GTA Spring 2024

TRANSITION TACTICS CAPITALIZING ON CAPITAL REPLACEMENT

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CONTENTS

10

COVER STORY IN THIS ISSUE

04

TIMED FOR SUCCESS

Building electrification syncs with capital replacement schedules

16

OEB RULING RAISES IRE

Ontario government moves to exert more sway over energy regulator’s decisions

10

20

TAXING DEBATE AHEAD

Decision on commercial parking surcharge deferred until 2025 budget discussions

RESTORING THE STARS

Outdoor lighting principles respect the dark side

16

12

UNEVEN INCENTIVE

Ontario opens up property tax relief mechanism for new purpose-built rental housing

22

PLODDING TO PARITY

Women increasingly welcomed on boards, less so in C-suites

“IF THERE IS GOING TO BE AN INCENTIVE FOR BUILDING NEW MULTI-RES, WE SHOULD DO IT DIFFERENTLY SO THAT IT DOESN’T FLOW DOWNSTREAM TO INCREASE THE EFFECTIVE TAX BURDEN FOR THE SECTOR.”

– DAVID GIBSON, MANAGING DIRECTOR, YEOMAN & COMPANY

TIMED FOR SUCESS

Building electrification syncs with capital replacement schedules

BY BARBARA CARSS

Early examples of large scale building electrification projects plot out a learning curve with some rewarding discoveries along the way. Notably, there are cost savings to be reaped when efficient new technologies enable the downsizing of HVAC systems from original specifications. That can further bolster the business case if the building’s existing electrical capacity can then handle the added heating load without need for expansion.

However, project proponents stress that the numbers will crunch most effectively when switchovers are synced with the end-of-life of existing mechanical equipment and/or asset repositioning plans. Sharing their experiences during a December webinar sponsored by the Collective for Advancement of Connected Buildings (an offshoot of the Proptech Collective), they sketched out both project details and the broader decarbonization mandates of their corporate employers or government clients.

“Our philosophy is that every time you have the opportunity to touch a system, if you’re spending money on it, replacing it or upgrading it, that is the best time to align it with a net-zero roadmap,” advised Lee Hodgkinson, head of sustainability and technical services with Dream Unlimited, which is targeting net-zero greenhouse gas (GHG) emissions in its portfolio by 2035.

NET-ZERO MAKEOVERS

One such example is 67 Richmond Street West, an 80-year-old, 50,000-square-foot mid-rise that Dream asset managers envision as a “net-zero-ready luxury boutique office building” in downtown Toronto. The inprogress transformation includes: a new variable refrigerant flow (VRF) heat pump system for heating and cooling; an energy recovery ventilator (ERV) for ventilation and managing outdoor air intake; and building envelope upgrades that underpin a 10% reduction in HVAC system size.

Collectively, retrofit measures are calculated to deliver a 61-tonne annual reduction in emissions, representing a 55% cut to the building’s previous tally, along with a 30% reduction in energy use.

“OUR PHILOSOPHY IS THAT EVERY TIME YOU HAVE THE OPPORTUNITY TO TOUCH A SYSTEM, IF YOU’RE SPENDING MONEY ON IT, REPLACING IT OR UPGRADING IT, THAT IS THE BEST TIME TO ALIGN IT WITH A NET-ZERO ROADMAP.”

Similarly, co-presenter, Joe Brown, vice president, building technology, and decarbonization lead with KingSett Capital is tasked with executing his company’s goal for a 67% reduction in GHG emissions by 2035. He underscored that the recent $65-million overhaul at Toronto’s venerable Royal York Hotel — which has merited CAGBC zero carbon certification for the 94-year-old facility — entailed about $55 million worth of upgrades that would have been required anyway.

“The additional $10 million to go zerocarbon was a very small uptick,” Brown said. “All these projects that we’ve done have really been driven by end-of-life mechanical equipment. Then you can come up with a longterm plan and the numbers start to make a lot more sense.”

In this case, the hotel was opportunely located to adopt deep lake water cooling (DLWC) with connections already in place to the district energy provider’s (Enwave) pipe. DLWC has supplanted three 800-ton chillers, cutting the building’s electrical load.

Water pulled from the return side of the heat exchange also supplies the energy source for the heat pumps that provide domestic hot water and space heating. Project commissioning was still in progress as of the mid-December presentation, but it’s expected to deliver a 7,700-tonne annual reduction in emissions.

TORONTO CLIMATE PERKS

Both the Royal York and 67 Richmond previously

relied on steam from Enwave’s district energy system for heating, and the building owners will continue to keep it as a backup option. In contrast, another KingSett project at 100 Yonge Street in Toronto, is now solely reliant on VRF air-source heat pumps that do not function in temperatures below -30 degrees Celsius. Since the initial start-up in November 2022, temperatures have dropped as low as -20 C on just one day, in February 2023.

“We have the capability of adding electric boilers; we just haven’t seen the need yet,” Brown observed. “They [heat pumps] cut out at -30 real temperature, but Toronto rarely, if ever, sees that temperature.”

Also related to Toronto’s climate, buildings are typically equipped for summertime peak demand, giving them surplus electrical capacity for their needs in colder months. This already provides manoeuvrability to take on an electric heating load, which can be stretched even further with other efficiencies a retrofit can introduce. When replacing end-of-life boilers and chillers at 100 Yonge Street, for example, decision-makers drew on historic consumption data to justify a 30% reduction in system size.

“I didn’t have to call Toronto Hydro because we didn’t increase our line,” Brown affirmed. “Our peaks have actually reduced in this building overall. We have more efficient cooling equipment now and our heating equipment doesn’t pull what the old equipment pulled.”

“THE TECHNOLOGY IS THERE. THE BUSINESS CASE IS TOUGHER THAN THE TECHNOLOGY, TRYING TO MAKE THE NUMBERS WORK, BUT IT’S DOABLE AS WELL.”

Hodgkinson described VRF heat pumps as “the most energy-efficient, GHG-efficient option that we looked at” — also calling its ability to provide precise temperature control within a number of different contiguous thermal zones a good fit for the needs of an office occupancy. Even so, the technology was chosen for 67 Richmond Street after a thorough exploration of other possibilities and with integrated technical expertise on hand.

“Engaging heat pump manufacturers, energy consultants and mechanical-electrical

consultants early on in a collaborative manner was very important,” Hodgkinson reported. “There are a lot of products out there, many of which are not tested for our climate. Also, there are a lot of products out there that don’t have real-world testing or data, and we need that data in order to form our energy models accurately as well as our HVAC design.”

FEDERAL “FLAGSHIP” RETROFIT

Heating for the government of Canada’s 442,000-square-foot office building at 25 St. Clair Avenue East in midtown Toronto is supplied via a new geoexchange system drilled in the underground parking garage. It’s one component of a wholebuilding retrofit — a recently completed five-year project expected to achieve an 80% reduction in GHG emissions — that also includes a full envelope upgrade and installation of rooftop solar photovoltaic (PV) panels to power about 15% of the building’s electrical needs.

The deep retrofit aligns with both required mid-life refurbishment of the 1950s-era building and the Canadian government’s pledge to pursue net-zero carbon within its own property portfolio. The project is considered one of the “flagship” undertakings, but is occurring along with a number of smallerscale interventions to reduce emissions and offset peak demand through equipment replacement and operational adjustments within federal buildings.

At 25 St. Clair, major project components were devised to be mutually supportive with airtightness and energy efficiency improvements deemed key to reduce the heating and electrical load. Adding to the challenge, the site is locked in on all sides with no exterior space to drill a geoexchange well.

“Using the envelope aspect has allowed us to make a manageable-sized geothermal system where we just had the space under the building, and that was it,” advised Paul Barton, director of energy and sustainability with the project manager, BGIS. “It was a very complicated drill session where we had more than 50 bore holes all at slightly different angles to spread out to be able to deal with the height restrictions in the parking garage.”

The system provided heating throughout the winter of 2023 while other construction continued, rendering the backup electrical boiler and emergency gas-fired boiler unnecessary. “We have had construction challenges throughout, but we’ve managed to get through and keep that gas turned off so we hope to use this as an example going forward for many other retrofits like this,” Barton recounted.

Meanwhile, synergies with energy efficiency are prioritized no matter what the project scale. BGIS has also managed a range of more scoped electrification projects in the government’s portfolio — switching out humidification or boilers without necessitating a complete system overhaul.

“We’re trying to keep flexible as we go forward and not presume we have to renovate everything. We can still do things with what we have and optimize that with controls and strategies to offset many peak demand charges and offset larger amounts of emissions,” Barton said. “The efficiency aspect in buildings is going to be hugely considered with this. We’re not doubling our demand at a building, simply jamming a heat pump onto an existing building.”

TECHNOLOGY AVAILABLE

Looking to the private sector, Hodgkinson and Brown concur that their companies’ emissions reduction targets are achievable, but other uncertainties complicate planning and budgeting. Unknowns include the future costs of electricity versus natural gas, particularly if there is a step back from the current carbon pricing schedule, while net-zero strategies in general are predicated on comprehensive and relatively rapid expansion of supporting infrastructure.

“The solutions are pretty available. I don’t really see a lot of buildings where I can’t come up with a combination of solutions to get there [net zero]. I think the concerns over the longer term are around the grid, the cost of electricity and the carbon tax,” Hodgkinson reflected. “That does make it challenging to forecast out, as an asset manager, where we can afford to do things.”

“The technology is there. The business case is tougher than the technology, trying to make the numbers work, but it’s doable as well,” Brown maintained. “You need to really push the engineering; you need the information; you need to make the decisions, but I’m picking them off based on when there’s capital work due. That makes the business case.” ■

MAINTAINED GARBAGE ROOMS IN MULTI-RESIDENTIAL BUILDINGS

Waste disposal systems in multi-residential buildings are under a great amount of pressure. Every day, residents pack their garbage down the interconnecting metal chutes which make up a building’s garbage disposal system, culminating in the garbage room. Cleanliness and garbage rooms may not instantly seem conducive, but the sanitary health of the waste disposal room is more important than you think. Here, we learn from the MJW Team the importance of ensuring garbage room maintenance is never overlooked:

1. Hygiene & Pests

“Food waste and household garbage is going down chutes unbagged. This is creating problems.” - Frank Spadafora, General Manager of MJW Team

• Health: Dirty trash chutes are a breeding ground for harmful bacteria and fungal pathogens which can significantly affect resident health. Ensuring a regular cleaning program will alleviate this risk.

• Pest Infestations: If garbage chutes aren’t cleaned regularly, the walls get thick with grease and organic matter. This creates a food source for pests like cockroaches. If waste collection bins and rooms are not thoroughly cleaned, rodents can become a problem. Cockroaches, mice and rats are some of the pests that can thrive in unsanitary garbage rooms, rapidly breeding. A building manager can reduce pest control costs by keeping waste management systems clean.

2. Odour Control

“Every time the garbage is picked up, the bin needs to be washed, and not just with water. We provide industrial degreaser to

building staff—the same product that our teams use when onsite for scheduled cleanings.” - Albert Perri, Accounts and Business Development Manager of MJW Team

• Unpleasant Odours: Regular cleaning helps control unpleasant odours which come from the garbage room making living conditions more pleasant for residents and guests.

• Industrial-Grade Cleaning Products: In-between cleaning visits, MJW educates onsite staff on recommended cleaning products and odour control methods and provides helpful recommendations for day-to-day upkeep. When used properly, the industrial-grade cleaning products give your staff the upper hand with cleaning garbage areas. Coupled with eco-friendly odour control products from shopmjw.com, the dirtiest room in the building can be kept clean, safe and hygienic.

“Regular maintenance and cleaning of a building’s waste system allows for essential repairs to be identified and completed before they become an issue.” - Frank Spadafora, MJW Team

• Damage to Equipment: While the first noticeable sign of a problem is often the lingering smell from the chute, garbage bin, and the garbage room itself, there’s a bigger problem to contend with. Grease, oil and residue eat away at the waste equipment—that’s when things stop working correctly. In addition, the corrosive nature of garbage eats away at floors and waterproofing systems.

• Long-Term Savings: Establishing a regular cleaning regime preserves the life expectancy of waste disposal equipment and saves on emergency repair and replacement costs.

• Fire Safety: A building’s garbage disposal system consists of a network of garbage chutes which collect garbage from building floors and lead it to the garbage compactor. The area is protected from fire by a fire damper, a spring-loaded shield device at the bottom of the garbage chute which is an essential life safety system. “If there’s a fire within the compactor, a mechanism within the fire damper melts away releasing a spring-loaded door so that the fire is unable to travel up the chute,” Spadafora explains.

4. Maintenance Made Easy

“Regardless of whether you’ve got a 5-storey or a 60-storey building, the condition of the garbage chute remains dirty and needs to be maintained.” - Frank Spadafora, MJW Team

• Waste Equipment Maintenance Plan: For boards and managers, a specialized garbage room maintenance plan can ensure safer living conditions for residents, cut building maintenance costs, and save time. While the biggest complaints around garbage might be the smell and infestation concerns, the fire safety significance should not be overlooked. MJW offers a convenient waste equipment maintenance plan to make things easy for busy building managers.

• Predictable Monthly Fee: Using a predictable monthly fee, garbage chute maintenance and odour control can be easily built into the property’s annual budget with payments spread out during the year.

• Quality Control and Waste Equipment Inspection: Following a cleaning by MJW, a representative will return to the building to complete a Quality Control and waste equipment inspection. Going floor-by-floor checking chute doors, fire dampers, sorters, compactors and bins, MJW will provide a full report on the mechanical and sanitary health of the waste control equipment. Recommendations for any faulty or damaged parts are noted along with quotations for their repair or replacement.

• Cost Savings: Extending the scope of possibilities, over the course of a three-year commitment, MJW maintenance plan clients ensure priority booking, and are able to take advantage of 10% off any other service offered by MJW, services which include underground and parking lot sweeping, washing and waterproofing, drains and catch basin cleaning, and parking lot striping and painting.

Establishing a regular maintenance plan with MJW for waste disposal systems makes it easy for boards, building owners, and managers to focus on matters which really need their attention. The services offered by MJW play a crucial role in supporting clean, hygienic garbage rooms, positively impacting residents’ health and living conditions, and keeping budget costs down.

MJW Team offers services throughout the Greater Toronto Area, London, Ottawa, and Montreal. To learn how the MJW team can help service your building, call 416-741-3999 or visit www.mjwcanada.ca

3. Equipment Preservation & Fire Safety Systems

TAXING DEBATE AHEAD

Decision on commercial parking surcharge deferred until 2025 budget discussions

Debate about a proposed surcharge on Toronto commercial parking spaces has been deferred until City Council begins to consider 2025 budget measures, giving potentially affected ratepayers more time to prepare a strategy before the discussion resumes.

Earlier this winter, Council’s executive committee instructed City staff to consult further and prepare more background information. Meanwhile, the Retail Council of Canada is conferring with the Ontario government to explore whether the proposed levy could contravene the allowed ratio of commercial to residential property taxes.

The levy on commercial parking spaces was first raised as a possibility in the City’s updated long-term financial plan last summer, as Council grappled for ways to tackle a mounting operational and capital deficit. A recent staff report to the executive committee follows up on instructions Council made at that time, and sets out a package of recommendations for imposing the special levy.

Those recommendations call for a twozone rate structure that would exact a 100% higher charge downtown and in the central waterfront area (categorized as Zone A) than elsewhere in the city (Zone B). That’s suggested at $6 per square metre in Zone A versus $3 per metre, but with no charge on the first 300 square metres, or roughly 10 parking spaces, in both scenarios.

It is estimated those rates will garner annual revenue of roughly $180 per space in Zone A and $90 per space in Zone B, and could raise $100 to $150 million from more than 1 million commercial parking spaces scattered across about 23,000 commercial properties. The impact on commercial landlords is calculated at about $0.49 per space per day in Zone A and $0.25 per space per day in Zone B.

“Staff feel that these rates will not have an overly negative impact on businesses,” the report states.

One-time costs to develop and implement the levy are pegged at $7.2 to $12.2 million,

while ongoing administrative costs are estimated at $1.3 million annually. Staff has now been instructed to conduct a thorough inventory of spaces and proceed with stakeholder consultation.

For their part, stakeholders in the commercial real estate sector are disputing the City’s interpretation of the numbers. In a submission on behalf of several notable industry organizations, Michael Brooks, chief executive officer of the Real Property Association of Canada (REALPAC) urges Council to weigh the potential dampening effect on economic activity as the levy filters down to vehicle owners. As well, he suggests the levy could play into the narrative that other municipalities in the Greater Toronto Area are more amenable to business with lower taxes and fewer operating risks.

“The parking levy is effectively a tax on those who live, work, shop and do business in Toronto,” Brooks observes. “A new burden will be added to Toronto businesses but not to any others in the region, presenting an

RETAIL COUNCIL OF CANADA IS CONFERRING WITH THE ONTARIO GOVERNMENT TO EXPLORE WHETHER THE PROPOSED LEVY COULD CONTRAVENE THE ALLOWED RATIO OF COMMERCIAL TO RESIDENTIAL PROPERTY TAXES.

obvious economic disadvantage to Toronto businesses and residents.”

RETAIL HARDEST HIT

An Altus Group study, commissioned by REALPAC, the Building Owners and Managers Association (BOMA) of Greater Toronto and the Financial District Business Improvement Area (BIA), notes that every 1% increment of increase in non-residential property taxes typically reduces assessed values by 0.9%. On that premise, the levy could trigger a $4.3 billion to $6.6 billion decline in assessed value across the property class.

“Accounting for a reduction in nonresidential property values and resulting lower property taxes payable, the net gain in municipal revenues will only be $10 to $15 million per year,” the study concludes.

Altus analysts project the commercial parking surcharge would result in an average property tax increase of 3.6% to 5.4%, depending on whether the City opted for its low-end (collecting $100 million) or high-end (to garner $150 million) scenario. However, that hides a much greater divergence between various types and locations of properties.

Based on anonymized examples of property taxes paid in 2022, retail properties would be hardest hit. For example, a neighbourhood mall that paid $50,000 in property tax in 2022 would see an extra $27,000 of added charges on 150 parking spaces in Zone A or an extra $13,500 in Zone B — equating to respective tax increases of 54% and 27%.

A large shopping centre that paid $4.4 million in property tax in 2022 would have to dish out another $862,200 to cover the levy on 4,790 parking spaces in Zone A or an additional $431,100 in Zone B — increases of 19.6% and 9.8%.

The blow would be more muted for downtown office buildings. Based on the example of one that paid $20 million in property tax in 2022, the $6/m2 levy on 1,410 parking spaces would equate to $253,800 for a 1.3% increase.

In a recent posting on its website, the Retail Council of Canada characterizes the

levy as “a new property tax increase, which would unfairly target retailers”. It cites Ontario regulations that should limit the City’s ability to increase the commercial property tax rate to no more than 50% of the residential rate increase. At the same time, a City bylaw dictates required parking spaces based on the square footage of the stores they serve.

“Retail Council of Canada views this as a tax on retail square footage, and as a method by the City of Toronto to try and circumvent the protections put in place by Ontario in O. Reg 121/07,” it asserts.

In deferring the debate until later this year, Council’s executive committee hints it

is waiting to see what might happen in its negotiations with the provincial and federal governments to secure other “revenue tools” that could be more effective. Toronto staff also alludes to that possibility in its report to the committee.

“Should the City identify possible alternative sources of revenue or be granted access to new revenue tools that are able to grow with the economy and do not exist currently, the City can review whether a commercial parking levy continues to be appropriate,” it advises. ■

FINES COULD AUGMENT THE HONOUR SYSTEM FOR EV CHARGER SHARING

Toronto’s commercial and multifamily landlords could be getting some enforcement clout beyond the honour system to discourage misuse of electric vehicle (EV) charging spaces in their parking garages. Toronto Council is considering a new fine that would be applicable on private property and in off-street municipal parking facilities, as part of a package of proposed citywide increases to on-street and off-street parking fines.

Currently, there is a fine schedule for on-street parking spots with EV chargers, which can see vehicle owners charged $60 per ticketed incident if they leave a combustion-engine vehicle or an EV that is either not charging or has outstayed the prescribed time limit in the space. However, there is no equivalent penalty for offstreet EV charging spaces.

Council’s Infrastructure and Environment Committee has already endorsed a new $75 fine pertaining to off-street EV charging spaces, which a report from City staff suggests will support consistency and “a positive customer experience for EV charging customers”. The $75 rate would be on par with proposed increased fines for various other on-street and off-street parking infractions.

If adopted, the new fine is expected to go into effect August 1, 2024.

Toronto’s municipal code will first have to be amended to add in the new private and municipal parking offences.

The staff report notes that operators of private parking facilities participating in the City’s consultation process were generally in favour of the new category of parking offence and associated fine. To make it enforceable on private property, they will need to post appropriate signage, as set out in the municipal code, to clearly state the rules.

Associated research cited in the report shows that relatively few other jurisdictions have similar fines in place yet. Ottawa and Victoria exact lower fines, of $70 and $40 respectively, for non-EV vehicles parked in off-street spaces outfitted for EV charging, while Oakville and Orillia both charge a $125 fine for any vehicle that occupies an off-street EV charging spaces but is not plugged in.

UNEVEN INCENTIVE

Ontario opens up property tax relief mechanism for new purpose-built rental

BY BARBARA CARSS

Apotential new incentive for the development of purpose-built rental housing in Ontario comes with adverse implications for existing multifamily properties, thanks to the mathematics of property tax allocation. In sync with the 2024 provincial budget, the Ontario government has enacted a regulation giving municipalities the flexibility to reduce their new multi-residential tax rate by as much as 35%.

However, as with a similar special tax subclass for small commercial properties, local governments will also be able to tap

other ratepayers to make up for revenue foregone from the tax break.

Property assessment and taxation specialists foresee that existing multiresidential ratepayers are likely to absorb most of that obligation. Nor is it likely that beneficiaries will capture the full intended reduction since the Municipal Property Assessment Corporation (MPAC) considers multi-residential buildings’ operating expenses in their valuations and a lower tax rate can be expected to translate into a somewhat higher assessed value.

“If there is going to be an incentive for building new multi-res, we should do it differently so that it doesn’t flow downstream to increase the effective tax burden for the sector,” maintains David Gibson, managing director with the property tax and assessment consulting firm, Yeoman & Company.

Under rules that came into effect in Ontario in 2017, purpose-built rental housing properties with seven or more units are classified as “new multi-residential” for 35 years from initial occupancy, during which time they are to be taxed at 1 to 1.1 times the residential property tax rate. After that

TORONTO OFFERS TAX DISCOUNT TO STRIP RETAIL PLAZAS

Nearly 30% of Toronto’s strip plazas now qualify for a property tax discount after City Council agreed to include them in the small business subclass during this winter’s budget deliberations. This will entitle approximately 235 neighbourhood/convenience retail centres with a maximum footprint of 25,000 square feet to a 15% reduction of the commercial property tax rate.

The small business subclass for property tax — which the Ontario government enabled and gave municipalities leeway to voluntarily adopt — first came into effect in Toronto in the 2022 tax year. Generally, eligibility is restricted to commercial properties with a current value assessment (CVA) no greater than $1 million.

However, the original rules also included properties with CVAs of up to $7 million that are located in specified areas such as downtown, the waterfront, or a designated arterial “Avenue” or “commercial centre” in Toronto’s official plan and fall within maximum space thresholds of 7,500 square feet for standalones or 2,500 square feet within a commercial condominium. About 29,635 properties qualify for the subclass in 2024 under those parameters.

Strip plazas located anywhere in the city are now included if they have a CVA no greater than $7 million, a single landlord entity, and contain at least two connected retail establishments that share a parking lot. Neither the total site area nor gross floor area can exceed 25,000 square feet, and the Municipal Property Assessment Corporation (MPAC) land use classification must be: community or neighbourhood shopping centre, or neighbourhood shopping centre without an anchor.

The extended eligibility applies to approximately $526 million worth of commercial assessment. City finance officials calculate the 15% property tax reduction translates to collective savings of $1.06 million for affected properties in 2024. This necessitates a 0.06%, or $8.65, increase for all fully taxed properties in the commercial class.

Along with the 15% discount on Toronto’s tax bill, eligibility for the small business subclass entitles strip plaza landlords to a corresponding reduction on the provincial education tax levy.

CBRE Canada’s retail rent survey for the second half of 2023 shows that strip/convenience plazas in Toronto command more modest rents than their equivalents in most other major Canadian markets. Average net asking rents in Toronto are pegged at $20 to $25 per square foot (psf) versus $35 to $45 psf in Ottawa, $35 to $40 psf in Vancouver and $40 to $45 psf in Calgary. Only Winnipeg, with average net asking rents in the range of $18 to $28 psf, and Montreal, at $20 to $30 psf, have somewhat on par pricing.

That’s for a retail format CBRE characterizes as unenclosed, less than 40,000 square feet and serving a “very limited trade area”. Meanwhile, Toronto achieves some of the highest rents in the country for other types of venues — notably regional malls ($155 to $165 psf) and street-based locations in downtown shopping districts.

period, they transition to the multi-residential tax class, which has historically been taxed at a much higher ratio.

In Toronto, for example, the 2023 multiresidential tax rate was 1.12 % versus 0.66% for the new multi-residential and residential tax classes. Total tax rates for 2024 will not be determined until the education tax rate has been announced, but rates for the City’s apportionment of the levy are 0.55% for new multi-residential and residential versus 1% for multi-residential.

“Looking at the municipalities that would choose to adopt this, in my opinion, it’s probably going to be the larger ones — Toronto, Ottawa, Hamilton, Mississauga, Brampton, London, Windsor — that already have a spread between new multi-res and multi-res rates,” Gibson suggests. “A tax reduction for a new subclass is going to cause that older grouping of properties to carry a higher burden.”

That won’t happen until at least 2025 given the timing of municipal budget processes. The regulation also requires local governments to pass a bylaw in order to implement the optional subclass, and

waterproofing and more.

“WE HAVE TO CONTINUE TO MOVE THE RATES FOR MULTI-RES DOWN AND INTO LINE WITH NEW MULTIRES. THE NEW SUBCLASS IS CREATING A BURDEN POTENTIALLY FOR THOSE VERY ASSET CLASSES THAT CAN’T AFFORD THAT BURDEN.”

properties will qualify for the tax rate reduction only if the bylaw is in place when their building permits are issued.

That will translate into three different multi-residential tax rates — two different rates in the new multi-residential tax subclass, as well as the multi-residential tax rate for properties that are 36+ years old — in many municipalities that choose to adopt the new subclass.

“The impact of this policy on existing stock in some markets might be different than in others,” says Tony Irwin, president and chief executive officer of the Federation of Rental-housing Providers of Ontario (FRPO). “We will be interested to learn more about the details, and we look forward to working with our government partners to ensure it’s implemented in a way that supports building much needed purpose-built rental housing right across Ontario.”

For his part, Gibson suggests incentive agreements enabled through community improvement plans (CIPs) — which provide developers with property tax rebates over a set period to reflect their projects’ positive impact on a municipality’s assessment base — could be a more effective strategy for local governments seeking to encourage new rental housing development. Although passing a bylaw to adopt the new multi-residential subclass is likely to be a much simpler process for a local government, the CIP route to tax relief could ultimately be fairer.

“We have to continue to move the rates for multi-res down and into line with new multi-res,” Gibson asserts. “The new subclass is creating a burden potentially for those very asset classes that can’t afford that burden.”

Meanwhile, the schedule for Ontario’s long-delayed reassessment remains unclear. The 2024 provincial budget confirms only that it will not occur until a promised review of the assessment and taxation system — which is to focus on “fairness, affordability, business competitiveness and modernized administration tools” — is complete.

“Consultations have commenced to seek input on the scope and priority areas of the review. Consultations will continue with broader engagement of stakeholders from across the province starting in early spring”, the budget document states.

OEB RULING RAISES IRE

Ontario government moves to exert more sway over energy regulator’s

decisions

The Ontario government plans to establish its authority to designate critical gas transmission projects and reaffirm the existing cost recovery model for connecting natural gas service to new residential development. Proposed amendments to the Ontario Energy Board Act, tabled as Bill 165, come after the Ontario Energy Board (OEB) issued a ruling that would have added an estimated $4,400 to the cost of a home or small commercial building in a new subdivision.

The OEB’s December 2023 decision directed Enbridge Gas to begin securing upfront payment for new connections to serve small volume customers as of January 2025 — thus replacing the historical financing formula, in which customers’ share of capital costs are calculated over a 40-year horizon and collected through a surcharge on rates. The OEB maintains this incumbent approach now risks leaving future generations to pay for stranded assets as the province moves away from reliance on fossil fuels.

However, the Ontario government argues a sudden switch to upfront payment — similar to the mandate that has long been in place for new connections to the electricity grid — would undermine housing affordability and limit consumers’ heating choices. Bill 165 aims to overturn the ruling and give the Ontario government more leeway to instruct the OEB’s decision-making processes in the future.

“Natural gas will continue to be an important part of Ontario’s energy mix as we implement our pragmatic plan to invest in and bring online more clean nuclear energy,” Energy Minister Todd Smith said, as he announced the new legislation.

Currently, under section 96.1 of the Ontario Energy Board Act, the OEB is compelled to approve the “construction, expansion or reinforcement” of an electricity transmission line that the government has deemed to be a “priority project”. One of Bill 165’s proposed new provisions would allow the government

to similarly designate priority “natural gas transmission or dual-purpose transmission and distribution” lines. If so designated, the OEB would be required to approve construction, and be prohibited from ordering a surcharge on customers to collect a contribution toward the line’s capital costs.

“The proposed approach seeks to ensure Ontario continues to attract new investments in sectors like greenhouses and electric vehicle and battery manufacturing,” states the explanatory summary posted on Ontario’s regulatory registry.

DECISION OVERSIGHT

Various other components of the bill will likely have repercussions for a range of consumers beyond the “residential, small commercial and small farm customers” who are central to the government’s initial messaging. To begin, it would enable the government to dictate the time period for capital cost recovery from small volume customers via regulation, but

it also includes measures to steer the OEB to decisions that are reflective of provincial policy and to introduce more stakeholder voices into OEB deliberations.

As set out in the bill summary, that would include: new requirements to notify and invite testimony from “specific stakeholders or economic sectors that could be significantly impacted by an upcoming decision or hearing”; and a new category of “generic” hearings to address broader issues that may affect numerous utilities, generators or stakeholder groups.

In the latter case, the government would determine when generic hearings would be conducted, and would have the authority to transfer any in-progress hearing to generic status. It could also reopen past OEB decisions, provided they were made at least 24 months earlier, for a generic hearing.

Specifically related to the disputed Dec. 2023 decision, the government states it will temporarily regulate a continuation of the 40-year horizon for cost recovery, while also setting a deadline for the OEB to reconsider and update its ruling. In this stipulated doover, the OEB would be expected to weigh evidence from “significantly impacted stakeholders”, such as developers and the Independent Electricity System Operator (IESO), not included in the original hearing.

Notably, though, groups such as the Ontario Home Builders’ Association (OHBA) and the Building Industry and Land Development (BILD) Association do not appear on the list of 33 organizations that requested standing in the original hearing. Meanwhile, the Building Owners and Managers Association (BOMA), the Federation of Rental-housing Providers of Ontario (FRPO), the London Property Management Association (LPMA) and Otter Creek Cooperative Homes Inc. were among the 20 organizations granted intervenor status.

The Bill 165 summary advises that the OEB could be directed to take “government policy documents and reports that have been published related to the future role of natural gas in Ontario” into account when considering the decision for a second time. That’s expected to include a pending Natural Gas Policy Statement.

“The proposed approach seeks to support the government’s policy to build affordable housing, maintain customer choice for homes and businesses and keep costs down,” the summary states.

NEW PROTOCOL FOR EV CHARGER GRID CONNECTIONS

Ontario is adopting standardized protocol for connecting electric vehicle (EV) charging facilities to the power grid at commercial and multifamily buildings and other publicly accessible locations. Recently finalized instructions from the Ontario Energy Board (OEB) give the province’s 58 local distribution companies (LDCs) until late May to get the required procedures and documentation in place.

Those will apply in scenarios where the existing electrical capacity and associated equipment must be upgraded to accommodate EV chargers. The protocol outlines steps and timelines for various stages of a project from preliminary consultation to the agreement and execution of the work, including clarification of customers’ and LDCs’ responsibilities and processes for securing contractors, calculating costs and conveying payment.

Of interest to building owners, the new EV connection protocol introduces an optional free consultation defined as “a high-level assessment” of electrical capacity and complexities for connecting chargers. Interested parties will be able to use online forms on LDCs’ websites to submit initially required information and request this preliminary evaluation. Provided the request form is complete, LDCs will have 15 calendar days to respond and, if requested, must meet to discuss the findings at no cost to the customer.

“The purpose of the preliminary consultation is to provide high-level connection feasibility information to a customer who has uncertainties regarding site selection for the EVSE (electric vehicle supply equipment), or those who are unsure about committing to EVSE installations. If a customer has already decided on a specific location for the EVSE, the preliminary consultation may provide limited benefits and requesting a preliminary consultation may extend the overall connection process,” the OEB’s protocol guide states.

Landlords, property managers or condominium corporations in the latter category may choose to begin with a direct request for connection — a process that is also to be facilitated through online forms on LDCs’ websites. Petitioners can expect a response from the LDC within a maximum of 15 days to either confirm that their request is complete or specify what further information is required. LDCs will be mandated to provide a formal offer to connect (OTC) no later than 60 days after a complete request has been submitted.

The new connection protocol also stipulates standard information to be contained in the OTC. Once accepted, it decrees “the distributor shall promptly work with the customer to complete the project and connect the EVSE” including “appropriate levels of communication” throughout all stages. LDCs may choose to allow customers to seek alternative bids for some components of the connection work, with the parameters for doing so set out in the OTC.

Once completed in keeping with prescribed service conditions, low-voltage chargers are to be connected within five business days and high-voltage chargers must be connected within no more than 10 business days. Again, those service conditions are to be revealed in the OTC.

The OEB is providing LDCs with templates for the standardized documents associated with the new protocol, and notes that it aligns with load connection processes that are already established in the Distribution System Code. “The OEB is of the view that three months will provide sufficient time for distributors to be prepared,” it states in its announcement of the new rules.

THE ELECTRIFICATION AND ENERGY TRANSITION PANEL ALSO WEIGHS IN ON THE DISCREPANCY IN COST RECOVERY MODELS FOR GAS AND ELECTRICITY UTILITIES.

“RIGHTSIZING” INFRASTRUCTURE

The promised Natural Gas Policy Statement follows from one of 33 recently released recommendations from the provincially appointed Electrification and Energy Transition Panel. Recommendation 6 calls for policy direction that is “consistent with the clean energy economy policy commitment”.

That would entail analysis of a range of issues including: energy efficiency; decarbonization options such as renewable natural gas and clean hydrogen; costs and complexities of switching to clean energy sources; feasibility of alternatives to gasfired plants to respond to peak electricity demand; and analysis of “decommissioning or rightsizing” of natural gas infrastructure as the transition to cleaner energy progresses. Congruently, the OEB’s December 2023

decision discusses the long-term outlook for natural gas assets

“Two important themes emerged during this proceeding: climate change policy is driving an energy transition that gives rise to a stranded asset risk; and, the usual way of doing business is not sustainable,” the OEB ruling states. “If the depreciation expense was expected to be recovered over a period that ends up being longer than the asset is used and useful, this will give rise to stranded asset costs. In the context of the energy transition, the question is how this risk should be mitigated or avoided, and if the risk is realized, who should bear the stranded asset costs.”

costs are allocated for upgrading electricity transmission systems requires upfront collection of customers’ capital contributions, arguably giving gas a competitive advantage. The EETP suggests adjustments to the natural gas governance framework may be required to remove a barrier to the electrification of new development.

Recommendation 15 calls on the OEB to conduct reviews of the cost allocation policies for natural gas and electricity, and to evaluate “natural gas infrastructure investment” with an eye to protecting customers and facilitating development of the clean energy economy — which appears to be what adjudicators have done in the ruling the Ontario government is disputing.

“Levelling the playing field between electricity and natural gas might encourage developers and other customers to make choices that are more aligned with the government’s clean energy economy commitment,” the EETP report states. ■

The Electrification and Energy Transition Panel (EETP) also weighs in on the discrepancy in cost recovery models for gas and electricity utilities. The code of practice governing how

THE ELECTRIFICATION AND ENERGY TRANSITION PANEL’S REPORT CAN BE FOUND AT WWW.ONTARIO.CA/FILES/2024-02/ ENERGY-EETP-ONTARIOS-CLEAN-ENERGYOPPORTUNITY-EN-2024-02-02.PDF

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RESTORING THE STARS

Outdoor lighting principles respect the dark side

BY BARBARA CARSS

Emerging principles for outdoor lighting could help the stars regain lustre in the night sky. The Illuminating Engineering Society (IES), a leading developer of lighting standards, is collaborating with the research and advocacy organization, DarkSky International, in an effort to curb light pollution and promote installations that could also deliver energy savings and improve neighbourly relations.

“Human beings have evolved under a day-night cycle where darkness is just as important as light,” Brian Liebel, chief program officer with DarkSky International, observed during an IES-sponsored webinar last fall. “We need to be conscious about how light affects people, flora and fauna and the view of the night sky, and we need to be responsible for what we are doing when introducing lighting that is not natural to the environment at night.”

Light cast in a upward direction is considered to be light pollution, while light that goes beyond the boundaries of the area it is intended to illuminate is defined as light trespass. Paul Mercier, principal of the firm, Lighting Design Innovations, and an international past president of IES, noted that untrained viewers of these effects are often mistaken about the cause.

“Visibility of light source is not glare. The biggest source of light pollution is reflected light,” he said.

It’s estimated that 83% of the global population lives under a lightpolluted sky and an even larger quotient of North Americans and Europeans cannot easily see the stars. Nighttime lighting can disrupt human and animal sleep patterns, divert navigation of birds and fish, and affect the flowering of plants with associated consequences for pollinators. It often trespasses across property boundaries, causing annoyance to those who do not need it, and is a significant electricity consumer, contributing to indirect greenhouse gas (GHG) emissions in jurisdictions with fossil fuel powered grids.

RESPONSIBLE NIGHTTIME APPROACH

IES and DarkSky International joined forces on the project in 2019 and have since developed five guiding principles for responsible outdoor lighting, which both organizations have adopted. Liebel, who participated in that process in his previous role as director of standards for IES, expects the principles will be integrated into IES standards and that maximum caps on outdoor illumination, which are currently absent from standards, could be added.

The five principles define how light should be applied, but, first, prospective installers should consider whether nighttime lighting is even necessary. The underpinning philosophy calls on designers, property

“WE NEED TO BE CONSCIOUS ABOUT HOW LIGHT AFFECTS PEOPLE, FLORA AND FAUNA AND THE VIEW OF THE NIGHT SKY, AND WE NEED TO BE RESPONSIBLE FOR WHAT WE ARE DOING WHEN INTRODUCING LIGHTING THAT IS NOT NATURAL TO THE ENVIRONMENT AT NIGHT.”

owners, business operators and regulators to restrict lighting to: areas where it is needed; during the time it is needed; and in the amount that is needed. The guidance is meant to help users identify those parameters and then sensitively implement required lighting.

“Basically, responsible outdoor lighting is useful, targeted, low-level, controlled and warm coloured,” Liebel advised. “To begin, if a light doesn’t have a use then there’s no point having it there. Be conscious about that; think about that.”

If needed, light should be scoped as much as possible to the tasks that require it; it should be triggered with sensors or moderated with dimmers where possible; and it should not exceed the level that IES standards recommend. Warm colours in the red, orange and yellow wave lengths are a lesser factor in light pollution than blue, which is to be avoided unless it is required for a specific purpose or circumstance.

“Shorter wave lengths of blue are the ones that scatter in the sky and cause more sky glow. They are also the wavelengths that are principally involved with circadian entrainment,” Liebel said.

However, he characterized the principles as a package of tactics that can be applied in various combinations to suit site-specific needs.

“If we target light, keep it at the lower level and control it, we’re 90% to where we need to be, so spectrum may not have as much of an effect,” he added. “In cases where we can’t do one of these things, spectrum may have more of an impact.”

SPINOFF ENERGY SAVINGS

Bringing a designer’s perspective to the discussion, Mercier talked about navigating lighting ordinances and other planning controls, and the role lighting professionals can play in helping both property owners and local officials work through the technical nuances. He also pointed to some key concepts and instrumental products in responsible nighttime lighting.

Local ordinances are generally tied to at least one of three objectives — reducing energy use; mitigating light pollution; or establishing a design aesthetic — which can be mutually supportive. Mercier suggested that’s particularly the case with the first two goals, but also cautioned that drafters and interpreters of ordinances aren’t necessarily well versed in lighting theory or aware that some stipulations could actually be undermining the outcomes they’re seeking.

Criteria for pole heights can be one such example.

“If you control wasted energy, you’re going to do a pretty good job of reducing the amount of light pollution and light trespass in the environment,” Mercier maintained. “Pole heights, in general, are a little suspect whether they help or hurt light trespass. At 20 feet [tall] you’re going to get less reflected light going into the sky because almost all light fixtures that are manufactured these days throw light downwards.”

Similarly, he cited an example of a local prohibition on laser lighting counterproductively hindering opportunities to take advantage of recent product advancements.

“Laser lighting is available as an architectural-style product that has the narrowest beam possible, the best control beam, and it shoots light at long distance at a very low wattage. It is the best product for dark sky because it only hits what we’re trying to light,” Mercier reported.

Proponents of the principles for responsible outdoor lighting foresee that they could help fill in the knowledge gap around light pollution and trespass. DarkSky International is already recognized for its certification program for commercial lighting, and it is now promoting the principles through a wide network of connections.

“In the policies that we’re working on and will be advocating, we’re working towards developing concise language with obtainable outcomes and practical implementation so that it will be easier for cities to adopt ordinances or governments to adopt legislation that can have proven results without over-complicating things,” Liebel affirmed. ■

FOR MORE INFORMATION ABOUT DARKSKY INTERNATIONAL, SEE THE WEBSITE AT HTTPS://DARKSKY.ORG. FOR MORE INFORMATION ABOUT THE ILLUMINATING ENGINEERING SOCIETY, SEE WWW.IES.ORG.

Berkley_CPM_Winter_2023_FINAL.pdf 1 2023-11-17 11:08 AM

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PLODDING TO PARITY

Women increasingly welcomed on boards, less so in

C-suites

Women are gaining more presence in the boardrooms than in the C-suites of listed Canadian real estate entities. Recent analysis from the credit rating agency, Morningstar DBRS, charts the changing gender split of senior leadership roles at 11 public companies since 2010, and finds that women’s share of board of director positions grew from 6% in 2010 to 36% cent in 2022.

Demographic shifts were less pronounced at the top executive level. Looking specifically at the duo of chief executive officer (CEO) and chief financial officer (CFO), women filled 5% of those positions in 2010 and 18% in 2022, with the latter all clustered at CFO.

Commentary from Brenda Lum, managing director of Morningstar DBRS’ North American corporate real estate ratings, highlights women’s relative higher numbers on real estate boards versus an average of 26% across all TSX-listed companies. Among the 11 real estate players, Artis Real Estate Investment Trust (REIT) and Allied Properties REIT had the highest share of female board members in 2022, at 57% and 50% respectively. In both cases, that’s a shift away from all-male boards 12 years earlier.

Women also increasingly carry out committee responsibilities on the real estate entities’ boards. Across the 11 entities, women filled 36% of committee positions in 2022 compared to 8% in 2010.

Women comprised at least 50% of board committees at Artis, RioCan and Allied Properties REITs, while Morguard Corporation was alone in having no women in committee roles. (That’s perhaps reflective of a smaller field of candidates to choose from since Morguard had the lowest quotient of women on its board in 2022 — at 11% — among the 11 entities.)

“The disappointment lies in the lack of women holding leadership roles, defined as CEO and chair of the board positions. No woman held any of these positions in the 2010, 2020 or 2022 periods,” Lum observes.

ALL-MALE BOARDS DWINDLE GLOBALLY

Turning to the C-suite, women’s representation in the CEO and CFO positions actually slipped in 2022 from 20% two years earlier. In 2010, First Capital REIT was alone in the group for its female CFO, while women held the CFO position at four companies — Allied Properties, Chartwell Retirement Residences, Crombie and Granite — in 2022.

The analysis also examines women’s status as of February 2024 in a slightly larger sample of real estate companies, broadened to include three more that were listed on the TSX after 2010. Women now fill 21% of top executive roles across these 14 entities, primarily as CFOs, but with one CEO (Allied Properties REIT’s Cecilia Williams). As of January 2024, women continued to be shut out of board chair positions.

Across the entire TSX currently, women chair 7.3% of boards and are CEO of 5.3% of listed companies. Although trends suggest women are steadily gaining parity in total board membership, Lum concludes that the “comply or explain” approach, leveraging mandatory disclosure to open leadership up to more women and under-represented groups, does not appear to have been a catalyst for women’s advancement to CEO or board chair.

“Perhaps gender parity at the board of director level will be an instigator of change for representation of women in these key leadership positions,” she surmises.

The 11 real estate companies in the analysis include: Allied Properties REIT; Artis REIT; Chartwell Retirement Residences; Crombie REIT; First Capital REIT; Granite REIT; H&R REIT; Morguard Corporation; Primaris REIT; RioCan REIT; and SmartCentres REIT. ■

THE COMPLETE TEXT OF THE REPORT, GETTING A SEAT AT THE TABLE, CAN BE FOUND AT HTTPS://DBRS.MORNINGSTAR.COM/RESEARCH/428994/ GETTING-A-SEAT-AT-THE-TABLEWOMEN-ARE-MAKING-STRIDES-INTOCANADIAN-REAL-ESTATE-BOARDS

All-male boards have become scarcer across the 128 real estate companies represented in MSCI’s all-country world index (ACWI), but women still fill fewer than 30% of board seats in the majority of cases. Results from MSCI’s 15th annual progress report, released in the winter of 2024, show that real estate made the best year-over-year progress in shedding womanless boards among the 11 industry sectors tracked in the index. Just 8.6% of boards excluded women in 2023 versus 14.8% in 2022.

Women directors account for less than 30% of the membership on 47% of real estate boards; they compose 30 to 40% of membership on 28% of boards; and fill more than 40% of seats on 16.4% of boards.

None of the all-male real estate boards meet in Canada or the United Kingdom since neither country makes the list of 23 nations where all-male boards are domiciled. As well, there is just one all-male board in the United States, representing 0.2 per cent all 597 U.S. companies in the index.

All-male boards account for the highest proportion of companies in Quatar (92.3%), Saudi Arabia (71.4%), Indonesia (50%) and Kuwait (43%), while, in sheer numbers, they are most likely to be found in China (146), Saudi Arabia (30) and Taiwan (15).

The complete text of MSCI’s Women on Boards and Beyond:2023 report can be found at www.msci.com/research-and-insights.

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