heritage buildings are out of step with current building codes. Property owners may face hefty environmental cleanup costs, particularly to make former industrial lands suitable for commercial or residential uses, while older buildings in some regions require seismic upgrades.

16 June 2015 | Canadian Property Management

SEISMIC UPGRADES STRESS BUDGETS Vancouver's 86-year-old Point Grey Secondary School offers an example of two seemingly reasonable perspectives that nevertheless lead to fairly divergent priorities and outcomes. Heritage advocates value the building's Collegiate Gothic design, interior features that include wood-beamed ceilings, metal lanterns and coloured leaded glass windows, and the legacy of its designers, Townley & Matheson. Meanwhile, its owner, the Vancouver School Board (VSB), is entrusted with the safety of the building's occupants and is responsible for a portfolio of buildings that must meet provincial seismic mitigation standards.

As of May 2015, the government of British Columbia's website lists 125 schools throughout the province considered at high risk for structural collapse in an earthquake that have not yet been allocated funding for upgrades or replacement. Required work has been completed on 146 schools, while 68 are either under construction or have been promised financing.

Point Grey Secondary School is actually among 23 of the VSB's schools that have received provincial approval to proceed with upgrades. Yet, Heritage Canada fears that may take the form of demolition and replacement – a fate four of the city's highrisk schools have already experienced.

"Given the Vancouver School Board's handling of past seismic upgrades, along with the [provincial] seismic mitigation program's inadequate funding envelope, heritage advocates are concerned that the school board will resort to widespread demolition, even in the case of Point Grey Secondary," Heritage Canada's Endangered Places overview states. "They say that seismic upgrading costs are inflated due to years of deferred maintenance and that the VSB also claims that older schools are inadequate for today's educational needs."

A 2011 engineering audit concluded required seismic upgrades at Point Grey would cost $22.7 million; a comprehensive retrofit to address other capital deficiencies and enhance energy efficiency and other

Photos by Chris Torry

capitalprojects

asset conditions was priced at $34.6 million, while replacement was estimated at $37.8 million. This occurs in the broader context of the projected $1.1 billion cost of undertaking full upgrades in the 58 schools the engineering report assessed compared to estimated outright replacement costs of $858 million. Notably, 26 schools registered facility condition indexes greater than 0.30, meaning they are deemed to have significant deferred maintenance requiring higher capital expenditure to correct deficiencies.

Facility condition indices for Point Grey's two wings are 0.28 and 0.22. Factoring in other evaluation criteria, it is one of 19 schools to score 10 out of 10 in architectural quality/significance category. It scored 67% for educational adequacy, which assesses the amount and quality of instructional space and general indoor environmental quality, health and safety conditions and the adaptability of space and building systems. A score above than 66% is deemed generally acceptable, but, as the engineer's report explains, this category weighs more heavily in decisions to demolish than to upgrade buildings.

"Some of the VSB schools are very old and reflect design standards, pedagogical approaches and ideas about public buildings and public education that are not necessarily consistent with modern thinking about appropriate educational environments," the report from Coriolis Consulting Group states. "VSB wanted to avoid a situation in which a school building is retained and upgraded for reasons pertaining to cost or heritage, but nonetheless provides an inadequate educational environment."

OBSOLETE FACILITIES, DISINTERESTED OWNERS Ontario's 2015 candidate for most endangered place results from what Heritage Canada calls a "stakeholder impasse". A report published earlier this year indicates that the owner of the 160+-year-old Barber Paper Mill in the Greater Toronto Area (GTA) community of Halton Hills/ Georgetown has now listed the property for

sale after a decade-long failed attempt to redevelop it.

Decommissioned and vacant since 1980s, the 19th century industrial complex boasted hydroelectric power, uniquely delivered in 1888 via a long-distance transmission network from the generating station three kilometres downstream. "The complex contributes to both the history of paper milling in Canada and the pioneering use of hydroelectric power," Heritage Canada observes.

Most recently, in 2010, the property owner proposed a 65-room hotel and associated retail space for the 12-acre site – a project likened to transformation of similarly aged industrial buildings in Kitchener, Ontario and Toronto's Distillery District – but did not move forward to obtain required development approvals. This followed an earlier proposal for a 14-storey condominium tower, which local officials had rejected.

"The buildings are suffering from demolition by neglect, at risk from wildlife, weather, vandalism and arson," the Endangered Places report states. "In 2012, the municipality used its Property Standards Bylaw to force a site cleanup and have fencing secured. Partial demolition of some of the buildings was subsequently approved by the municipality."

Montreal's former MisĂŠricorde Hospital highlights the plight of obsolete health care buildings. A convent-based hospital for more than 100 years, the Quebec government took over upon the formation of the Ministry of Health and Social Services in the late 1960s. A long-term care facility, Centre hospitalier Jacques-Viger, then called the address home from 1975 to 2013.

Heritage advocates say the property is important for its cultural legacy "as a reminder of the essential role religious communities played in 19th-century Montreal life", for its architectural style and for its key location in a downtown heritage district. They fear that its current vacant state further contributes to structural deterioration.

"To date, there is no plan to adapt the facility to a new use," Heritage Canada reports. "Masonry restoration is badly needed along with the revitalization of the complex that comes with a conversion to a new use."

Religious arch i t e c t u r e f i g u r e s prominently on this year's list, with somewhat the same story for each of the three endangered candidates in Windsor, Ontario, Sackville, New Brunswick and Rustico, Prince Edward Island. The two churches and a former convent now used as a spiritual centre have suffered the onetwo punch of dwindling congregations and aging building components and systems that require capital injection.

Notably, Windsor's Our Lady of Assumption Church, which ceased operation in November 2014, needs an estimated $10 to $15 million investment for essential structural, electrical, mechanical and life safety repairs and upgrades. A demolition permit was issued in March 2015 for the former Sackville United Church, which had already been closed and sold to a private developer in 2013. The new owner has been instructed to salvage significant elements, including a set of stained glass windows, as a condition of the permit.

INFRASTRUCTURE & LAND FORMS Heritage Canada's remaining four endangered places include two deteriorating bridges and two natural sites. In British Columbia, the proposed Site C dam and generating station would flood approximately 31,000 acres of agricultural land and 25,000 acres of forested land in the Peace River Valley.

This currently accommodates more than 60 family farms, 78 First Nations heritage sites, 27 built heritage sites and four paleontological sites.

Ottawa's Central Experimental Farm represents a much smaller area, but is emblematic of development pressure on urban green spaces. Plans to sever and lease a 60-acre parcel to the neighbouring Ottawa Hospital will reduce the venerable agricultural research facility's crop lands by nearly 20%. zz The Top Ten list of Endangered Places can be found on Heritage Canada's web site at https:// www.heritagecanada.org/en/issues-campaigns/ top-ten-endangered Canadian Property Management | June 2015 17

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Landlords' Cooperation and Confidentiality would be Compulsory

By Barbara Carss

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CANADA'S NEWLY ADOPTED Department material states. "With its facilitate whatever the warrant authorizes – Anti-terrorism Act, 2015 (Bill C-51) has new mandate, CSIS could take measures, usually entry into a residential unit or access implications for landlords. It gives the at home and abroad, to disrupt threats to digital video recordings. In a condo, Canadian Security Intelligence Service when it had reasonable grounds to usually it would require a unit owner to (CSIS) powers of physical entry and believe that there was a threat to the allow access to the building and a rented tahta th retthat yro elypo m lpemde nd ansatnsetn ilcesolely i,lscr,esnrthe e wnowrousecurity oru yowyow hofo SCanada." hS search were previously suite, if the unit is a rental. If the purpose is hpurview tiw htidwradof dra nd a n tsapolice, tseth se gh ihalong ge ihhe th owith to fle t the sflreusoru yodyAny lodhlousuch hou yoactions y the would first require to gain access to an owner-occupied suite, o.n ita on itin a gn isgeid seId MIO MBpresent OaB a a written application and then a property manager or the condo authority to compel others to.nassist CSIS to those tasks. affidavit to a judge and receive a warrant. corporation could be required to provide a The pertinent section of the legislation, Through that process, other participants key, although sometimes the police just 21.1 (3), gives authorization to: could be unwittingly tagged for bash the door in."

• enter any place or open or obtain mandatory cooperation, as Section 22.3 In contrast, the Anti-terrorism Act access to any thing: (1) of the legislation states: "A judge includes confidentiality options that • search for, remove or return, or may order any person to provide support more covert tactics. A warrant examine, take extracts from or make assistance if the person's assistance may can stipulate that the identity of those copies of or record in any other reasonably be considered to be required providing assistance remains secret manner the information, record, to give effect to a warrant..." and that "any other information document or thing: Property owners/managers would concerning the provision of the • install, mm ocmaintain o.a c.daadnor aanremove caim cim oany bo.w bthing; .ww wmost likely be called on to enable assistance" remains secret. or access to a residential or Thus, in the scenario of a rental unit in 193193that -91-2is182 -8-8888-81-1physical • do any other9thing reasonably commercial unit, whereas IT experts a condominium, the condo corporation necessary to take those measures. speculate access to telecommunications, or property manager would not be The Act is aligned with the federal such as phone or internet intercepts, informed that CSIS had gained access to government's stated goals to thwart would be obtained via the service a unit with the owner's cooperation. propaganda, recruitment and/or attacks provider rather than at the point of Perhaps more precariously, there could that advance terrorist causes. For CSIS, presence (PoP) in a building. Logistically, be legal ramifications for any landlord or that translates into a broader mandate such requirements don't necessarily property manager who deliberately or than its previous legislated advisory role. differ greatly from landlords' customary inadvertently broke the imposed A Jan. 30 release from the Department dealings with police, except CSIS would confidentiality. of Justicefleexplains "install" or "That's yllaynlloain ssodefinitely eisfsoerP fow rPorwGoarGpossibility," slaistn laeitdneerflexibility dCerC uorYuodYliudto BliuB sfrleusorYuohYsthat iu hg sinuthe ig tsniD inew tsiD powers be afforded would reallow CSIS to actively intervene "maintain" that the police do not have.

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Hoffer, the .lev.elel vtxeel ntxeCSIS h nt eoht tsoste unbisruie bhrtiehtto f .rgonfikglaw onoikl oein or’luemid-June. ory’unooyitnaociutadcezz ude .noi.tnisoin oitpisresidential rouporyunoiyenviitectenancy veiftfceeffe law "Currently, issnsiselimited and specialist Act.rointo collecting and analyzing information and with Cohen Highley LLP. "A judge i n t e l l i g e n c e , a n d a d v i s i n g t h e could order a rental landlord, a unit owner The preceding article is reprinted from the Government of Canada," the Justice or the condo's property manager to REMI Network. See www.REMInetwork.com.

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Canadian Property Management | June 2015 19

capitalprojects

MAPPING FUTURE EXPENDITURES Building Condition Assessments Identify Likelihoods and Contingency Costs

By Gina Cody

20 June 2015 | Canadian Property Management

capitalprojects

BUILDING CONDITION assessments are carried out for a number of reasons associated with reserve funding, financing, repair maintenance, safety, energy conservation and accessibility by handicapped people. They can be broadly grouped into seven categories: • Building condition assessment to identify future (reserve) funding requirements • Building condition assessment for due diligence, insurance, mortgage or vendor purposes • Evaluation of the “as built” condition of a new building • Evaluation of fire safety systems • Energy consumption audit • Evaluation of the condition of a building, or part of a building, in need of repair or renovation • Evaluation of accessibility for handicapped people A comprehensive building assessment should include the structure, building envelope, mechanical equipment, electrical systems, interior finishes, life safety, elevators, pavements and

function in terms of accessibility by handicapped people. With private rental or non-profit housing buildings, the appliances and in-suite components of the building must also be included.

A reserve fund is money earmarked for major repairs and total replacement of the various building components: the roof, windows, doors, exterior cladding (brick veneer, precast concrete, metal siding and panelized systems), sewers, heating and cooling systems, fire safety systems, electrical and mechanical systems, paving, landscaping and parking facilities.

The amount of money required for this is identified in a reserve fund study, which provides a realistic assessment of the funds required, from time to time, to meet the major repair and replacement costs that will arise in the future.

DETERMINING NEEDS The level of effort expended on a building condition assessment should reflect the expectations and

requirements of the client. Each component of the building requires special attention and should be reviewed by a professional trained and experienced in the required field.

Ideally, a number of professionals should be involved, each with the specialized experience to ensure that all aspects of the condition assessment are properly addressed.

For example, the Ontario Fire Code makes the upgrading of the fire safety systems in older buildings m a n d a t o r y. T h e r e q u i r e m e n t s detailed in the Ontario Regulation 627/92, Fire Code, governs the work with the level of enforcement and upgrades varying between different municipalities. For buildings with CFC chillers, new accelerated legislation affects how to set aside appropriate funds more than the age or condition of the equipment.

Prior to an inspection, the following preliminary work is normally undertaken: • Design Document Review of the building's engineering and architectural drawings

MATERIAL CHOICES: CAULKING TALK When selecting a material like caulking, a good past experience with a particular material under similar service conditions is the best guide. The material should fulfill required performance for adhesion, elongation and flexibility with both the joint design and the substrate being taken into account.

Caulking materials must be applied to clean dry surfaces within the correct temperature range for the particular material being used. Its sensitivity to moisture is also important since both masonry and concrete are porous, meaning that the surface to which the caulking material is adhering will periodically become damp.

Replacement of caulking involves removal of the existing material, cleaning the surfaces to which the new material will adhere and then installing a new bead with

the correct cross-sectional shape and with a bond breaker at the back.

The shape of the bead of caulking material is important to its successful performance in its service environment.

The bead should be concave on both the outside and inside surfaces, have a widthto-depth ratio of approximately 2 and its sides should be fully adhered to the sides of the joint.

The depth of the caulking bead can be increased in relation to its width in joints that are expected to undergo only small changes in width. Fillet beads at re-entrant corners, such as between window frames and brickwork, will likely be subjected to significant movement and should be convex and have the bond broken in the corner to avoid a concentration of stress at the corner that could result in premature failure.

Bubbles of air trapped in the caulking bead create weaknesses that often cause localized splitting failure.

Caulking beads split and fail due to inadequate cohesion of the bead, and separation from the substrate material due to loss of adhesion.

Caulking material is sometimes left in place and a thin bead applied over the top. This procedure will not result in a durable repair since the split in the underlying caulking, or the crack where it has separated from the stresses in the thin overlying bead can initiate early failure of the new material at the same location. The localized installation of an overlay bead at failure locations will, however, buy time and maintain water tightness until a general replacement program is undertaken.

Canadian Property Management | June 2015 21

capitalprojects

• Post-Occupancy Document Review of all available previous inspection reports, together with any complaints made by the occupants of the units. A review of the maintenance records and energy and water consumption records can also provide additional information which could assist in the investigation.

• Interviews with the building manager and occupants often provide useful information.

The inspection should be carried out taking into account all physical operating and functional requirements and should be designed to identify the condition of each building component establishing regulatory compliance with the Ontario Building Code, Ontario Hydro Electric Code and Ontario Fire code or identifying items of non-conformance.

The information obtained during the Building Condition Assessment is then used in the Reserve Fund Study.

CALCULATING RESERVES Components with a predictable service life, such as roofs and caulking, require funds to be reserved for both future repairs and eventful replacement. The timing of these events can normally be predicted with reasonable accuracy.

While it is generally not necessary to reserve funds for the full replacement cost of those components that should not deteriorate significantly during design service life of the building – foundations, interior walls and floor slabs – for example, it would be overly optimistic to anticipate that they will never require repair. Such an event must be allowed for in the reserve fund as a contingency cost, which is normally taken as an arbitrary percentage of replacement cost.

After capital costs and life expectancies, interest and inflation rates are the most critical factors in preparing cash flow projections and

determining initial contributions.

These cannot be accurately determined in advance, which complicates realistic projections over a 20 to 50 year period.

What does remain constant is the effect of interest and inflation rates on a reserve fund and its allocations.

Interest rates affect the money held in reserve and inflation rates affect replacement costs. Traditionally, the interest rate is approximately twice the inflation rate and this ratio should be reflected in the reserve fund study projection. Also, important is the spread between the two. zz

Dr. Gina Cody is principal with CCI Group, a multi-disciplinary engineering firm with offices in the Greater Toronto Area, Montreal, Calgary and Vancouver.

For more information, see the website at www.ccigroupinc.ca.

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capitalprojects

TELUS GARDEN ANCHORS URBAN REGENERATION Vancouver's Newest Office Space in Vibrant Mixed-use Development

By Cheryl Mah

IN A CITY KNOWN for innovative and sustainable buildings, Telus Garden in Vancouver is pushing that reputation to a whole new level. The $750-million mixed-use development is transforming an entire downtown block into a vibrant hub of commercial, residential, retail and public space. With its modern design, cutting-edge sustainability and technology, the project promises to set new benchmarks.

Located on Georgia, Richards, Robson and Seymour Streets, the one-millionsquare-foot development is comprised of a 22-storey office tower and a 47-storey residential tower. It will create 500,000 square feet of much needed Class AAA office space as the first major office space to be built in downtown Vancouver since 2007. Communications giant Telus will occupy nine floors for its new national headquarters.

Designed by Henriquez Partners Architects and developed by Westbank Projects, Telus Garden will not only have distinctive architectural features but will also boast one of the most environmentally sensitive designs.

“From the start, both Telus and Westbank wanted the building to be the most sustainable and technologically advanced office building in Canada, if not the world,” says Peter Wood, the director of architecture at HPA. “We 24 June 2015 | Canadian Property Management

wanted to be different than other office buildings, and to have those differences be recognized as sustainable strategies by the public. The building itself becoming the message of the corporation’s commitment to a better work environment and a better world.”

Wood cites the facades on the office tower as a good example of how that commitment to the environment is being visibly expressed. Each facade has been designed to optimize its orientation: the south elevation has deep aluminum horizontal sun shades; the east and west have vertical glass sunshades; and the north has floor to ceiling glass to capture the views.

The development has ambitious sustainability goals with the office tower being built to LEED Platinum while the residential tower is targeting LEED Gold standard.

“This is one of the most aggressive developments in Vancouver in terms of size and aspirations,” says Westbank project manager Rhiannon Mabberley.

“The office tower will be first tower in Canada to be certified LEED platinum under 2009 standards. It has the most aggressive sustainability features of any building today in Canada.”

Nature was also a key inspiration for the building design which includes gardens and water features.

“Unusual for a commercial building we have made all the roofs accessible to the tenants with terraces, trees and gardens,” says Wood. “This idea carries into the sky gardens as communal spaces for people to meet and socialize. The lobby itself will have a forest of trees, a koi pond and a three-storey waterfall – all enclosed by low-iron structural glass that blurs the distinction between inside and out.”

DISTINCTIVE ARCHITECTURAL ELEMENTS One of the more distinctive architectural elements on the office tower is two fourstorey structural steel cantilevered “sky gardens.” Comprised of exposed monumental 60-foot-deep steel trusses, the sky gardens are suspended over both Richards and Seymour Streets. The cantilevers were the result of a dramatic reduction in the allowable height of the building to maintain a View Cone (city policy to control the height of downtown buildings to maintain distant views of mountains and water bodies).

“We surmised that if the tower could not have a presence in the skyline by building up, it would have a presence on the street by building out,” Wood explains.

Another condition that affected the development was the fact that the office site was split by an existing lane.

Photos courtesy of Henriquez Partners Architects

capitalprojects

“Although we closed the lane to traffic, it still needed to be open for service and emergency vehicles so that’s why there’s a four storey bridge element that spans over the lane connecting both sides from Richards to Seymour. It continues as cantilevered elements over both streets,” he says.

A dramatic 250-foot clear span steel and glulam canopy arch defines the public plaza and pavilion along Georgia Street. More than 100,000 pounds of steel was used in the canopy along with 54 custom curved glulam arch beams, which were topped with curved glazing from Spain installed by Echo Glass.

The canopy presented a number of structural challenges due to the complexity of its geometry as well as the varied materials used, according to structural engineer Anthony El-Araj and project manager at Glotman Simpson Consulting Engineers.

“The feature canopy was particularly challenging – a unique and complex design that required intensive collaboration with the ownership, architect, consultants, contractor and trades during the all stages of design, fabrication and installation,” he says.

All the steel was fabricated by George Third & Son (GTS) over the past two years, and installed on site by partners KWH Constructors. Challenges included

erection sequencing and dealing with large cantilevers.

“The complex geometry of the pavilion canopy made the fabrication and installation a real feat of teamwork and dynamic coordination that most steel fabricators would shy away from. The canopy which is a hybrid steel and timber structure will make the Telus

the residential units without compromising the function of the spaces.

SUSTAINABILITY & ENERGY EFFICIENCY To achieve the project’s high standards for environmental sustainability, Integral Group (providing mechanical and electrical engineering design services) incorporated the latest technology and

“For the ownership group, there was really a desire to create something that exceeded expectations.”

Garden a signature structure in Vancouver,” says Rob Third, president of GTS, adding the structural steel for the rest of the building was 2 million pounds (of 90% recycled steel).

On Richards and Robson streets, the residential tower’s east facade also features a unique design. Above a retail podium, the tower has three distinct offset blocks – offset north and south about 20 feet at one-third points up the tower. Structurally the offset was achieved through two level transfer walls, which were located to fit within

sustainable features which will make the project a model of high energy efficiency.

Green features include an innovative district energy system (DES) with a central plant linking both towers, heat recovery from the data centre (in the existing Telus facility), radiant heating and cooling, demand-driven ventilation and LED lighting. The Telus Garden project is expected to be 35% more energy efficient than the relevant ASHRAE base case.

The data centre generates and rejects large volumes of heat into the air so the Canadian Property Management | June 2015 25

capitalprojects decision was made to capture that waste heat. The waste heat is transferred to the central plant where it is used to provide 80% of the heating and cooling and domestic water requirements for the complex. Provisions have also been made to install a future geo-exchange system.

Many different areas were examined to see what could be achieved. The final design includes a rooftop solar collection, solar shades, high performance tripleglazed curtain walls (office) and 10,000 square feet of green roofs.

“We are most proud of the PV arrays on the top of the building,” notes Wood.

“They exist pragmatically to offset all our architectural lighting at night, but from the street they majestically float above the building as this wonderful halo-like element.”

The office tower has a long list of other items to help achieve the LEED Platinum designation including rainwater harvesting, energy efficient LED lighting and advanced lighting controls.

“This is the first building in Canada to encompass a standard base building light fixture that is LED,” says Mabberley.

EFFICIENT SCHEDULE General contractor ICON Pacific Construction (construction division of Westbank) broke ground in 2012 and completion of the office tower was scheduled for May 2015. The residential tower will begin a phased occupancy toward the end of December 2015.

Amenities at the complex include a dog park, 17,000-square-foot fitness centre with a 25-metre outdoor pool, restaurant and retail space. Tenants and residents will enjoy state-of-the-art communications technology. “The buildings are wired for the fastest Internet in Canada,” says Mabberley.

Challenges on a project of this size were many, but Mabberley says, in the end, they were overcome with teamwork, perseverance and considerable amount of coordination between the various trades.

“For the ownership group, there was really a desire to create something that exceeded expectations. Coming out of it three years later we really feel that’s something we’ve achieved,” she says.

When completed, the development will not only be a showcase of innovative design and construction techniques, it will also help to achieve significant urban repair of an important city block.

“From an urban design perspective, it repairs a block which consisted of t w o l a rg e p a r k a d e s a n d w a s a significant void in the urban fabric,” says Wood. “The block is an important transition from residential to the south to office/residential to the north. It also starts to pull new development east along Georgia towards a future new cultural district.” zz Cheryl Mah is Managing Editor of Construction Business. The preceding article is reprinted from the REMI network.

See www.REMInetwork.com.

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Real Estate Industry Leaders Pick Up Their Sticks to Conquer Cancer Since 2011 the real estate industry has played a critical role in the fight against cancer. Industry leaders and their organizations have generously donated their time, energy and much needed funds to Road Hockey to Conquer Cancer – the world’s largest road hockey fundraising event. The event – which benefits the Princess Margaret Cancer Centre – is heading into its fifth year anniversary and is aiming to break two (2) world records. The event has raised over $11.0M across Canada since 2011 and seeks to exceed $2.5M raised in Toronto in 2015.

Please consider joining these team captains and their companies on SATURDAY SEPTEMBER 26TH at Woodbine Race Track to stick it to cancer once & for all!

THE

C D HO ROA

KEY

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CA

ASS

F IT IN

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For more information, please contact the Road Hockey to Conquer Cancer office at 1-877-541-4646 or speak to Chuck Nervick at 416-512-8186 ext. 227.

Game On Cancer.

TIM DONALD

SCOTT HARPER

PATRICK LANGDON

CHUCK NERVICK

Manager of Development , Oxford Properties Group

Associate Vice President, CBRE

Vice President, NKF Devencore

Senior Vice President, MediaEdge

The industry veteran is not unfamiliar with stickhandling, having spent 8 years in the real estate world with Oxford Properties Group. Inspired by watching Canada win the World Junior Championship at the ACC with his brother, Tim was quick to register with Road Hockey to Conquer Cancer, and since 2011, has seen OXFORD raise over $80,000 across their teams. Why does Tim play? For his dad, uncle and grandmother, and is very proud to see Oxford’s participation in Road Hockey to Conquer Cancer grow from just a handful of players to two full teams.

Scott Harper has achieved a lot of goals through his 20 years with CBRE Limited, but also takes great pride in seeing CBRE raise $50,000 since 2011. Why does Scott participate in Road Hockey to Conquer Cancer? Because he saw his mother lose her fight to cancer in 2008. There is great vengeance in Scott’s game. As a kid of 10, Scott and his teammates were beaten badly by the Neapean Raiders in his first outof-town tournament, but finally earned their revenge when they won the tournament 7 years later.

After 20 years in the industry, Patrick Langdon scored his position at Devencore NKF 4 years ago. There are few regrets in his life…other than the Maple Leafs’ dramatic loss to Los Angeles in the 1993 Conference Final. Why does Patrick play in Road Hockey to Conquer Cancer?

For his Mom, Dad and a sister who were lost to the disease and for a sister currently battling cancer. Patrick loved playing in the 2014 event despite a broken toe, but realized that if his loved ones can deal with cancer treatment, he could put up with his pain. Patrick Langdon and NKF Devencore have proudly raised over $25,000 in Road Hockey to Conquer Cancer since 2013.

Chuck Nervick has been involved in the Canadian real estate industry since 1992. His firm, MediaEdge Communications, proudly produces many different print and digital media properties including Canadian Property Management, “Canada’s Premier Magazine for Building Owners, Asset and Property Managers.” This is the first year Chuck has served as an Honorary Chair for the annual Road Hockey to Conquer Cancer event, however, he will play a crucial role in further growing & developing the REAL ESTATE CHALLENGE.

Since 2011 Road Hockey to Conquer Cancer has been generously supported by the following industry leading organizations:

In 2015, join the Real Estate Industry Challenge and let’s do our part to break TWO world records & conquer cancer – GAME ON! For more information please visit: www.TeamUpToConquerCancer.ca or contact Chuck at 416-512-8186 x227 or chuckn@mediaedge.ca All organizations that register a team for the 2015 RHCC event will be profiled in the November 2015 issue of Canadian Property Management magazine. We encourage you to be part of this year’s Real Estate Industry Challenge - Please register your team today! Contact Chuck Nervick with any questions at: chuckn@mediaedge.ca / 416-512-8186 x 227.

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THE JETSONS MEET THE DIGIRATI Visions of the Workplace in 2040 Looking to the workplace 25 years hence, futurists, academics and real estate strategists foresee the domain of the so-called Digirati, an emergent, soon-to-predominate class of workspace consumers who are anchored to technology rather than a precise physical location. Johnson Controls Global WorkPlace Solutions (GWS) consulted with a wide range of industry experts and convened workshops in the United States, Europe and Asia-Pacific to explore future trends and envision how they will translate into the workplace. The recently released Smart WorkPlace 2040 whitepaper is the result. The following is an excerpt – Editor.

By Marie Puybaraud and Kjetil Kristensen @Warp workspace @Warp workspace

@Coworking @Coworking

@Faraday Bistro @Faraday Bistro

@Hive @Hive

@pHive @pHive

@Eco Workplace @Eco Workplac

@Smart Workspace @Smart Workspace Image courtesy of Johnson Controls Global WorkPlace Solutions

30 June 2015 | Canadian Property Management

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facilitiesmanagement A VISION OF 2040: The presence of technology infiltrates every aspect of life. The workplace of 2040 is far more agile; the presence of technology is ultra-predominant and human beings are highly reliant on it. Yet the technology is shy – not intrusive, transparent and highly reliable. Failure is neither a possibility nor an option.

The home (also known as the hive) is hyper-connected and adaptive, responsive to the environment and its users, supporting multiple requirements simultaneously. Complex software applications will suggest to users what they should do to maximize performance, not miss any important deadlines, and make sure they allocate enough time for important tasks that are not necessarily urgent.

In an ubiquitously networked world, true offline time is both a luxury and a necessity. Being physically present is perceived as more authentic – a privilege. Meanwhile, adaptive white noise technology makes it possible to have a first rate telepresence session in an open environment.

Through the DIY movement, people are literally building their own products, bought through their smartphones using mobile web applications, and printed on demand. Lower costs of energy and unmanned vehicles in combination with high costs of individuals owning a vehicle, plus high parking costs in densely populated megacities, benefits new sharing regimes.

The EcoCampus will provide the context for the new world of work, with the following parameters: Choice: deciding where and how to work Adaptability: adapting working patterns to meet private needs and family constraints Work: entrepreneurship is the norm Location: deciding who to work with and how Workplace: access to “Trophy Workplaces” so going to the “office” is a luxury, a reward Services: offering real-time services, catering to peak demands Wellness: privileging wellness over work Network: reliance on an extremely wide network of experts to carry out work A RANGE OF WORKSPACES Going to “work” is therefore accessible through a complex model of locations, spread across an Eco Campus, accessible less than 20 miles away from home: @HIVE: (Meet you there) - The new labour force loves waking up

highly networked, campus-based network. More like a co-working environment than a workplace, the Eco Campus is the place rather than a space where colleagues meet and collaborate at least once per week. Located in the main urban hub, it attracts entrepreneurs and specialists from all horizons. @FARADAY: The “Faraday Bistro” (Relax with others there)

- A place to escape from the business and production-oriented environments normal workplaces offer. The intensive knowledge-based economy of 2040 is exhausting, draining energy faster than ever before. AI solutions allows Digiratis to transfer some load to software-based Personal Assistant, but it feels great to escape the buzz of 2040 life in a Faraday Bistro. @WARP WORKSPACE: Public Transport (Get you there) While transport used to be exhausting, sometimes unsafe and overcrowded, in 2040 it is the opposite, Public transports are pleasant environments, extremely secure and a place to spend the minimum of time to go from A to B.

All organizations will need to adapt to the changing demands, aspirations and expectations of end users. Facilities management and corporate real estate will be pressed to: • Adapt service delivery to fit, proactively and in real time, the increasingly complex requirements of the end users – Digiratis

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at home and not having to cope with extensive travel like workers of the past. Travel is a luxury in 2040! The focus on health & wellness has been a major shift for society and a focus on exclusive locally based services and solutions is now the norm.

@pHIVE: Personal Hive (Take you there) - The notion of lost

time is a thing of the past. In 2040, smart technology services enable high-performance workflow throughout the day and continued productivity across different contexts and situations, implying that being performance-driven is a choice, not an imperative. The good thing is that it is all up to you. The bad thing is that it is all up to you.

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Canadian Property Management | June 2015 31

facilitiesmanagement • Redefine real estate models to meet the

demand of end users wherever they are and at any given time of the day • Redesign working environments – single facilities, shared facilities, local amenities, service delivery, support services – to meet increasing real-time user demands • Digitize service delivery for simplicity and provide human-centric support services to enhance the performance of end users.

EXPECTATIONS & OUTCOMES It is all about choice by 2040. Expectations will dictate offers and demands of service providers. The rise of the service economy will create a real-time economy, constantly adapting to the expectations of users and customers in search of multiple, more extravagant experiences on a daily basis.

The workplace will need to reflect more adaptability in the way it is designed to support more mobility and collaboration. The research suggests that many companies do not currently support collaborative working when compared to office workers’ expectations for: more time working in team spaces that have in-built collaborative technologies; an increased use of video

conferencing; more use of dedicated collaboration rooms; and far less time spent at their desks or in traditional meeting rooms.

In turn, the workforce will need to embrace a dynamic entrepreneurial culture to respond to and move with the market. A major key to the survival of organizations is how dynamic their human resources will be – following their markets and their customers in rapidly changing industries, while asking developing economies to ride a rising demographic tide (a potential shortage of about 38 to 40 million highly skilled workers by 2030 according to McKinsey).

Collaborative working environments must grow with the increasing demand for engagement at all levels of the organizations in a dispersed market. A study by the Massachusetts Institute of Technology into creating high-performance teams found that best performing and most creative teams “sought fresh perspectives constantly, from all other groups in (and some outside) the organization”. Global companies must become places that allow pockets of extended entrepreneurship to flourish by introducing incubator like workplaces.

Workplace infrastructure must support extensive collaborative tasks and high levels

of interaction through technologies.

Increasing use of technology and the drive to productivity have raised demand for highskill workers. According to the HBR, they greatly amplify abilities to interact simultaneously with large number of people. Organizations that are not implementing a powerful technology platform will not survive in the future.

“Open tunnels of collaboration” created between and amongst competitive businesses could become a powerful innovation platform for organizations.

The networked workforce will be essential in the future to ensure market positioning and growth in competitive markets. A stronger reliance on the network will ensure continuous growth of organisations in new markets while maintaining strong positioning in existing ones, and enlisting social technology users to crowdsource product ideas and co-create new features. zz The complete text of Smart Workplace 2040 can be found at www.johnsoncontrols. com/content/us/en/products/ globalworkplacesolutions/gwi.html

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32 June 2015 | Canadian Property Management

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POLLUTERS TO PAY IN ADVANCE OF CLEANUP B.C. Court Awards Costs Prior to Remediation Work

By Tony Crossman, Janice Walton and Nardia Chernawsky THE RECENT DECISION of the British Columbia Supreme Court in Dolinsky v. Wingfield may allow those who have to clean up contamination on their lands to obtain those costs from the responsible parties before actually doing the work. This approach under B.C.'s Environment Management Act (EMA) is different from previous decisions and practice, where money had to be spent first and then recovered from those responsible. Given the significant costs often associated with remediation, this could provide a better option for those facing cleanup and its costs, but could also place an earlier potential burden on those facing these lawsuits.

Gina Dolinsky found oil contamination at her house and after protracted investigations, environmental consultants identified the source as an old, underground oil tank located on her neighbour’s property. Some of the contamination was remediated, but more was required, which the consultant prepared a plan for, together with the estimated costs and a 50% contingency.

Ms. Dolinsky did not complete the remaining work, but rather commenced a legal action against those responsible to recover the money already spent, along with the estimated costs to complete the remediation.

Regulatory and governance updates at

34 June 2015 | Canadian Property Management

COURT AWARDS FUTURE COSTS The EMA casts a broad net on those considered responsible to remediate contamination and includes those who have an interest in, or control over, the lands. In this case, it also included a person who was not the registered owner, but who was shown to have controlled contractors on the property.

The EMA allows a person who has incurred remediation costs to recover those “reasonably incurred costs” from responsible persons. In the past, courts have interpreted the cost recovery provisions as requiring that the remediation costs be incurred first, before a court can make an order. In this case though, the Court said that the EMA only requires “some costs of remediation” to be incurred before an award can be made for future costs.

Given that the consultant had set out the scope of the remaining remediation with a cost estimate, the Court ordered those responsible to pay to Ms. Dolinsky the estimated future remediation costs, including the contingency. The Court based its decision on the wording in the EMA that those responsible are to indemnify for remediation costs.

The Court ordered the estimated costs to be paid in advance and held in trust by Ms. Dolinsky’s lawyer on her undertaking not to release the funds except upon proof that the costs were actually incurred and subject to an analysis that they were reasonable.

Any money not spent was to be returned to the responsible persons. The Court said that this approach was preferable to awarding a specific amount at the time of trial, which could result in a windfall for either of the parties, depending on what the actual cost was.

The Court said that if the property was remediated by an appropriately qualified environmental remediation specialist in accordance with the usual standards, the remediation costs would generally be assumed to be reasonable.

IMPLICATIONS This Court’s approach will likely encourage those who have incurred some remediation costs, which includes any investigation and consultant costs, to seek an order from the courts for the full cost of remediation, without first incurring all of those costs. For those who are the victims of contamination, this may alleviate some of the significant financial burden in carrying out remediation. But for those who are responsible persons under the EMA, it means that there may be a more aggressive pursuit of legal actions to fund the remediation.

As a practical matter, this means that those who seek such court orders will require an appropriately qualified specialist to investigate and delineate the contamination and to prepare a remediation plan with a defensible cost estimate. Those receiving such an order will want to have their own specialists review and critique any remediation plan and estimate and monitor the remediation and review the costs incurred to ensure that they are all reasonable and recoverable. zz Tony Crossman, Janice Walton and Nardia Chernawsky are lawyers based in Vancouver with Blake, Cassels & Graydon LLP's Environmental Law Group. The preceding article is reprinted from the Blakes Environmental Law Bulletin. For more information, see the website at www.blakes.com.

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