C A N A D A ’ S O N LY N A T I O N A L P U B L I C A T I O N F O R A P A R T M E N T O W N E R S A N D M A N A G E R S
VOLUME 4 / NUMBER 3 / AUGUST 2007
Multi-Unit Residential Mortgages
Community Thermally Connected Headline Cogeneration Fuels Markham Development
Vertica Resident Services aims to Change the Game
2007
MOVERS AND SHAKERS
Windstorm Hits Owners in the Pocketbook: Are you protected against Lost Income? Tall Thinking: Should Multi-Residential be Part of Your Investment Mix?
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june 2007 3
22 Cover Story
Life made easy– Changing the Game in Multi-Residential Property Managememt Vertica Resident Services, a new multi-residential property management company, intends to focus on resident services. The company’s goal is to provide a convenient and comfortable living experience.
contents... 8 Windstorm Hits Owner in the Pocketbook If your building is damaged by a windstorm, or other act of nature, your insurance policy can provide money to repair the damage and income replacement if tenants are forced to move.
12 Tall Thinking for your Investment Mix The purchase of an apartment building can be a valuable part of your investment mix. Before you sign on the dotted line do a careful analysis of both the building and your investment goals.
16 Four Wheels and a Light Bulb More and more companies are using environmental awareness to help market their buildings. Everything from light bulbs to cars can be a green improvement.
30 Trenchless Technology Saves Time and Property Sewer line leaks can cause a major disruption to your business, especially if the drains have to be dug up using an open cut method. Trenchless technology allows pipes to be repaired or replaced with minimal digging.
34 How Green is your Building? More and more tenants are looking for “green” buildings when assessing where they want to live. A few green improvements to common areas and suites can make your property a preferred location.
36 Why Hire a Third-Party Property Manager? Many landlords hire a third-party property manager to look after their buildings. The reasons are varied, but in most cases, they want the expertise that professional managers can offer.
20 Multi-facts 38 Regulations
4 Canadian Apartment Magazine
june 2007 5
editor’s note Keeping your Building Green and Well Managed In this month’s issue, we profile Vertica Resident Services, a new company that intends to change the property management game by focusing on making life easier for its customers. A wholly-owned subsidiary of GWL Realty Advisors, the company is currently managing about 3,200 suites. Vertica’s goal is to get closer to its customers in an effort to better control delivery of services and through that enhance returns to investors. Also on the property management front, Anne Meinschenk, of MetCap Living, a company that specializes in managing multi-unit residential buildings, outlines some of the reasons that building owners hire a third-party property manager. In most cases, landlords are tired of the day-to-day demands and want the expertise that professional managers can offer. Also in this issue we discuss the growing trend toward green, or environmentally friendly buildings. Our regular columnist, Robert Helyar offers up tips on how to make green improvements to your building. He points out that more and more tenants are using environmental criteria when choosing a place to live. Regular contributor David Truscott offers up some valuable advice on how to protect yourself if your building is damaged by a windstorm. Your insurance policy can provide money to repair the damage and, in some cases, income replacement if tenants are forced to move. If you’ve ever had a sewer line leak, you know what a major disruption it can be to your building, especially if the drains have to be dug up using an open cut method. Larry Rothman of Roto-Rooter describes several types of trenchless technology which allow pipes to be repaired or replaced with minimal digging. C A M
PUBLISHER
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Stephen J Bronetto Robert Helyar Jason Leonard Anne Meinschenk Larry Rothman David G Truscott For sales information call 416.966.HUSH
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Quoteworthy “We launched Vertica Resident Services because we felt we could be industry leaders.” – page 23
6 Canadian Apartment Magazine
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risk management
Windstorm Hits Owner in the Pocketbook by David G. Truscott
If your building is damaged by a windstorm, or other act of nature, your insurance policy can provide money to repair the damage and income replacement if tenants are forced to move. OUCH! Our small real estate investment company had just suffered a painful setback, and it looked as though there was more pain to come. Our 150-unit apartment building had recently experienced a major loss, due, surprisingly enough, to a windstorm. Who would’ve thought that Mother Nature could do that to a highrise apartment building? While the major damage to our building was painful to us and our tenants, little did we know that there could be a rough ride waiting for us regarding the structuring of our rental income insurance. One thing at a time though. Fortunately, the timing being what it was, most residents were at work on their day jobs when the storm struck so there were very few injuries. The storm did, none the less, leave the building management with a major mess to clean up. Before the dust settled, our insurance person was on-site. We quickly came to terms with the need to remove debris, we arranged to have a structural assessment performed, and we requested quotes on the restoration. We then learned that even though most of our building was still standing, there would be a lengthy period of time during which the majority of tenants would have to find accommodation elsewhere. Their relocation became necessary during the partial demolition following the storm, and those tenants with units that were remotely close to the damaged side were ordered to live elsewhere until the building was deemed safe for their return. While many would be able to resume living in our building 8 Canadian Apartment Magazine
following the structural “all clear”, there was a significant number of our long-term tenants that were forced to remain living elsewhere during the reconstruction. Not surprisingly, when our tenants could no longer live in our building due to forces beyond their control, they ceased to pay their rent to their landlord. Then came another painful surprise. During one of our first discussions with our city’s building inspection department, we learned that there may be some issues with building and zoning bylaws that could influence how we were to rebuild. This was not getting any easier, and, we were about to find out, not any less painful either. The same week, in speaking with our insurance company’s claims adjuster, we learned that our rental income claim could be influenced by problems related to those bylaws that were forcing delays in our plans to rebuild. Fortunately, upon checking deeper into our policy wording, the adjuster confirmed that our “extended rental income (broad form) policy” would not penalize us if our rental income were to be interrupted by a problem with by-laws. Had this not been the case, it would have placed us (as building owners), in an awkward spot were it not for our rental income coverage. We had chosen to insure for one hundred percent of the annual rent, and had coverage in place that would pay for our loss of rent for a full year after the loss occurred. At least we knew we’d be able to continue to make our mortgage payments. When we provided our insurer with an accounting of what our monthly rents should have been, and showed the insurer how our rental income had declined directly due to the insured
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windstorm loss, our insurer began replacing the lost income for us. At that time, we learned that if we had not insured for the full amount, it was quite likely that the insurer would not have paid for the full amount of our present rental income claim. Not long into the restoration work, the union crew working for our contractor went on strike. Enter our claims adjuster again. This time, we learned that a “regular” rental income policy would not pay for loss of income due to “delays or loss of time due to the presence of strikers or other persons or to labour disturbances on or about the premises, interfering with the rebuilding, repairing, etcetera.” Fortunately for us, our extended rental income policy covered us for labour disruptions. Again, we came up lucky, but it was not without some concern. What could happen next?
Our extended rental income (broad form) policy gave us very good coverage. It did so for a finite period, though. As you can imagine, an insurance policy of this sort is not intended to pay the claimant forever. All good things must come to an end, and our entitlement to claim our lost income ended twelve months after the date of loss. While our insurer also helped out with the expense of promoting the rental of our now ready apartments, we realized that it might be a good idea to revise our insurance to provide a longer term of coverage in the event of another loss such as what we had already experienced. If our units were finally restored and ready to rent, what would happen if vacancy rates were a little higher than normal, and we simply couldn’t re-rent our units as promptly as we had expected? What could we do to make sure that we wouldn’t encounter another interruption
“We learned that we could have had a longer period of indemnity available to us.” Several months later, with the majority of our units now restored and ready for rental, we realized that very few of what we thought were loyal long-term tenants were ready to return home. In fact, the vast majority of those who were forced out had settled elsewhere, and had no intention of returning. Through no fault of our own, our vacancy rate had skyrocketed! This time, our insurance adjuster called us, with good news; and yes, the other kind, too. First, the good news. The adjuster chose to remind us of the benefits we were enjoying as claimants on the “extended rental income broad form”. We had not been negatively impacted through the influence of by-laws. Our insurer continued to pay, despite the delays we faced with bureaucracy. The loss of rental income caused by the labour union strike that had temporarily halted reconstruction of our damaged building would not have been covered by an inferior insurance policy wording. We were fortunate to have coverage on the “broader” form of rental income protection. Best of all, our insurer would continue to pay to replace our rental income that was lost due to the cancellation of our individual apartment leases. As our tenants were forced to live elsewhere, they also had to commit to leases in their new premises. As this had left us with a high number of restored units that were now vacant, we were indeed grateful for an insurance policy that would allow for this. Otherwise, our real estate investment company would have been hurting badly. On the last point above, an inferior policy could contain an exclusion that reads “the insurer shall not be liable for loss due to the suspension, lapse or cancellation of any lease or license, contract or order, which may affect the insured’s income after the period following any loss during which indemnity is payable.” Following the good news from our claims adjuster was the inevitable “bad news”. 10 Canadian Apartment Magazine
to our cash flow? This one could have hurt us badly if it had extended even a few more months. We learned that we could have had a longer period of indemnity available to us. Options available to us with our insurer included eighteen months’, and even twenty-four months’ protection. Between the time involved in debris removal, wrestling with bylaws and building codes, a labour strike, and the normal construction delays, our experience had taught us that extending our period of protection beyond twelve months would be the prudent thing to do. The increase in the cost of our insurance to do so was not significant. It did involve using an amount of insurance that was 100 percent of the total rental income for the extended period we chose, but we knew that by doing so, we could make our next unexpected loss less painful than this one had been. A lesson well learned for this hypothetical apartment building owner. Readers are encouraged to share their thoughts and experiences by contacting the columnist directly. CAM
David G. Truscott, CAIB, CRM is the President of Risk Review Inc., a risk management consulting practice. Their website and contact information for David can be found at www.riskreview.ca
investment counsel
Tall Thinking for your Investment Mix by Stephen J. Bronetto
The purchase of an apartment building can be a valuable part of your investment mix. Before you sign on the dotted line do a careful analysis of both the building and your investment goals.
Buying an apartment building requires “tall thinking”. Being a buyer is very exciting and can have many rewards, but there are also many pitfalls and costs to contemplate before you look up at the horizon as part of your investment mix. Start your analysis of buying a residential property by thinking about the location of the property you would like to purchase. Each type of building (low-rise, highrise) is different and initial investment costs with the cost to maintain the property are vastly different. Ask yourself what type of people do you envision living in the building and what will attract tenants to keep it full. For the most part do you want a building that needs some TLC or one that you can just operate in its current condition? These are only a few questions you need to ask yourself. You also need to consider: 1. Is the location appropriate? For example, if you want to keep an eye on the property you will want it located within a reasonable driving distance from your office or home. 2. Does the purchase price correspond to the fair market value of the building and is the building in your price range? Most people overextend their requirements. This can become quite expensive if the market changes and you have put to much capital into the building without a lot of reserve operating income or cash on hand. 3. What are the comparable rental rates in the area, including the costs of acquisition, costs of financing, land transfer tax and other soft costs? These extra costs can increase the expenditure for your property. 12 Canadian Apartment Magazine
4. Are there existing vacant spaces or delinquent tenants in the building and for how long? What are the expiry dates of the leases and monthly rent for each apartment? Your cash flow for the property is based on your vacancies. If not leased quickly, you lose money and it can’t be regained. 5. What is the general condition of the building - i.e. structure, electrical and mechanical systems, elevators, roof, windows, sprinklers, sidewalks, garage, parking areas, etc. What warranties and guarantees are in existence or will be made available? If the building has been inspected, then you should know where you stand. Unforeseen costs and repairs add to the overall expense of your investment. 6. What provisions for capital expenditures and maintenance expenses are in the budget and when did these occur. What is last year’s financial performance and are there audited financial statements? If the building has been under budgeted and not maintained by the prior landlord, then it may be too expensive for you to correct. Be a prudent investor by reviewing the up front costs and if work is needed now or in the future. 7. Are there economies of scale available? Often management of the office, HVAC, mechanical and electrical systems, elevators, electrical maintenance and snow removal are contracted out. You can increase your buying power by coupling different services under one contract, thereby reducing your costs. 8. How long do you anticipate owning the building and what return on investment or profit do you want to get back? Can you collect money to meet your investment criteria and financial obligations? Each investor has a different level of return that would make him
Don’t Sweat It! Trying to stay on top of the day to day pressures, of effective property management, can really heat things up. So, let MetCap cool things down. With over twenty years of proven success, the MetCap team will ensure you never reach the boiling point, but remain relaxed and free of concern. We know your world, because we are in the heat of the action on a daily basis. Marketing, leasing, accounting and site management—in fact, anything and everything you require to provide a better living experience—MetCap can deliver. We’ll tailor our expertise and well established infrastructure, to the specific needs of multi-unit properties. Think of us as a breath of fresh air. Always ready. Always professional.
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“A prudent decision is to include other professionals to assist you with the selection of the property.” or her happy. Be realistic, but as a guideline it may be practical to look for a six to eight percent return. If you are looking for higher amounts then you will need to re-think your initial investment timeline to gain higher returns. 9. What tax implications do you need to consider when analyzing amortization, depreciation and recapture elements of the purchase? Taxes are important to consider in real estate as the amount paid varies for each region. You must understand the existing costs and what adjustments are pending or forthcoming as this can change the overall property cost. 10. Do you eventually want to own a group of apartment buildings? If so what opportunities are available on either side of the property for further expansion or redevelopment. This can greatly enhance your project’s value and offer a long-term direction for future profits through a teardown and rebuild of a bigger project such as a highrise condominium.
To start the search for an ideal property you will need to know if you want to purchase a duplex, four-plex or larger apartment building. Then make a site selection criteria list and the investment dollars you have available or can access to complete the purchase of the building.
You don’t have to limit your search to new projects to obtain cash flow for your investment as many people choose real estate ownership through the acquisition of “fixer-uppers” or “problem” properties. This will take some hard work, cash influx and imagination to see past the existing building, but the profit upside can be much larger. Your objective is to make modifications subject to marketplace demands to increase your profits. Fixer-uppers can be tricky and time consuming with each project being vastly different from the last. Everything you do must pass inspection and conform to local building codes. Expect unplanned delays and unanticipated obstacles. Finding qualified contractors and subcontractors who will quote when requested, show up when they promise and stay 14 Canadian Apartment Magazine
until the job is done is often a challenge. Project managers can ensure the work gets done correctly, on schedule and more importantly on budget. Remember to check credentials, seek references and see their recently completed work. Ask yourself, can I work with and trust these individuals. The most important thing is to keep an eye on the work and that timelines are kept on schedule and budget. The money paid to these professionals can reap a considerable return by freeing up your time and greatly reducing your effort. You are the investor and should be looking for other investments to work on, not trying to do the job of several people with specific skills and talent. That is just not a practical use of your time. A friend thought he could do it all and after his initial purchase began the renovations. What a mistake. He ended up working day and night redoing his mistakes, altering for code corrections and this led to higher costs and wasted time. Cost overruns might not be recovered if he were to sell the property in the wrong cycle of the marketplace. A prudent decision is to include other professionals to assist you with the selection of the property and to negotiate the purchase on your behalf. Drawing up detailed purchase and sale documentation is also necessary. Knowing fair market prices in the selected area and having savvy negotiation skills in order to finalize the purchase agreement are skills that you may not have. If you possess these skills you may not want to devote the lengthy time and resources it may take from the selection criteria process to the signing on the dotted line. Don’t assume that the on-site building maintenance equipment and tools are included with the purchase of the property. Trained professionals will know what to look for in the records in the due diligence phase and can help you navigate your way to long-term profits. For example, does the building comply with health and safety codes, handicap access? Were seismic and environmental evaluations completed? Are all required licenses up to date? The uniqueness of owning real estate can be rewarding if you take the time to decide what residential property is right for you and your investment mix criteria. Unlike the stock market, you can see it, touch it, modify it, and feel a sense of accomplishment - an asset increasing in value right before your eyes! CA M
Stephen J. Bronetto is President of BonaMax Realty Inc. and is a real estate advisor with 23 years experience in the commercial, industrial, retail and real estate investment sectors. He has completed a wide range of acquisition/disposition, and leasing arrangements for North American clients. Stephen can be reached at 416-817-4377 (Mobile) or sbronetto@bonamax.com
june 2007 15
marketing
Four Wheels and a Light Bulb by Jason Leonard
Green Improvements Help Market Your Building
What do Smart cars and compact fluorescent lights have in common besides being smart and bright ideas? They’re both environmentally friendly and at the core of two prominent property management firms’ green initiatives. With “Live Earth”, “Earth Day” and countless movies coming out about environmental awareness, there couldn’t be a better time to think ‘Green’. While a lot of people think being environmentally friendly means making drastic changes, the reality is you may already be doing things and are not even aware that you’re making a better world to live in. Think about it. There are plenty of environmental improvements made in this industry everyday, yet they are rarely talked about. Consider the following common improvements: • Have you upgraded any windows lately? • Have you recently replaced any boilers? • Have you replaced the weather stripping around your doors?
• Have you added trees and plants to your landscaping? • Have you implemented a recycling program in your mail room? 16 Canadian Apartment Magazine
• Have you replaced old appliances with new energyefficient models or upgraded to water-saving front-loading washing machines in your laundry room?
• Have you installed low-flow shower heads and toilets? With so much attention being directed at environmental issues, why not let people know what you’re doing in your properties? While some people may not care about these efforts, there is no doubt a growing group of people who do. Letting prospective and current clients know you care and are doing your part could mean the difference between prospective residents choosing you over your competitor across the street. So how do you deliver this message to the market? Well, let’s take a look at three companies that are leading the way in green marketing and examine what they are doing to get their message out to their clients and prospects. If we go back to the Smart car initiative, this one is actually quite easy. The vehicle itself is the medium. TransGlobe Property Management, owners of the largest fleet of Smart cars in North America, recognized that not only was this a cost-efficient way to move their leasing professionals from building to building but that as people saw their cars they were delivering a clear message. “We
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• Have you upgraded any windows lately? outfitted our cars to make them attention grabbing,” says Leonard Drimmer, CEO of TransGlobe. “Not only are they delivering a marketing message about our company, they’re sending a clear message that we care about the environment”. Sometimes it’s really that easy with no additional message required. Another example of this is planting trees and flowers around your property since they become instantly noticeable to your current residents and people that are walking or driving by. It’s an external element people can easily see and recognize. Marketing your environmental initiatives, however, isn’t always so simple. Often it takes a concentrated effort with a focus on the long term. Take Skyline REIT for example. They recently purchased 20,000 compact fluorescent lights, imprinted with their logo, to give to all their clients free of charge. It’s definitely a smart idea as not only does the investment pay back in terms of energy savings, (for those buildings where the hydro is included in the rent) but it also clearly shows their residents that they are willing to take the first step and lead by example. But how do you market an idea such as this to prospective residents? You don’t need to. You execute your plan and let your current residents market it for you. “Our residents are taking note of our efforts and it’s creating a really positive perception of our company,” says Carissa Drohan, Marketing Coordinator at Skyline REIT. “They see the many energy-saving initiatives we have underway and are now taking our message to the market for us”. 18 Canadian Apartment Magazine
At Minto Management, their newest building, MintoRoehampton, not only meets but exceeds all environmental standards set by the city of Toronto. The list of environmental initiatives for this building is indeed impressive and is at the core of their marketing. Much of the marketing effort for Minto-Roehampton is centered around a well designed website that focuses heavily on the environmental aspects of the property. The website, minto-roehampton.com, however, goes well beyond your typical website offering a pod cast from Andrew Pride, VP of Minto Energy Management. In this online audio episode, Andrew talks about some of the unique environmental and energy-saving attributes built into the Minto-Roehampton to improve indoor air quality and energy efficiency. Plus, he offers energy-saving and environmental tips for renters in the market for a new rental property. In the next issue, we will take a closer look at how to deliver your green message to your clients and prospects. In the meantime, if you have any questions, drop me a line. CA M
Jason Leonard is the Director of Marketing for gottarent.com. He can be reached at jason@gottarent.com or toll free (888) 966-4966 ext 225
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multifacts Eskimos Tackle Rental Squeeze Edmonton’s severe housing shortage, brought on by Alberta’s oil and gas boom, created a rental housing crisis for about 20 new members of the Edmonton Eskimos, the city’s Canadian Football League franchise. The players made the team but, couldn’t find apartments in the city. The team’s fans responded to the scarcity, phoning team offices and offering up accommodations. “It’s a difficult situation and people are stepping forward with options and opportunities, said Dave Jamieson, the team’s director of marketing and communication. He said the situation shows that even professional football players “aren’t immune” from Edmonton’s acute housing crisis. The city’s rental-market vacancy rate is at a record low, and some monthly rents have jumped by hundreds of dollars. Money is an issue for these young football players, and renting is their only option.
forum on the issue in July to educate people on how to prevent an infestation. He said the provincial Ministry of Employment and Income Assistance has been paying the tab for cleaning up repeated bed-bug infestations in Vancouver’s single-room-occupancy buildings in the Downtown Eastside. Some apartment buildings in the West End have also been dealing with bed-bug infestations, he added. Medical health officer John Blatherwick said bed-bug outbreaks are common and tough to get rid of. Even after a room has been cleaned, he said, it takes just one person to start the cycle all over again. “It also causes health problems because the bugs bite, cause itching, and if you’re living in less-than-ideal conditions, [the bites] can lead to infections.”
The starting salary for a CFL player is $37,000 and the average wage only $50,000. That compared with the National Hockey League average of $1.7-million (U.S.). Most CFLers have jobs during the off-season to supplement their unguaranteed football contracts.
Montreal woman wins smoking dispute
Mr. Jamieson said the Eskimos’ unprecedented homeless problem was exacerbated by the fact that the team’s training camp started later this year and players missed the traditional turnover date for many apartments in the city: June 1.
Sandra Ann Fowler held a news conference in front of the building to say she is happy with the Quebec rental board’s decision.
The housing issue dominated the spring sitting of the legislature and has become a political headache for Premier Ed Stelmach’s young government.
Ms. Koretshi, who suffers from asthma and was pregnant when she tried to have the clause added, did not think it was necessary to ask Ms. Fowler if she smoked when she signed her lease.
The Premier refused calls to enact temporary rent controls and instead favours doling out millions worth of rent subsidies to the needy.
She and her spouse, who live below Ms. Fowler, said earlier this year they assumed she didn’t smoke.
City Hopes Education Puts Bed Bugs to Rest
Loopholes Push Tenants out of Condo Converts
The British Columbia government wants to put the bed-bug problem to sleep in Vancouver.
The Alberta government’s new rental laws, passed earlier this year, are allowing landlords to get rid of tenants to convert apartments into condos in three months, rather than one year.
Vancouver-Burrard Liberal MLA Lorne Mayencourt held a public
A Montreal tenant has won the right to continue smoking in her apartment.
Her landlord, Olesia Koretshi, wanted to add a no-smoking clause to Ms. Fowler’s existing lease but the board turned her down.
Landlords only have to give the one-year notice if they’re doing major renovations and need the unit empty. Under the regulation there is no cap on rent increases, and there are no regulations to stop a landlord from selling a unit when a renter is living there. “If he sells a unit and the new owner has requested vacant possession, he can now issue a three-month notice to terminate a periodic tenancy,” said Monica Frank, a consultant at Edmonton’s Landlord and Tenant Advisory Board. “I think people expected they could get a one-year notice just because it was being sold as a condominium ... but we are trying to clarify that so people have a better understanding of what the changes mean.” More than 4,000 apartments in Edmonton were converted to condos in the first five months of this year, nearly as many as in the whole of last year. Eoin Kenny, who speaks for Service Alberta, said the government is getting swamped with phone calls about the issue. “It’s a very delicate balancing act the government is trying to maintain now between the rights of the tenant and the rights of the property owner,” he said. Kenny doubts there will be any changes to the tenancy law passed this spring. Regulation changes would only happen after public consultations, he said.
CAP REIT Acquires Adult Lifestyle Communities Canadian Apartment Properties Real Estate Investment Trust (CAP REIT) has announced that it is acquiring two premiere luxury land lease adult lifestyle communities. They are located in or near the communities of Bowmanville and Grand Bend, Ontario. Combined the two communities consist of 1,233 rental sites on 371 acres of land. Occupancies at the two properties are a very stable 99.5 percent. The total purchase price is $75 million, or approximately $61,000 per rental site, and includes the acquisition of all community services and amenities. The purchase will be financed by a $55 million first mortgage financing, the issuance to the vendor of $8 million in new CAPREIT Limited Partnership Units (at a weighted average price of $19.45 per unit, exchangeable into CAP REIT Trust Units), and the balance from its acquisition facility.
20 Canadian Apartment Magazine
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multifacts “We are very proud to be adding two of Canada’s premiere adult lifestyle communities to our growing portfolio. These superior properties are recognized as among the best in the country, offering the highest quality of lifestyle available in the market with a complete range of services and amenities,” commented Thomas Schwartz, President and CEO. Wilmot Creek is situated near Bowmanville, Ontario. Surrounding a 9-hole golf course, the community is comprised of 861 large and landscaped rental sites well-located in a rural setting along a three kilometre expanse of Lake Ontario shoreline, just 40 minutes east of Toronto. Average monthly rents at Wilmot Creek are approximately $648 per site. The well-planned community is comprised of highquality, single storey site-built homes ranging from 828 to 1,805square feet. Grand Cove is a 372-site adult lifestyle community situated in Grand Bend, northwest of London and close to the shores of Lake Huron. The bungalow-style, single storey homes of Grand Cove range from 1,167 to 1,805-square feet. Average rents are approximately $481 per month. “We are very excited about this new line of business for CAP REIT,” Mr. Schwartz continued. “Owning and operating a land lease adult lifestyle community is very similar to the apartment business. However, unitholders will benefit from the significantly lower capital and maintenance costs, minimal rent collection issues, reduced exposure to energy costs, high stable occupancies and generally longer lease terms with low resident turnover. Most importantly, the acquisition will enhance our overall profitability and be immediately accretive to our distributable income.” Homeowners in a land lease community own their home and enter into a lease agreement for the lot on which it is located for terms up to twenty years for a monthly rental charge. In Ontario, residents are subject to annual Provincial guideline rent increases. Homeowners are responsible for all of their utility costs, and all sites are connected to full municipal services. The average age of homeowners at CAP REIT’s two new properties is approximately 65 years. “Looking ahead, we will prudently examine additional acquisitions in this new line of business. With more than 1,100 land lease communities in Canada, and over 92 percent managed by single property owners, there is ample opportunity to expand our presence in this highly accretive sector,” Mr. Schwartz concluded.
Fire Code Requires Emergency Planning In most cities across Canada you will find many fire protection and service-type companies kindly reminding building owners and property managers of their requirement and responsibility to have their fire equipment, i.e. fire alarms, fire extinguishers etc., inspected and serviced as required under the National Fire Code, but when it comes to Section 2.8 - Emergency Planning that’s a different story. The code varies across Canada as some provinces and cities have adopted and amended the code to their own needs, but Section 2.8 still applies. Most buildings today have a fire safety plan as required under Section 2.8 but historically we find (after twenty eight years in business) this plan is usually out date, not submitted or inspected as required by the local fire authorities and even, in some cases, nowhere to be found in the building. Obviously fire protection systems are very important to the building and its occupants but, as outlined in Section 2.8 of the code, the emergency planning requirements go well beyond just having a firesafety plan sitting on your bookshelf. This section clearly states the requirements and it is the responsibility of the owner to ensure these requirements are performed. More information on the National Fire Code of Canada 2005 - Section 2.8 Emergency Planning will be available in the next issue of Canadian Apartment Magazine. For more information contact Doug Araki, WPS Disaster Management Solutions Ltd. at 800-545-9028 or email daraki@wps-plan.com
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feature
Living made easy C H A N G I N G T H E GA ME
I N MU LT I - R ES I D E N T I A L PRO PE RT Y M A N AG EME N T
22 Canadian Apartment Magazine 26
< Evan Kirsh Senior Vice-President Multi-Residential, GWL Realty Advisors
GWL Realty Advisors Launches Resident Services Division by Randy Threndyle
Wayne Tuck Vice-President Multi-Residential Property Management
Amin Rahim Director Marketing and Leasing
Vertica Resident Services, a new multi-residential property management company launched in January 2007, has a vision, “Living made easy” for its customers. While Vertica is based on a property management business model, the company intends to change the game by focusing on resident services rather than simply being a custodian for its property owners. The company’s goal is to provide residents with a superior living experience that will help make their lives more convenient and comfortable. A wholly-owned subsidiary of GWL Realty Advisors, Vertica is currently managing 3,270 suites located in Toronto, Brampton, Burlington and Oakville. Evan Kirsh, GWL Realty Advisors’ Senior Vice-President, Multi-Residential says the company made the decision to enter into the multi-residential property management business as it recognized an opportunity to reshape the residential property management industry in Canada by being more customer-centric. “Vertica has allowed us to get closer to our customers, so that we can better control service delivery and the overall customer experience,” says Kirsh. “We launched Vertica Resident Services because we felt we could be industry leaders by delivering superior service to our residents and enhance returns to our investors by being customer-centric and through key pillars like staff professionalism and technology.” august 2007 23
These pillars, which allow Vertica to differentiate itself from other multi-residential property managers, include: 1. People and Training - champions of Living made easy; 2. Leveraging Technology - to enhance the customer experience; and 3. Customer-centric Approach - to ensure the customer is always the central focus.
People and Training Wayne Tuck, Vice-President, Multi-Residential Property Management for Vertica Resident Services, says “Our focus is on the resident experience. We really don’t see Vertica as property management, but rather resident services. Our goal is to provide superior service to help make living easy, convenient and comfortable for our residents. And achieving this goal would not be possible without our staff.”
Leveraging Technology The company is applying an added level of sophistication to traditional operations to enhance the customer experience and realize better returns for investors. By leveraging technology, Vertica aims to improve service levels and save time for residents and staff. One example is the soon-to-be launched online resident portal to make online maintenance requests. Residents can access the portal anytime with the click of a mouse, from the comfort of their home, or the convenience of their office. This online tool will allow Vertica staff to better service the residents through improved communication and the efficient use of technology. Once an in-suite maintenance request is completed, the resident is immediately advised via e-mail and provided with an online survey which allows for instant feedback on how the service request was carried out. “Not only does this make the entire process more convenient for our residents, but if we find there are any gaps along the way, we can address them right away,” says Tuck. “Plus, as part of our ongoing efforts to
Ease of living and superior customer ser vice
Enhanced propert y returns
Vertica sought to ensure this goal was embraced and reinforced by engaging its staff from the outset and immersing them in a culture built on understanding the residents’ needs while focusing on Vertica’s brand promise of Living made easy. In addition, a dedicated Customer Experience Manager was put in place to represent the voice of the customer and plan for any process or staff improvements to increase overall customer satisfaction and loyalty.
be more environmentally responsible, it reduces the amount of paper used.” All of this is only part of what residents can expect in a Vertica managed building. Tuck says while each building will feature services and amenities geared toward resident needs, the company intends to concentrate on maintaining a high level of service for even routine day-to-day tasks.
Customer-centric Approach Other examples of staff training include: • Everyday coaching that takes place between the company’s property managers and the rest of the staff;
• Specialized training courses for Leasing Consultants with top hospitality industry experts on a benefits-driven sales approach; and
• Future hands-on training on new technology designed to ensure that each member of the Vertica team has the tools and skill sets required to deliver on the commitment to service. 24 Canadian Apartment Magazine
To maintain Vertica’s focus on customers, the company has recently launched a number of exciting initiatives to ensure the customer always remains front and center. Amin Rahim, Director, Marketing and Leasing for Vertica Resident Services says “The biggest challenge for Vertica is ensuring the connection between the brand promise of Living made easy and the actual brand experience for customers at their property. That is why we are committed to our people and to training. Ultimately, we would like to create positive word of mouth so people will want to live in a Vertica managed building.
“Our customer events are an excellent opportunity for us to meet our residents” In order to help create positive word of mouth advertising and further build customer loyalty, Vertica has organized customer events like concerts, summer barbeques and charity drives. These events allow staff to meet residents face-to-face in an informal setting and allow residents to become part of the Vertica community. Concerts in the Courtyard, co-sponsored with GWL Realty Advisors at Commerce Court in Toronto, were held in July and August and were open to all residents, along with their families and friends. In addition to the concerts, Vertica hosted a barbeque at each of the buildings that it manages. Earlier in the year, all Vertica buildings and customers participated in the Annual Spring HOPE (Housing Owner & People Everywhere) Food Drive. The company is hoping to sponsor another initiative to coincide with the December holiday season. “Our customer events are an excellent opportunity for us to meet our residents and to thank them for their continued loyalty,” says Rahim. “It also provides another customer-centric
“In May, we sent out a letter to all our customers thanking them for participating in the annual JD Power survey.” says Rahim, “In the letter, we reported our successes and areas that needed improvement. We also included our action plan and timing to make those improvements. This goes right to the heart of being customer-centric and working towards Living made easy.”
The Vertica Experience Focusing on the customer experience by being customercentric is the basis of Vertica’s goal of Living made easy. This includes Vertica’s commitment to its people and providing them with the right tools and training to achieve alignment with the brand experience and the brand promise. For customers this means convenience, comfort and superior service. The effective use of technology also helps to solidify Living made easy by providing another dimension of service and convenience. All this Vertica hopes will result in satisfied customers. Today, with over 3,200 suites under management, Vertica
Living made easy
touchpoint where Vertica employees get the chance to interact and build rapport with customers. For residents, it offers the opportunity to meet their neighbours and others living within the community.” To further integrate staff into the community and aid in building a socially responsible organization, Vertica staff participated in GWL Realty Advisors’ Build Days, supporting Habitat for Humanity. In May, these staff worked with Habitat to build an energy-efficient green home that was being constructed to Energy Star specifications. Besides being active at the buildings, Vertica is also proactive by initiating in-house surveys and participating in the annual JD Power Resident Survey. Results are used to obtain insights and take action, as required, to strive to ensure the brand promise and customer experience are aligned. 26 Canadian Apartment Magazine
believes there is plenty of opportunity for future growth by partnering with other institutional and private owners that have similar business objectives to Vertica. “For our customers, our promise of Living made easy means we will continually strive to provide them with the comfort, convenience and service that they expect from Vertica,” says Kirsh. “Life is complicated; home life should be simple. Our brand promise will resonate with residents who appreciate our attention to their specific needs, and the little things we do to help make life easier for them. When our residents are happy, we believe our owners will enjoy better returns through reduced turnover and lower vacancy, resulting in higher rental income and lower operating costs.” CA M
CONGRATULATIONS VERTICA FROM YOUR TRUSTED COMMUNICATIONS PARTNER
As Vertica continues to develop into a leading apartment management company, the Rogers Consumer Major Accounts team would like to extend to you our best wishes for success.
Trademarks of Rogers Communications Inc. used under license. All other trademarks, brands, names and/or logos are trademarks of their respective owners.
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68-00
When GWL Realty Advisors made the decision to launch a new multi-residential property management subsidiary they recognized they wanted a distinct name. Since the goal was to reshape multi-residential property management, GWL Realty Advisors wanted a name that would not only reflect this vision, but be able to effectively communicate it to residents, prospects and future investors through its brand signature.
They chose the name Vertica Resident Services for several reasons. “Vertica is a play on the word vertical,” says Amin Rahim, Director, Marketing and Leasing for Vertica Resident Services. “It represents both the vertical orientation of a building and, more importantly, the notion of aspiring to something higher. It also reinforces the promise of taking rental living to new heights and raising the bar on customer service.” Choosing the name Vertica Resident Services rather than Vertica Property Management represents an emphasis on a cus-
tomer-centric focus, says Rahim. It is also intended to distinguish Vertica in the marketplace. “Resident is a warmer, more personal word than tenant and services is more customer-oriented than the industry term property management.” The new company is a wholly-owned subsidiary of GWL Realty Advisors. Launched in January 2007, Vertica has 3,270 units under management. Vertica hopes to expand its business over the next few years in collaboration with institutional and private owners with similar business objectives.
W H AT V E R T I C A B R I N G S To Customers: Ease of living and superior customer service. To Clients: Enhanced property returns To GWL Realty Advisors: An industry leading multi-residential property management company 28 Canadian Apartment Magazine
Living made easy vertica.ca
pipeline problems
Trenchless Technology Saves Time and Property by Larry Rothman
What happens when roots get in the line.
Sewer line leaks can cause a major disruption to your business, especially if the drains have to be dug up using an open cut method. Trenchless technology allows pipes to be repaired or replaced with minimal digging. If you’ve ever had a water or sewer line leak into your building, you probably experienced the nightmares that often accompany the repair - trenches in your parking lot, destroyed landscaping and dug up basement floors. But “trenchless” technology allows pipes to be repaired or replaced without the digging and mess caused by traditional methods.
The causes of pipe problems Water chemistry is a major contributor to pipe problems across Canada, and impurities and chemicals in the water by Randy Threndyle often cause damage to plumbing systems. Water may contain iron, manganese, calcium, magnesium compounds, hydrogen sulfide, sodium, or chlorine. Hard water causes scale build-up in the pipes, and low pH or acid water may corrode pipes. Over time water may weaken pipes as a result of corrosion or erosion. Pinhole leaks may develop, or lead and other potentially harmful chemicals may accumulate in pipes. Settling or shifting soil in the area surrounding pipes may also cause problems such as sunken, misaligned, broken, cracked or collapsed pipes, or leaking joints. Certain types of pipe, such as Orangeburg, clay or terra cotta, concrete, thin plastic, and cast iron, are more susceptible to deterioration and collapse than some of the newer pipes, such as PVC or highdensity polyethylene (HDPE). 30 Canadian Apartment Magazine
Roots from trees and shrubs frequently find their way into drain lines and sewer pipes through extremely small cracks, holes, or poorly sealed joints. Once roots have entered the pipe, they continue to grow and expand, exerting considerable pressure at the crack or joint. The increased pressure often breaks the pipe and may result in total collapse. Regardless of the cause, broken, collapsed, or corroded pipes need to be repaired or replaced to restore maximum water flow, reduce the chance of backups and eliminate raw sewage leaks into the environment.
Trenchless pipe replacement For many years, open cut installations have been the standard for pipe repairs and replacements. The open cut method requires a trench the entire length of the damaged pipe — often resulting in destroyed landscaping and parking lots, a disruption and rerouting of traffic, an inconvenience to residents, and the occasional ruptured utility line. Using technology developed by gas companies, special equipment has been developed for the plumbing industry to replace broken or damaged water and sewer lines with minimal digging and damage associated with “open cut” methods. A number of “trenchless” pipe replacement methods are currently in use, including pipe imploding, pipe splitting,
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pipe eating, pipe reaming, pipe ejecting/extracting, and pipe bursting, or in-line expansion, which is the most widely used method. The pipe bursting replacement process requires only small access holes where the damaged pipe starts and ends. Using the damaged sewer line as a guide, a cone-shaped “bursting head” moves through the path of the existing pipe, simultaneously breaking up the damaged pipe, displacing the old pipe fragments into the surrounding soil, and pulling fullsized replacement pipe, usually HDPE, into place. HDPE meets American Water Works Association requirements, is resistant to leaks, and has a long life expectancy. Replacement pipe can also be PVC, cast iron, or concrete. Watertight fittings seal the connections between pipes and laterals.
repairing damaged pipes by creating a “pipe within a pipe” to restore function and flow to a poorly operating sewer pipe. Pipe relining is most commonly used in cast iron and steel pipes to protect against internal corrosion, leaks and infiltration. Pipe relining can usually be performed through a building’s cleanout access, and generally requires no digging. There are two methods of relining. The pull-in-place method uses a winch cable to draw an uncured flexible tube (the liner)
Pipe bursting can be classified into three main types based on the type of bursting head used in the process: 1) Pneumatic in which pulsating air pressure is used to hammer the head forward and burst the pipe as it progresses; 2) Hydraulic expansion in which the head expands and closes repeatedly to burst the pipe; and 3) Static pull in which the head has no moving parts, but is pulled through the existing pipe using a pulling device. Pneumatic pipe bursting, which delivers 180 to 580 blows per minute, is the most frequently used method of pipe bursting in pipes over six inches in diameter. Static pull is most frequently used for pipes six inches in diameter and smaller.
Pipe bursting is typically used for existing clay, asbestos cement, non-reinforced concrete, cast iron, and steel pipes ranging from two inches to 36 inches in diameter; however the process also works for pipes as large as 48 inches. Replacement lengths can exceed 400 feet. Pipe bursting is the only trenchless method in which the pipe diameter can be increased up to 50 percent for additional flow capacity.
Advantages of pipe bursting Pipe bursting is faster and more efficient than open cut replacements, due in large part to reduced digging and restoration time and costs, often making it less expensive overall and generally requiring less downtime for plumbing systems. Pipe bursting is less disruptive to traffic, residents and the environment. Pipe bursting creates minimal damage to property, including buildings, parking lots, nearby roads, and underground utility lines. Pipe bursting can also be used to protect historical sites, wetlands, and other environmentally sensitive areas where water or sewer lines run underground. Pipe bursting is very effective where there is limited access to the pipes in need of repair or in highly congested areas. Worker and site safety is another important advantage of pipe bursting because as much as 85 percent of the open excavation work area is eliminated, which greatly reduces the chance of cave-in, and the open area can be restored more quickly. The process is quickly gaining acceptance among local plumbing authorities as a safe and efficient way to replace sewer lines.
Trenchless pipe relining Pipe relining, or cure-in-place pipe (CIPP), is the process of 32 Canadian Apartment Magazine
Before Relining
After Relining
into the existing pipe. The liner is typically comprised of a polyethylene and resin mix that cures, or hardens, with air and/ or steam pressure. The second method is the inversion method, in which a felt-lined flexible liner is filled with an epoxy and resin mix then inserted into a roller machine which evens out the mixture and inverts the liner as it is inserted into an existing pipe. In both methods, a “bladder” (a balloon-type expander) is inserted into the pipe and inflated to press the liner against the sides of the existing pipe. The bladder is left in place for four to six hours until the lining has cured, creating a high-strength sleeve around the inside of the damaged pipe. The pipe relining process can be used for pipes ranging in size from three inches to 100 inches, can transition from a fourinch pipe to a six-inch pipe in a single run, and can make multiple 22-, 45-, and some 90-degree vertical and horizontal bends.
Advantages of pipe relining All materials used in the relining process are non-hazardous, which preserves the environment and reduces health risks. The relined pipe is seamless and durable, with a long life expectancy. The process involves minimal, if any, property damage and there is no risk of damage to nearby existing pipes. Relining offers a quick and permanent solution for damaged plumbing systems.
Market overview of trenchless technology Trenchless technology is used all over the U.S. and Canada to repair or replace aging pipelines, minimize property damage, and protect the environment. Trenchless pipe rehabilitation accounts for approximately fifty percent of all sewer rehabilitation currently performed in the U.S., and industry analysts project that the trenchless market will grow 10-15 percent annually. Trenchless rehabilitation is considered the most cost effective, least invasive method of repairing or replacing subsurface sewer and water pipes. CA M
Larry Rothman is the director of plumbing and engineering Services for Roto Rooter Services Company. For more information contact Stanley J. Collinin of Roto Rooter Plumbing and Drain Service at 416-503-4444, or visit www.rotorooter.com
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what’s hot what’s not
How Green is your Building? by Robert Helyar
More and more tenants are looking for “green” buildings when assessing where they want to live. A few green improvements to common areas and suites can make your property a preferred location
How often have you heard “It’s not easy being green”? Being green has now taken on a whole new meaning and it is definitely not an insult to have your property known as “green”. In fact, it may make you a preferred choice as more people view energy efficiency and being environmentally friendly as part of the criteria in deciding where to live. At one time, if you recycled, you were considered to be environmentally friendly. Today, however, this is now a standard practice and people are more aware of other areas where they can do their part in energy conservation. In a multi-residential property, there are two areas to consider when evaluating the “greenness” of the building. They are the in-suite and common areas.
How can you create Green units in your property? • When renovating suites, use lighting fixtures that are designed for long-lasting, energy-saving light bulbs. This can offer savings of up to $45 per month.
• Replace old appliances with Energy Star rated appliances. • Install low-flow showerheads. This offers savings of up to $8 per shower.
• High performance dual flush toilets will reduce water consumption and can save up to $60 per toilet.
• The use of fine latex paints and coatings will limit effects of toxic odors.
• Low-maintenance plank-laminate floating floors are an alternative to carpet.
• Submetering can cut electrical consumption by over 20 percent per year.
How can you improve the efficiency of the common areas? • Use energy efficient light bulbs in hallways and lobbies. • If the building has a garbage chute room, set the light
• Provide environmentally friendly products (such as cleaning materials) wherever possible for building staff to use.
Another area that can be improved upon is your building roof. A green roof, or ‘vegetated roof,’ is a plant-filled rooftop garden that offers an attractive and energy-saving alternative to a conventional rooftop. A green roof can keep buildings cooler, save energy, and extend the useful life of the roof, while adding beauty and useable space. There are many other energy conservation measures that can be taken, however, they are often quite costly.
Some of these can include: • When the time comes to install replacement windows, choose a high-performance window.
• Insulate floors over unheated areas. • Replace gas-fired boilers with high-efficiency units. • If residents control their own heating, provide programmable thermostats with adjustable settings for daytime and nighttime.
Some of the most dramatic performance benefits can be achieved through efforts to improve operations and educate both your staff and residents. The installation of expensive and sophisticated technology can be a waste if staff and residents are not trained to use it properly. Energy conservation should not be looked at as a one-time project but included as an ongoing component of your portfolio and asset management. In today’s business world, being socially responsible and environmentally conscious is simply good business practice. CAM
to come on only when door is opened.
• Set stairwell lights on timers or sensors so they only come on when there is inadequate natural light
• Equip laundry rooms with energy efficient washers and dryers. Green laundry detergent is also available if you offer your residents the option of buying it from a dispensing machine. 34 Canadian Apartment Magazine
Robert Helyar is the President of DALA Group of Companies and has held a number of executive positions with development and real estate holding companies. His numerous professional credentials include Registered Property Manager and Senior Certified Valuer.
November 28-30 2007
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Greening Existing Buildings: Major Focus
Metro Toronto Convention Centre South Building Greening is a major priority for building owners and managers as they seek to develop and implement strategies and practices that will use substantially less energy, ensure that indoor environments are healthy and comfortable, and reduce GHG emissions. SHOW THE MARKET WHAT YOU ARE OFFERING Greening existing buildings will be a one of the major themes of PM Expo 2007 as we respond to the interests and priorities of the real estate, property management and building industry. As an exhibitor, you will be able to showcase your service, product and/or technology to the market and demonstrate how you can help owners, managers and operators meet their needs and priorities for greener buildings and provide a reasonable ROI. The GREEN PRODUCT & SERVICE RECOGNITION and the PRODUCT KNOWLEDGE CENTRE (new to the Show this year) will help you to facilitate higher profile for the effectiveness of your offerings to the market. The National Green Building Conference will be held concurrently with PM Expo. With over 200 speakers, this will be the largest program ever offered in Canada of seminars and presentations on the best practices, most current strategies and the latest technologies for greening new and existing buildings. Be sure that you are a part of this significant market trend!
90% OF EXHIBITOR SPACE IS ALREADY SOLD! With a total attendance of over 22,500, PM Expo 2006 was sold out for the fourth consecutive year. The space rate for 2007 is $28 per sq.ft.
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To reserve your exhibit location or to receive additional information, please contact Jeff Ingram at (416) 512-3811 or send an email to jeff@yorkcom.to Your Customers and Prospects Will Look for You at PM Expo!
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property management
Why Hire a Third-Party Property Manager?
by Anne Meinschenk
Many landlords have made the decision to hire a third-party property manager. The reasons are varied, but in most cases, they want the expertise that professional managers can offer. For many landlords, owning a multi-unit residential building is a good long-term investment. The real estate values are bound to increase over time and the units provide a steady stream of income. But like all investments, there are challenges to work through. Challenges run the full range from high vacancy to capital improvements and repairs right through to tenant collections. In many cases long-time building owners are finding that times have changed and it’s no longer a “landlord’s market.” Yet many building owners continue to apply outdated techniques of attracting and retaining quality tenants to this changed market. This is where professional management with a reputable company can really give a landlord an edge. Often professional managers are very experienced with all aspects of management including the latest in advertising, leasing, capital improvements, and even collections. In other cases, day-to-day management can become burdensome and many landlords simply don’t have the time or skills to manage a building without help. Third-party property managers can also help landlords that are looking towards scaling back or retiring and therefore need to create a succession plan for the next generation. The children want the building for the investment value, but they don’t want to manage the building or deal with tenants on a day-to-day basis. Frequently people inherit a building, but they already have their own career and don’t have time to manage a building. In other cases, people who are new to the multi-residential business can benefit from hiring a third-party manager. They want to invest in multi-residential housing, but they don’t know anything about managing a property or they don’t want to deal with the investment on a daily basis. Typically, a managed building would have 100 to 200 suites, but buildings as small as 30 to 50 suites could benefit from third-party management. For the most part, high vacancy rates that have gotten out of hand have pressed landlords who would normally never consider enlisting outside help into hearing what third-party managers have to say. In many areas of the country vacancy rates have been on the rise as former tenants have taken advantage of low interest rates and purchased a home. Tenants may have also been lured away to other buildings by competitive pricing, upgraded suites and sometimes incentives and specials other landlords are offering. Landlords, who in years gone by, had 36 Canadian Apartment Magazine
no difficulty maintaining high occupancy levels, now find they have an aging building with high vacancy rates. For a lot of landlords it’s the first time they have faced this type of situation. They were used to running an ad in a newspaper or putting a sign on the lawn and filling the apartment almost immediately. Frequently they made no effort to renovate the apartment or market the building. As a result, the vacancy problem has escalated to the point where it’s not uncommon to see buildings with vacancy rates as high as 50 percent. It’s now a renter’s market and a lot of landlords are not prepared to deal with today’s competitive rental market. They don’t know how to attract tenants because they’ve never had to advertise. It’s a big change and a lot of landlords don’t know how to handle it. While some building owners are sticking to the old ways of don’t renovate or advertise, that doesn’t work with today’s renters. They want apartments in move-in condition and are more likely to surf the net for an apartment than to write down a phone number from a lawn sign. In order to attract and keep tenants, you need to develop a marketing plan that promotes your building to prospective tenants. The first steps in turning around a building can be as simple as cleaning and painting common areas and putting in new landscaping around the property. Not only does this give prospective tenants a good first impression, it helps to reduce turnover of existing tenants. In addition, vacant suites need to be assessed and renovated so prospective tenants will have a model suite to view. Part of a marketing plan involves studying the demographics of the area and finding the right advertising media to attract new tenants. Often that involves web-based advertising and cultural publications, rather than relying solely on mainstream newspapers. In metropolitan areas landlords are facing an increasingly diverse population. For many new Canadians, English is a second language. If you want to attract and keep new customers in this growing market segment, it’s essential to speak their language. A third-party manager with leasing agents who speak two or more languages will be of greater benefit in leasing vacant suites especially for buildings in downtown areas. Economies of scale are another area where a third-party management company can become a real asset to your business model. The bulk buying power that a third-party property manager offers can significantly increase your bottom line.
In many cases they can even help their clients add incremental revenue by making deals with companies that supply cable or laundry services to your building. Large third-party property managers get price breaks from suppliers which are passed on to the building owner. In the case of cable, third-party managers can negotiate a per-door fee which gives the building owner a percentage of the cable bill for each apartment. That goes directly to the owner’s bottom line. That extra revenue is only part of the service that a third-party property manager can negotiate for your building. Typically a third-party manager will get a price break from suppliers and trades as they are managing thousands of units. With that type of volume, contractors and trades are willing to quote lower prices. And, given the volume of work, contractors are keen to work with a third-party manager to develop a longterm relationship. In other cases landlords who want cost security can benefit from long-term contracts for natural gas or electricity. Through bulk buying power, third-party managers can often negotiate a better price for natural gas and lock in the price you pay for the length of the contract. A third-party management company will also develop a budget for the building, which allows the owner to assess how the building is performing in both the short and long-term. In the short-term, you need to know that the rent is up-todate and the bills are being paid. In the long-term you need to know that money is being set aside for capital expenses and building improvements. Most third-party property managers will utilize cost-control and property management software. For example, expenditures will require a purchase order and purchase orders above a specified amount may require two or three additional signatures from management. You also need to take a close look at the physical condition of the building. That includes the building envelope, structural issues and mechanical systems. For most buildings, it’s a good idea to have a five-year plan to budget for repairs and upgrades. The plan assesses what work needs to be done immediately and what can wait until future years.
Another service a third-party property manager may be able to offer building owners is legal and collection services. For instance, if a tenant has not paid their rent, a property manager will automatically issue the proper legal forms from head office. Mailing legal forms from head office ensures continued good relations between the building superintendent and the tenant.
In future issues we will discuss these topics in more detail. CA M
Anne Meinschenk is the Director of New Business Development for MetCap Living, a company that specializes in managing multi-unit residential buildings.
august 2007 37
regulation
Ontario Rent Increase Guideline Lowest in History The Ontario rent increase guideline for the year 2008 will be 1.4 per cent, the lowest guideline in the history of rent regulation in Ontario. The 2008 guideline was calculated for the first time under the new Residential Tenancies Act, and is based upon the Ontario Consumer Price Index. “Our goal is to protect tenants from receiving a rent increase well above the rate of inflation,” said Minister of Municipal Affairs and Housing John Gerretsen. “By linking the rent increase guideline to the Ontario Consumer Price Index, we’ve ensured that landlords can recover the increase in their costs, while tenants can still pay their rent.” Brad Butt of the Greater Toronto Apartment Association took a different view saying “Our costs often run far ahead of what inflationary costs are.” He said low rent increases might actually work against tenants’ best interests because landlords who can prove their operating costs surpass inflation will be able to apply for greater rent increases down the road. The rent increase guideline is the maximum amount by which a landlord can increase the rent of a tenant without seeking the approval of the Landlord and Tenant Board. Most tenants in Ontario receive an annual rent increase that is at or below the amount of the guideline. The old formula was based on the inflation rate for operating costs. Introduced in 1987 at a rate of 5.2 per cent, the old formula averaged 3.55 per cent in the years since. The previous low was 1.5 per cent in 2005.
The Residential Tenancies Act took effect on January 31, 2007. The 2008 guideline applies to a rent increase that occurs between January 1 and December 31, 2008. Federation of Metro Tenants’ Associations program director Dan McIntyre has different reasons for disliking the new formula. “The price of tea and coffee will affect the rate of inflation, and that has nothing to do with rental housing,” McIntyre said. He said rental increases should be a percentage of the inflation rate, because apartment buildings are fixed assets and the cost of utilities, mortgage and property taxes are easily absorbed by current rental rates. In recent years the guideline has been announced in early August or later. Mr. Gerretsen said the simpler math allowed his department to make the calculations earlier than usual. Tory housing critic Ernie Hardeman said the new formula is potentially unfair to both sides on the debate. “If the cost of housing repairs and maintenance has not gone up as fast as the consumer price index, then obviously the people are going to pay too much rent,” he said. “And if the cost of doing the business has gone up faster than the consumer price index ... then obviously the landlords will not maintain their buildings.” CA M
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C A N A D A ’ S O N LY N A T I O N A L P U B L I C A T I O N F O R A P A R T M E N T O W N E R S A N D M A N A G E R S
VOLUME 4 / NUMBER 3 / AUGUST 2007
Multi-Unit Residential Mortgages
Community Thermally Connected Headline Cogeneration Fuels Markham Development
Vertica Resident Services aims to Change the Game
2007
MOVERS AND SHAKERS
Windstorm Hits Owners in the Pocketbook: Are you protected against Lost Income? Tall Thinking: Should Multi-Residential be Part of Your Investment Mix?
IT’S CLOSER THAN YOU THINK...
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