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Bid or Pass Should Canadian cities pursue mega-events
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Life after the back cover…
what’s on BUILDING.ca
READ > The Energiesprong model comes to B.C. Lessons from Europe are guiding the Pembina Institute’s Affordable Housing Renewal pilot project.
67 04
CONTEntS
Features
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11 > Putting on a Grand Show / Are mega-events a wise investment or fool’s gold? By Rhys Phillips
18 > Common Ground /
Factors such as economic indicators, uncertain cost variables and even human emotion can have significant impacts on construction disputes. By Roy Cooper & David Hudd
Explore > La Vague A new roadside installation in Montréal mimics the motion of a wave hitting the pavement.
22 > Project Financing: Is There Change in the Air? / By Mahyar K. Hansotia
24 > A New Strategic Driver? / How the lack of a property tax strategy could be costing firms billions. By Terry Bishop
Explore > Fire Station #5 STGM Architects and CCM2 Architects put a decidedly modern new fire station on the outskirts of Lévis.
26 > Power in Precision /
Why it’s better to plan your submetering installation early. By Kevin Neild
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05 > Editor’s Notes 06 > Market Watch 08 > Legal 28 > Site Visit 30 > Viewpoint
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Volume 67
04 Number Editor / Peter Sobchak Art Director / Roy Gaiot Assistant Editor / Stefan Novakovic Legal Editor / Jeffrey W. Lem Contributors /
Terry Bishop, Roy Cooper, Mahyar K. Hansotia, David Hudd, Richard Joy, Megan J. Lem, Shannon Moore, Kevin Neild, Rhys Phillips
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Here We Go Again
I’ve said it before and I’ll say it again: mega-events do little to stimulate growth, strain already-burdened budgets, and in the end rarely deliver on their promises of urban rejuvenation. Back in mid2015 I was paranoid that Toronto — coming off a post-coital glow from the Pan Am Games — would foolishly lurch into the Summer Olympics fray (Building, August-September 2015). Thankfully my dire predictions about that did not come to pass, and in fact Toronto side-stepped another mega-event siren song when city council extinguished pursuing a World Expo bid last November. However, elsewhere in Canada it appears the promise of worldwide fame and fortune that mega-events purport to lavish on host cities is beguiling potential supporters. Not only is Calgary currently exploring whether to officially bid for the 2026 Winter Olympics (because it seems like the act of bidding alone will practically guarantee a win), but it also appears that gears are in motion for Canada to throw its hat into the ring of a joint bid for the 2026 World Cup, along with the United States and Mexico (notice anything special about those dates?). It should be fairly obvious that I am not a big fan of the “mega-event syndrome” and its various permutations. I’ve warned before about the dangers of being seduced by shiny new pro sports facilities (Building, February-March 2013), and the scale of potential damage caused by a mega-event — overpromising of benefits, underestimating costs, and using public resources for private interest — is even worse. There is plenty of economic literature warning that publicly financed mega-events like World Cup do not create positive net economic benefits for the community, and in fact are more prone to creating results like oversized or obsolete infrastructure and facilities that the public is forced to pay for (please observe a moment of silence for poor Brazil). At the same time, I have to admit that there’s something to be said about the experience of witnessing (or being one of) thousands of fans streaming out of a venue and through downtown streets: a potent reminder that the collective sharing of a megaevent can be a powerful tool in building a city’s identity. But mistakes tend to happen when planners and city boosters try to harness that emotional connection as an engine of urban redevelopment. There are examples out there of “good” mega-events (they tend to be World Expos) that left a lasting legacy of positive socio-economic benefits to a city or region as a whole, but as Rhys Phillips points out in this issue’s cover story it tends to come down to strong governmental leadership that made use of unbiased economic analysis and well-designed financing and governance structures to minimize the economic and financial costs. The type of literature I mentioned above urge new policy directions for potential host cities, such as no longer linking mega-events to large-scale urban development; earmark and cap public sector contributions; and bargain hard with event-governing bodies for better conditions. Canadian governments are not immune to pressures, public-opinion or otherwise, that push for us to be recognized on an international stage. But if we are to reap the maximum benefits at the lowest cost possible, governments need to do their homework — carefully and without prejudice assess the long-term economic and social dimensions — before making commitments, because these events leave a mark for a long time.
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Peter Sobchak Editor We welcome your feedback. Send your questions and comments to psobchak@building.ca building.ca
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market Shifting clouds, surging M&A shape 2017 data centre demand
As consumers turn to their smartphones for everything from streaming video to buying their groceries, the data centre industry is stepping up to meet escalating demand for storage. A new report from JLL reveals data centre construction in North America is up 43 per cent from 2016 and industry consolidation powered a $10-billion surge in mergers and acquisitions (M&A) in the first half of 2017. Meanwhile, cloud leasing activity started shifting to global markets. “While M&A activity is surging, data centre leasing has quietly returned to normal in the U.S.,” said Bo Bond, Managing Director and Data Centre Solutions Co-Lead, JLL. “The acquisition of large amounts of server space in the U.S. by cloud companies continues, but is no longer as frenetic as it was in 2016. Data centre users are now turning their attention toward filling out their global data centre footprint and making technology investments to keep them ahead in a rapidly changing industry.” Data centre users investing in the future In the report, top data centre users revealed the biggest industry changes coming over the next two years and addressed the hot topics in the industry and how they affect their investment decisions. According to users, efficiency programs will install automation to make data centre operations more valuable to the core business; artificial intelligence will help reduce human intervention in data centres and significantly cut time to restore operations in the event of a failure; artificial intelligence will make greater use of predictive analytics on-site; and processor technology investments will improve cooling and reduce energy usage. “Data centre users are investing in systems that will allow them to use their servers more efficiently and effectively,” said Mark Bauer, Managing Director and Data Centre Solutions Market Director, JLL. “Essential technological advancements like artificial intelligence to anticipate failures and automation to reduce response time are what the industry needs to keep up with today’s digital consumer.” August September 2017
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Montréal Following the raging storm of U.S. cloud activity in 2016, bigname cloud providers swooped in to Montréal in the first half of 2017. The timing is right for providers to enter the Canadian market and take advantage of its optimal pricing and low power rates. Supply is being driven by a few key companies: ROOT Data Centres in Baie-D’Urfé; COLO-D in Longueuil and Drummondville; Urbacon in downtown Montréal; and CogecoPEER1 in Kirkland. Smaller providers such as METRO OPTIC also have capacity available in the downtown core. Demand in the Montréal market remains extremely robust due to low power costs and cloud service providers demand. The demand shows no signs of slowing down and absorption rates remain extremely brisk. In this region, cloud companies are continuing to expand rapidly. Government Shared Services RFP is indicative of large organizations moving to the cloud. Renewable energy coupled with competitive power pricing from Hydro Québec make Greater Montréal an attractive market, and large investment funds are putting money to work through data centre development and acquisitions.
User demand by industry
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Spotlight: Data Centres
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Toronto Wholesale co-location inventory is expanding in Toronto, driving market competition. As in Montréal, supply is being driven by a few key companies—primarily DuPont Fabros(DFT) and Urbacon. DFT’s TOR1 facility (the former Toronto Star printing press) will add new wholesale co-location space in Q4 2017. Urbacon has recently announced the addition of 10 MW in Richmond Hill. I.C.E. DATA CENTRES is also bringing new inventory to the market. Further, Ascent purchased the BlackBerry facility in Cambridge, adding another 4.8 MW to supply. Demand in the Toronto market remains buoyant with traditional financial services and high technology businesses absorbing both space and power. Toronto’s place as the centre of business in Canada continues to provide a safe haven for mission critical infrastructure; however, the demand and supply economics certainly favour end-users. Market trends find cloud companies looking to solve local market latency and connectivity needs. Financial services remain at the centre of the Greater Toronto Area (GTA) market.
Cloud
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Western Canada Supply is high in Calgary, yet low in Vancouver. Calgary is facing a struggling local economy as well as minimal incentives being offered to users — no new projects are expected as operators work to fill vacancies within existing portfolios. Conversely, supply is low in Vancouver with every operator at or near capacity. Yet, in a market performing extremely well, only one expansion is anticipated due to the high costs of building. Demand for both Calgary and Vancouver is slower than 2016 for multiple reasons but expected to pick up as the big six cloud operators and international co-location operators investigate Western Canada. Also, Calgary is seeing typical transaction sizes significantly lower than in 2016, with the requirements in the market consisting of 60 kW or below. Market trend predictions are saying to expect interest to stay consistent until significant rent reductions and other concessions emerge. Initial POPs into Western Canada with primarily U.S. based hyperscale operators will continue to trickle in to satisfy Canadian customers. b
Banking & Financial services
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legal Small Slice Ministry of Finance data suggests that supply side factors, not foreign buyers, are at the root of GTA housing price pressure. By Megan J. Lem
Ontario’s recent experiment with a foreign real estate ownership tax has finally produced some hard data, and none of it has come as any surprise to industry pundits. Effective April 21, 2017, with almost no prior warning, a 15 per cent surtax (in addition to the regular land transfer tax) was imposed on all foreign buyers acquiring residential property in the Greater Golden Horseshoe Region, stretching roughly from Peterborough in the east to Midland in the north, Waterloo in the west and around the horn to Niagara Falls in the south. This 15 per cent surtax, called the “Non-Resident Speculation Tax,” was intended to curb perceived foreign speculation in Southern Ontario, which the government had estimated was as high as eight per cent of all sales in the Greater Golden Horseshoe Region, and was modelled almost entirely after the same sort of tax on foreign buyers in the Greater Vancouver Region implemented by the British Columbia government last year. Data released by the Ministry of Finance for the month ending May 26, 2017 (being the first full month period following the introduction of the tax) shows relatively modest foreign buyer activity. Far from being the huge market driver that the government had predicted (the government itself anticipated that foreign ownership could be as high as eight per cent of all purchases in the Greater Golden Horseshoe Region), the data revealed that only 4.7 per cent of the resiA store on purchases West dential made in that month in the Greater Golden Horseshoe Region Street in Goderich, was made by foreigners. Ont.’s historic downtown the a former federal cabinet minister and economist, summarized Garthbefore Turner, tornado hit (above), the general industry reaction to the news in an interview for CBC News. “The the damage (right), bottom line2013 here is that if we want to blame someone for ridiculous house prices and in August (below) after the town’s you’re going to have to look at yourself or look at your neighbour,” he said, “berebuilding efforts. cause it’s not guys coming over by the planeload from mainland China.” In defence of the original government predictions, however, one has to remember that the 4.7 per cent number reflects only post-tax transactions. That is, 4.7 per cent of purchases in the month were made by foreigners after the tax was already in effect. Unlike the B.C. Foreigner Tax, Ontario’s version of the tax “grandfathered” all pending transactions that were already under contract before the announcement of the tax. While this had the laudable effect of not causing a “rush to close” that caused a literal stampede to the Registry Office in Vancouver in the days before the tax came into effect, it also meant that any data that the Ministry of Finance has can only reflect the post-tax paradigm. The Ministry of Finance has no hard data on the level of foreign investment in the province before the tax. August September 2017
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Data revealed that only 4.7 per cent of residential purchases made in May in the Greater Golden Horseshoe Region were made by foreigners.
In a further irony known mostly to real estate lawyers and very few others, the Ontario government actually implemented a mandatory plan to gather comprehensive property ownership data in the province, but then decided to launch the tax before gathering any data under that plan! As it stands now, we will never know for sure what the pre-tax level of foreign ownership in the province actually was before the introduction of the tax, and, hence, we will never know how effective or ineffective the tax was in curbing foreign speculation (but, depending on how much of a conspiracy theorist you really are, maybe that was the point all along of rushing the tax in before the government had the data). Preliminary indicators of market activity in Ontario suggest that the tax is working. The Toronto Real Estate
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Board reported the number of homes sold in the Greater Toronto Area (the epicentre of the Greater Golden Horseshoe Region) fell 20 per cent in May compared to May last year. More recent numbers suggest that there is almost a 50 per cent reduction in the number of homes sold in the first two weeks of June compared to the same period last year. The same report also shows that the average price has fallen 12.2 per cent from the all-time, pre-tax high (although it is important to note that average home prices are still up 6.7 per cent on a year-over-year basis). Anecdotal evidence from real estate lawyers also suggest that the sheer volume of house deals has fallen this spring/summer, in some cases as a welcome respite to the blistering pace of the previous couple of years. Some analysts have suggested that the decline is actually part of an organic correction that was due in any event, and that the tax merely triggered, exacerbated and concentrated the otherwise inevitable market correction. We will not really know for sure, nor is it particularly relevant, whether the market has been permanently affected by the tax. Industry pundits are almost universal in suggesting that the effect of the tax is fleeting, and point to the Vancouver experience as a harbinger of things to come in the
Megan J. Lem is a corporate lawyer in the Toronto office of Osler, Hoskin & Harcourt LLP. This article reflects the opinions of the author alone.
Greater Golden Horseshoe Region. In a report on the impact of the B.C. Foreigner Tax, now a year old, the CBC summed-up the efficacy of the west coast version of the tax: “The foreign buyers’ tax, introduced by the previous Liberal government, has done little to improve affordability a year after it was introduced, say observers of Metro Vancouver’s real estate market. Analysts say home prices have continued to escalate, sales are on pace with pre-tax expectations and houses are largely still out of reach for most residents.” This brings us full-circle back to the original proposition held by many in the industry that housing affordability is a policy question involving long-term supply, and that policies aimed at artificially suppressing price (like the Non-Resident Speculation Tax) are simply doomed to failure. b
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Putting ✫
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Show ✫ Are mega-events a wise investment or fool’s gold? By Rhys Phillips
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he Globe and Mail has spoken. In its June 26 editorial, Canada’s self-proclaimed oracle of prudent economics strongly cautioned Calgarians against a foolish bid for the 2026 Winter Olympic Games. “The magical reputational benefits that allegedly derive from hosting the Olympics dissipate quickly, when they aren’t an outright illusion,” the editorialists proffered. “Calgary has already been an Olympic city once,” they concluded patronizingly. “Isn’t that enough?” This may seem rich from a paper headquartered in the city that hosted the 2015 Pan Am / Parapan Am Games, an event considered by most as a success, and “a gamble that paid off” according to the Globe’s own Mia Pearson. Simple hometown bias? No, since the paper ran an October 2013 story by Mark Hume headlined: “Vancouver Olympics worth the $7 billion price tag, report says.” And when Toronto city council was mulling a bid to host Expo 2025, Globe columnists had competing headlines, with Gary Mason arguing “Hosting a World’s Fair is Worth the Gamble” in 2013 while Marcus Gee cautioned “Toronto taxpayers should be wary of Expo 2025’s big promises” in 2016 (council eventually chose not to bid). Of course, the Globe and Mail is not the definitive arbitrator of whether hosting world mega-events such as Expos August September 2017
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from top to bottom:
Icons of past World Fairs include the Expo Axis from Shanghai Expo 2010 (previous page); the Buckminster Fuller-designed American Pavilion for Expo ‘67 later became the Montréal Biosphère; built for Vancouver’s Expo ’86, the Expo Centre later became Science World; The Los Angeles Memorial Coliseum is the first stadium to host two Summer Olympics, 1932 and 1984, and will presumably do so again in 2028; the Tree of Life was part of the Italian Pavilion during Expo 2015 in Milan.
or Olympics are wise socio-economic investments or wasteful indulgences. But the paper’s seesaw “for/against” stance illustrates two things. First, for many journalists, politicians and a majority of economists, such events have a sketchy reputation apropos their economic performance. Second, if the results of the just-released Calgary Bid Exploration Committee (CBEC) report are accurate, they can still muster broad public support.
First Problem: How are Costs and Revenues Defined? At first blush, defining costs and revenues of a mega-event seem straightforward. Usually, however, the “total cost” reported in the media appears considerably higher than organizer’s net estimates. Shanghai Expo 2010, for example, had an official cost of $4.2 billion, not unreasonable given its whopping 5.3 square kilometres and over 250 participants. Media reports, however, cite $50 billion as the real cost. Most reports omit that approximately $45 billion covered transforming this city of 20 million with vast infrastructure projects including three subway lines, a new airline terminal, a massively revamped waterfront, and other projects. Similarly, media reports on Olympic costs often do not separate out operating and other event specific costs from permanent infrastructure and sport facilities that, at least in theory, add long term assets to a city or region.
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The now-shelved Toronto Expo 2025 proposal, to its credit, carefully separated out required incremental investment for Expo to derive the event’s net cost of $1.910 billion (according to PwC with ARUP). This excluded $1.060 billion for other required infrastructure investment like flood control and transit already forecast by Waterfront Toronto for the site as well as new but permanent legacy facilities such as an Aboriginal Cultural Centre. Operating costs of $1.625 billion would be offset by similar revenues, leaving an incremental funding shortfall of approximately $1.9 billion. But, said the PwC report, hosting the event would generate incremental government revenues of $1.257 billion, thus reducing the unfunded figure to approximately $600 million. Anticipating frequent criticisms by economists in the past, PwC was careful to calculate in its analysis only the incremental tax revenues generated by the event. They also posit secondary incremental gains to spending, GDP, employment and employment income impacts. The result produced an estimated handsome return on investment. This approach extends to other mega-events although there are important caveats. A World’s Fair typically runs for five to six months versus two weeks for an Olympic Games, meaning less pressure on transit infrastructure such as airports (the grossly underutilized Athens airport is an oftcited example) and hotels (40 per cent of Lillehammer’s hotels went bankrupt following that city’s 1994 Winter Olympics). Olympics also usually require far more publically funded sport-
ing facilities, many so-called “legacy facilities” in name only. Beijing’s iconic but underused Birds Nest stadium is a popular example. Athlete housing requires significant investment although, if done properly, can be discounted as a post-event asset. An assessment by the Conference Board of Canada and Deloitte LLP of Calgary’s 2026 Winter Olympics was released this July. It predicts an unfunded balance of $1.2 billion without deducting legacy facilities. Because Calgary continues to fully utilize its major facilities from 1988, the CBEC is projecting upgrading existing facilities and adding only two new ones, plus $135 million for legacy endowments. Athletes’ accommodation would be financed through social housing and developer investment. While no new major public infrastructure is assumed, a contentious debate over public/private financing of a new arena and the need to complete an airport LRT link are not addressed. The report also posits significant incremental secondary economic impacts. Interestingly, some economists suggest that when a mega-event coincides with a recession — such as happened prior to Vancouver’s Expo ‘86 — the impact is greater because unused capacity reduces opportunity costs. Conversely, a housing recession created problems for Vancouver’s 2010 Winter Olympics athlete’s village, although in the end the city, after rescuing the failing private sector project, posted a net profit of $70 million (a number disputed by some).
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Witnesses for the Prosecution For observers of mega-events, corruption headlines like those swirling around FIFA, the International Olympic Committee ( IOC) and Expo 2015 in Milan; online image collections of abandoned Olympic venues; and inevitable stories of huge cost overruns are enough to turn many into opponents. In a scathing review of Milan, the Guardian’s Olly Wainwright invoked building.ca
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Seville Expo 1992’s now “post-apocalyptic landscape.” Many Canadians remember Montréal’s long financial burden engendered by its 1976 Summer Olympics, too often repeated by other hosts. Some may remember the U.S. federal government bailout of New Orleans’ Expo 1984, preventing a humiliating bankruptcy closing during its run, or the alleged $600 million-$1.6 billion loss at Hannover’s Expo 2000 when less than half of expected attendance materialized. The fact that few cities will now bid for the Summer Olympic Games confirms an increasing scepticism about bottom line benefits. With only Los Angeles (the only host city ever to turn a real profit) and Paris interested, the IOC is on the verge of opting to give them the 2028 and 2024 Summer Games, respectively. For the 2025 World’s Fair, however, four cities — Osaka, Japan; Baku, Azerbaijan; Greater Paris; and Ekaterinburg, Russia — are vigorously competing for the Bureau International des Exposition’s (BIE) coveted sanction. But more important has been the raft of post-event studies that have challenged consultants’ always rosy, pre-event assessment of economic outcomes. In his article Mega-Event Syndrome: Why So Much Goes Wrong in Mega Event Planning and What to Do About It (Journal of the American Planning Association, Winter 2015) Martin Muller summarizes decades of research augmented by multiple visits to megaevent sites and 51 participant interviews. He posits seven key negative consequences: Overpromising Benefits – including the pre-event economic multiplier effect, event tourism impact and postevent economy outcomes. “The bid book is science fiction,” he quotes one Olympic organizer; Underestimating costs – caused by firmly fixed delivery dates; inability to “ramp up” facilities over time; deadline profiteering; need for large contingencies given too many unknowns; long lead-times allowing for significant changes in variables; and promoter low-balling to achieve buy-in; Event takeover – in which the event pushes aside other more pressing planning needs (for example Toronto Mayor John Tory, in his opposition to Expo 2025, cited social housing and transit as more important); Public Risk Taking – where the public assumes the risk and the private sector reaps the profit. In Brazil’s 2014 FIFA World Cup, private investment failed to materialize leaving the public sector to provide 94 per cent of the investment; August September 2017
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Rule of Exception – resulting in disruptive special legislation, tax exemptions, suspensions of property rights (18,000 people were “resettled” for Shanghai Expo 2010) and changes to immigration rules. And it is not just in authoritarian countries. Vancouver expropriated a working class “slum” in 1986 and introduced free speech restriction by-laws in 2010; Elite Capture – because “mega-event planning tends to privilege local businesses and real estate interests, global corporations, and cronies of the political elite.” Again, we could cite Vancouver for Expo ‘86 where a prime waterfront site was sold by the provincial government post-event to a Hong Kong billionaire, well under its estimated value; Event Fix – happens when an event is used to create a catalyst to leverage money out of reluctant senior governments to achieve broader infrastructure or urban planning objectives. Canadian cities’ weak taxing capability, we could add, leads municipal officials to play provincial governments off the feds, an “Olympic” sport in itself. Some proponents, however, turn fixed deadlines and event fix into positives. Toronto city councillor Kristyn Wong-Tam, in an articulate defence of Toronto’s Expo 2025 bid to Build-
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from top to bottom:
Derelict icons is common post-megaevents, such as Seville Expo ‘92 or Beijing’s Bird’s Nest from the 2008 Summer Olympics (although re-use is intended for the 2022 Winter Olympics); Toronto’s plan for Expo 2025 focused on overhauling the Port Lands; Dubai’s Expo 2020 master plan, designed by HOK, will cover 438 hectares.
ing, argues that a “fixed date project” is the only thing that will ensure Toronto’s huge waterfront potential is achieved. She points out that the recent tripartite government announcement of $1.2 billion for flood control of the Don River estuary, a required component for Expo, comes with no implementation schedule. Wong-Tam also dismisses Tory’s “more important priorities” rationale, arguing Expo was very much about transit and social housing units. Economists have frequently supported criticisms of mega-event’s economic impact, particularly the tendency of ex-ante assessments to overestimate pre-, during and post-economic impacts when compared with economists’ own ex-post reviews. In 2016, John Wihbey, managing editor, Shorenstein Center, Harvard Kennedy School issued a summary of academic studies in which many, but not all, backed such findings, at least in terms of Olympics and World Cups. In an article titled Going for Gold: The Economics of the Olympics, economists Robert Baade and Victor Matheson report that in addition to every Olympics from 1968 to 2012 produ-
cing median cost overruns of 150 per cent, most ex-ante predictions on net or incremental improvements in economic performance were “rarely matched by reality when economists look back at the data.” There are three key reasons. First is failure to discount the “substitution effect” where investment, consumption, employment, and so on is diverted from a competing and perhaps more productive economic activity that would otherwise have taken place; second is “crowding out” where Olympic visitors are counted as additional rather than alternative visitors (both Beijing and London experienced fewer visitors during the Games than normal); and third, standard economic multipliers for expenditures overestimate the actual multiplier effect created within an Olympic economy. In terms of long term economic impacts, sport facilities such as stadiums and arenas tend to have few economic returns, are abandoned or inflict high maintenance costs. Additionally, there is no reason to conclude that supporting Olympic infrastructure investment will “provide higher returns than alternative infrastructure projects.” Other cited studies, however, have found that Olympics can “put a city on the map” and improve future tourism. Both Barcelona (1992) and Salt Lake City (2002) profited in this way. Similarly, Andrew Rose and Mark Spiegel in The Olympic Effect found “statistically robust, permanent and large, over 20 per cent” improvement in post-Games foreign trade.
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Witnesses for the Defense Mega-events are “great thing to do if you do them well; if you don’t do them well they are a bad thing to do,” says Joe Berridge, a partner at Toronto’s Urban Strategies Inc. who has worked on several major urban-centred events. A corny aphorism, admittedly, but one echoed by others, such as the Globe’s Gary Mason, who wrote glowingly of the enormous “transformative” impact of both Vancouver’s Expo ‘86 and 2010 building.ca
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Winter Olympics, attributing their success to “exceptional leadership.” Elsewhere, Conrad De Aenlle argues that unlike Seattle’s well-orchestrated 1962 World’s Fair, the excessive extravagances of infamous New York planner Robert Moses financially doomed that city’s 1964 Fair. Stung by well-publicized past negative outcomes, organizations like the IOC, FIFA and even the less-criticized BIE are attempting to refocus — at least publically — on better assessing the economic, financial and legacy outcomes proposed in bids as well as ways to reduce costs. Most telling, Los Angeles intends to build no new athletic facilities for the 2028 Summer Olympics, and house athletes in existing university dorms, thus reapplying the profit-making approach employed in 1984 when the lack of alternatives required the IOC to agree. It is also probable that future Summer Olympics will remain the prevue of developed cities with considerable existing capacity. Additionally, Berridge argues the 2012 Summer Olympics’ impact on the social, economic and environmental regeneration of East London/River Lee Valley will resonate positively long into the future. Less recognized and despite problematic costs, Barcelona’s 1992 Summer Olympics helped turn a faded industrial city into a regional powerhouse and the Seoul 1988 Summer Olympics played a major role in South Korea’s then-fledgling democratization. Shanghai Expo 2010, as Georgi Kantchev wrote in The New York Times in 2013, “is a perfect example of an expo held to show that a country is an important international player,” not to mention consolidating that city’s emerging role as a world economic powerhouse. Collectively forgetting Montréal’s Summer Olympics financial fiasco, one of the strongest arguments for hosting mega-events may well be Canada’s own record with Expo ‘67, Expo ’86, the 1988 and 2010 Winter Olympics, and 2015 Pan Am Games. Although all have their financial controversies, often about cost overruns and real profit/loss figures, all have both helped promote their cities on the international stage and left a defensible legacy. If nothing else, all of these events have left a domestic sense of community achievement. But there is more. Expo ‘86, focused on public transit and False Creek’s subsequent urban rebirth, played a major role
in Vancouver’s emergence as one of the world’s most admired cities while also helping mitigate a bruising recession, wrote Glen Korstrom in Business Vancouver. Similarly, the 2010 Winter Olympics left a legacy of well-distributed sports facilities in two cities and a much-needed infrastructure legacy including public transit, social housing, the Sea-to-Sky highway and an expanded convention centre. The magabove: The centrepiece nificent athlete’s village is a model of of Expo 2017 in Astana, intensification signalling Vancouver’s Kazakhstan, is the movement away from towers to loweight-storey Nur Alem and mid-rise housing. A UBC report sphere. found that while the Olympics neither increased net tourism (unlike Calgary and Toronto) nor added to its “international image,” it did result in vital infrastructure the two cities might never have seen. In other words, it successfully leveraged incremental funding out of both the federal and provincial governments. Learning from Vancouver, Toronto carefully responded to long term community legacy sports facility requirements at the regional level while using infrastructure spending, including housing, to make a major contribution to a London-like revitalization of the eastern core. Additionally, the legacy facilities “now allow for hosting other events such as the Aboriginal games,” says Jeff Everson of the Canadian Urban Institute.
The Verdict To this day, Calgary continues to use its 1988 Olympic sports facilities. If the city proceeds with a bid, it is considered the IOC’s preferred location and, like Los Angeles twice before, it may well end up as the only viable candidate, thus finding itself in a position to dictate more modest acceptable venues and more generous contributions from the IOC. The latter has already suggested there is room to lower Calgary’s projected costs even further, reports the Calgary Herald. Ultimately, the success or failure of mega-events is less tied to their specific, inherent and difficult structural circumstances than to how those responsible respond. Bad outcomes arise from the demands of highly dysfunctional sanctioning bodies, self-centred proponents and vested interests, overt corruption and bloated ambitions and egos of public actors. But the same could be said of most major projects. Properly executed, with careful consideration of a city’s economic, social, infrastructure and urban design priorities and capabilities, the long term outcome can be a positive legacy. So, bid or pass? The verdict is both simple and unsatisfactory: it depends. b
Visit building.ca for full interviews with Councillor Kristyn Wong-Tam; Joe Berridge; and the Bureau International des Expositions August September 2017
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Architecture Construction Design Engineering Property Renovation
Principal Supporting Associations
2017
November 29-30 Metro Toronto Convention Centre North Building
Your design connection. Our design community.
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Ground Factors such as economic indicators, uncertain cost variables and even human emotion can have significant impacts on construction disputes.
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Key highlights The global average of construction disputes dropped USD$42,800,000
isputes have long been one of the most frustrating obstacles for the real estate, building and construction industry. As such, the indusPart one: Time taken to resolve try has changed its behavior over Disputes and disputes decreased the years and recognizes the imavoiding the by 1 month, down to portance of early intervention. In same pitfalls 14 months. fact, many North American-based By Roy Cooper contracts include some kind of The highest value dispute formal administrative process that handled by Arcadis in 2016 brings these parties together to try was worth USD$2 billion and resolve disputes. These administrative processes are also designed to The social infrastructure/ kick in early in a dispute life cycle, which public sector is most at is usually at the beginning of the construcrisk with the most disputes tion phase of the project. Yet despite these proin 2016. active measures, a recent report by Arcadis Contract Solutions finds the value and duration of disputes have remained essentially unchanged over the last few years. In Failure to properly other words, the industry is experiencing the same pitfalls year after year. But why? administer the contract The construction industry is good at solving technical problems and developing still ranks as the #1 cause innovative methods. Look around at the cutting-edge projects that are completed of disputes. each year in every market sector. Technical issues always get solved. After all, there are not very many half-built buildings, highways, airports or power facilities 32.24% of Joint Ventures around the world. Employing formal, early intervention forums and robust conexperienced a dispute. tract provisions are the industry’s “technical” answer to avoiding disputes. However, as the Arcadis survey reveals, there are non-technical factors at the core of Party to party negotiation every dispute. Some of the factors are represented on a global scale, and some are remains the #1 method specific to the North American market. of dispute resolution. For clarity, Arcadis defines a “dispute” as a situation in which two parties typically differ in the assertion of a contractual right. The value of a dispute is the addiSource: Arcadis tional entitlement to what is included in the contract for the additional work or event which is being claimed. The length comply with the contractual obligations, a sign that experiof a dispute is the period between when it becomes formalenced industry advisors are not being sought at the outset. ized under the contract and the time of settlement or the conThe social infrastructure and public sector saw the most clusion of the hearing. disputes, moving up one spot from last year. This was closely followed by the property, real estate, and oil and gas sectors. The global perspective The report shows that both the global value and duration The view from North America of disputes have slightly decreased over the past year. The Much like the global averages, the value of disputes in North global average value of disputes was $42.8 million (all America dropped slightly in 2016. This is the third consecutive figures USD) and the global average length of disputes year that the value of disputes dropped since a peak in 2013 dropped to 14 months (compared to $46 million and 15.5 for this region. However, the average time taken to resolve months respectively, recorded in last year’s report results). these disputes in the region increased by over two months in The decreased dispute value and dispute duration will have 2016 and is over a month longer than the global average. multiple effects for both parties and are likely to have a posiFor the third year running, the most common cause for distive impact on the construction industry. putes in North America during 2016 was errors and omissions With that said, this year’s report continues to find that in the contract documentation. Poorly drafted, incomplete or globally, poor contract administration is the number one unsubstantiated claims, a newly added cause, ranked in the cause of construction disputes year after year. Specifically, second position. Failure to properly administer the contract — a failure to properly administer the contract remained the the top cause globally — moved from second to third position. most common cause of construction disputes worldwide. In North America, where a joint venture (JV) was in place, the Moving up this year in the rankings was the issue of the emproportion of disputes caused by a JV-related issue increased ployer, contractor or subcontractor failing to understand or from 2015 to nearly a third of all cases (30.36 per cent).
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With the new U.S. administration, and the forecasted increase in infrastructure spending, the North American construction market will be changing. Many of these new projects will be delivered using non-traditional delivery methods such as design-build, public-private-partnership, and construction manager as general contractor. All of these factors are sure to affect dispute values and durations in 2017 and beyond, and it will be interesting to see how the market adapts.
Understanding an emerging theme of 2017 The global pattern is that human factors are driving disputes and the same is true in North America. The pattern from previous years’ reports shows a similar trend, indicating that while the industry has developed better contracts, done a better job of risk allocation and has more educated participants, it has not figured out how to control human emotion. Human emotion and the need for being “right� often drives a dispute from infancy to the courtroom. Resolution of claims continues to present significant challenges for public owners. While the causes of those disputes vary, an important path to resolution is early intervention in the claims process. Whether it is through an administrative process or through mediation, proactive resolution minimizes the costs and delays for all of the parties and keeps the project on schedule. Public projects involve a lot of negotiations and therefore are often influenced by human emotion. Early intervention in the claims process helps avoid emotional entanglements that can emerge when disputes drag on.
Regional average dispute values (USD$ millions)
UK
US
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Part two: Cost uncertainty in an uncertain world By David Hudd
espite improvement in market sentiment and a positive global economic outlook, risks remain in the forecast and some turbulence is expected in markets which could affect the volume and complexity of construction disputes. Commodity prices have seen some improvement as a result of stronger activity and expectations of more robust global demand, coupled with agreed restrictions on oil supply. In fact, industrial commodity prices experienced a slight resurgence, increasing by around 15 per cent between October 2016 and February 2017. Overall, the 2017 global growth outlook is positive. Stabilizing oil prices, Brexit, and increased activity from policy stimulus in the U.S. and China are turning out to be larger than the current forecasts and would all result in a stronger pickup of activity.
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However, there are factors that could counteract the positive trends that began last year and have created the current global growth momentum. A potential widening of global imbalances coupled with sharp currency exchange rate movements, should those occur in response to major policy shifts, could further intensify protectionist pressures. The ability of investors and developers to flex their approaches to project procurement, finance and delivery will continue to be extremely valuable as politics and markets continue to be buffeted by both unexpected events and shifts in growth and economic conditions that will impact the global construction industry’s business. Fluctuating currency, commodity prices and politics can directly affect project capital expenditures and supply chain performance. A consideration of other cost variables Capital costs associated with constructing the infrastructure and buildings of tomorrow vary widely by location and remain hard to predict. Fluctuating currencies and commodity prices, and unexpected political developments have added to a complex and dynamic mix over the last year. These factors add further dimensions of risk to investment decision making, increasing the challenges associated with securing certainty of outcome. The 2017 International Construction Costs report by Arcadis details the relative cost of construction in 44 of the world’s major cities. Like the construction disputes report, this cost report found that risk can result in increased costs. Given construction’s poor record in improving productivity, there is a possibility that growing uncertainty might become a barrier to the successful delivery of project investment. And with the significant shift in the political landscape seen in 2016 in mind, the challenge for businesses and government has increased in many markets. Meeting investment decision criteria and achieving the predictable project outcomes may be more challenging in many markets, but will remain essential if vital infrastructure investment is to be delivered.
$84
Addressing cost variables Agility is a valuable capability in uncertain markets. However, in seeking to be agile, developers and investors may have to relinquish some level of control over the detail of project delivery. This has consequences for overall construc-
Source: Arcadis
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tion costs and can impact the probability of a dispute. Ultimately the challenge for construction professionals remains how to make smart investments in an increasingly uncertain world. Having access to high quality data and current, relevant market insight is one tool that will help the industry successfully navigate these challenges. No matter the city or country around the world, a fundamental truth is that the cost of constructing critical infrastructure and new buildings over the course of a long build phase is notoriously difficult to predict, making the challenge of providing cost and commercial certainty a vital one. However difficult the process of construction, when completed, built assets generate a formidable economic contribution to the communities and cities within which they are built. For example, in 2016 the built environment generated a huge $36 trillion of gross domestic product globally. This is evidence that throughout history constructing built assets, from roads and railways to residential high-rises, is critical to national wealth. Across the globe, governments are planning, constructing and redefining their built environments in order to create thriving communities that improve the quality of life for their citizens and generate better returns for the economy. World cities, including London and New York, continue to be some of the most expensive locations in the world to build. However, a slowdown in the rate of global growth, led by China and the resource economies, such as Brazil and Saudi Arabia, points to wider changes affecting the world’s construction markets. To address costs in this complex Roy Cooper is senior global market, it is increasingly imvice president portant to leverage available data anaof Arcadis’Contract lytics and digital construction methSolutions group in North ods to develop a higher degree of cost America. He is certainty and investment confidence. A responsible for all claims digitally enabled cost and project delivrelated service offerings ery framework allows for a more agile including claims response to these shifts in investment analysis, schedule fundamentals during project delivery review services, as well as driving long term asset life constructability reviews, cycle performance. cost estimating and With an increasingly volatile and quantitative risk uncertain geo-political and economic assessment. landscape, the importance of monitoring and controlling the cost life cycle David Hudd is a principal has never been more evident. Fluctuof the Arcadis Cost ating currency, commodity and politics Consultancy group. can directly affect project capital exHe provides comprependiture and supply chain performhensive cost planning, ance underpinning investment decimanagement and sions; the events of 2016 show that analysis services these fundamentals can shift quickly across a broad range and unexpectedly. b of sectors.
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Project Financing: Is There Change in the Air? By Mahyar K. Hansotia
When it comes to land development and construction projects everything largely comes down to the numbers — an equation of cost, interest rates, spreads, sales and profit. The planning phase is vital even for experienced builders, from securing funds to ensuring financial contingencies for project delays or shortfalls. For smaller or less-established developers, some of the critical questions our firm encounters can come during this phase, when determining cash inflows and requirements, or when evaluating a project business plan through the eyes of a lender. Financing and cash flow are the lifeblood of any project, and while the industry has been enjoying strong performance in recent years, it is also being impacted by a number of mitigating factors, from tightened lending rules and regulatory pressures to evolving tax legislation. How are these factors impacting available credit, risk and rates for all developers? Are there new trends in financing, and do they have implications for traditional lenders?
Appetite for risk
To help answer some of these questions, I spoke with Carl Lavoie, vice-president of Debt and Structured Finance at CBRE Limited, for his insider perspective. According to Lavoie, lenders’ attitudes are changing and they are becoming a bit more risk averse. This is not a case of oversupply in the market but a combined effect of several factors:
• Ratings agencies: The industry is being subjected to regulatory pressures, from the recent Home Trust situation and the downgrading of Canadian banks;
• Rent Controls: Ontario government regulations with regard to rent increase/control are giving developers pause about rental stock given the decreased chance of profit, especially if interest rates go up;
• NAFTA: While the impact of discussions is still unknown, there have already been layoffs in Québec’s lumber industry;
• Immigration: What are Canadians’ attitudes, do we allow more or less? How will this impact future demand?
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However, some developers aren’t necessarily feeling an impact, despite the recent turmoil. “There is still ample money available for established developers and quality, well-thought out projects, whether commercial or residential,” says Lavoie. “Lenders are just becoming pickier about where the money is going.” Much of it is also a function of location and pre-leasing. If you’re a commercial developer who is 80 per cent pre-leased and have national anchor tenants, securing funds won’t be an issue. But if you want to put shovel in the ground on speculative construction, or if you’re in a marginal area, on a side street with little or no exposure and no-name retailers, you’ll need cash on hand as it’s unlikely you’ll get financing. The higher quality projects will have a better chance of getting debt at reasonable rates. This may come as no surprise, perhaps. But from experience with some of my own clients, that doesn’t mean there aren’t options available for smaller builders, or those with more marginal projects. In this case, they may get a smaller loan amount and/or a higher interest rate, which will impact calculations on profitability. They may either need to self-fund the shortfall of the loan, or take a non-traditional approach. At this point, as a borrower you have several considerations. If supplying your own funding, will it come from your personal savings and/or personal line of credit? Do you have another business with surplus funds that can be used? If you have the cash to purchase the land, can enough funding be obtained to see it through to completion? Capital required for zoning changes, development plans, construction costs, neighbouring disputes, delays, and so on, must be estimated. Your accountant can help establish cash inflows from operations or other companies, potential sale of assets, personal sources if required and, based on all this, estimate the loan amount to determine whether you have sufficient cash.
If not, they can also help determine whether to move forward with the project or seek out alternative lenders, and connect you with contacts they may already have.
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Rates and spread
It’s harder to predict where interest rates are headed. Most borrowers are on a floating rate, with terms dependent on the length of the project. Many developers usually have loans on a “bank prime plus” basis, with a current spread anywhere between 0.5 per cent and 2.5 per cent, based on the quality of the project, past success rate of the project/developer, etc. The biggest developers with plenty of proven experience, however, will attract lower BA (Bankers’ Acceptance) or CDOR rates, which currently range from 0.9 per cent to 1.5 per cent, with a two per cent spread. There are other factors that impact pricing and debt. For condominium developers, for example, what will drive rates is the pre-sale level, where you are on timing of the project, zoning, etc. If you are ready for shovel in the ground, with pre-sales of 75 to 80 per cent and structured deposits of 25 per cent, financing shouldn’t be an issue. It’s important to note that access to funding is also a function of finding the lender that has the appetite on that particular day. There are a number of projects being built and at any given time some are coming to fruition, resulting in available capital looking for a new worthwhile investment. And what are the best projects developers should be focusing on in 2017? According to a 2016 joint study by Pricewaterhouse Coopers and Urban Land Institute, they include industrial property, urban mixed-use and seniors’ housing.
Trends in financing
While many borrowers use ‘traditional’ sources — technically, only banks and credit unions regulated by OSFI (Office of the Superintendent of Financial Institutions) are considered traditional lenders — today there is a large pool of non-traditional financing available. This includes money from mortgage investment funds, public or private companies, pension funds and residential or commercial REITs. These entities are looking for higher returns than what traditional banks offer and are entering this market with the intention that land security limits their risk while offering a much greater reward. An increasingly popular alternate lending scenario, according to Lavoie, is A/B structures or syndicated lending. For example, a borrower would have 65 per cent of the cost with an A lender, and 10 to 15 per cent with a higher rate B lender. On an average type loan, this can work out to a fairly reasonable cost. However this structure is done primarily with corporate lenders who expect higher returns, in the range of 8 to 13 per cent for riskier projects. Mahyar K. Hansotia, A new and still rare source of project funding is crowdMBA, CFA, CPA, CA, is sourcing, but Lavoie doesn’t see it impacting traditional president of Sobel and lenders, nor is it something they want to get involved with. Company, Professional “If more of these are done they will become heavily scrutinCorporation, which is ized by the securities industry, and by the Office of the Regisfocused on business trar of Mortgage Brokers. There’s already enough oversight owners of small- to midin our industry.” sized companies, as well The bottom line is that capital is available for quality deas large corporations, velopers or projects of any size, provided you plan for it apwho are looking for finanpropriately and your numbers work. The higher the quality, cial acumen and stratethe more capital is available at a lower interest rate, and with gic business expertise less effort required. Otherwise, be prepared to lower the risk over and above traditional for the lender with increased self-funding, or accept a higher chartered professional interest rate, which can affect your rate of return. b accountant services. building.ca
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By Terry Bishop
How the lack of a property tax strategy could be costing firms billions. Commercial real estate (CRE) is widely considered to be the fourth asset class, and as a result there is an increasing amount of competition for available assets and greater expectations for existing asset performance. The pressure to operate efficiently has never been greater and firms are looking for ways to derive greater asset value and returns from their portfolios. While many expenses such as property management costs are heavily scrutinized, only 25 per cent of over 200 C-level and senior CRE property tax and finance executives surveyed by Altus Group incorporate property tax management directly into their investment strategy and decisionmaking. With USD$515 billion of asset investment sales last year in Canada and the U.S., this results in USD$165 billion of CRE assets, including $9 billion in August September 2013 2017
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Canadian CRE assets, that are at risk of underperformance due to the lack of strategic property tax planning. Property tax is the single largest operating expense affecting commercial properties, and implementing a proactive approach to property tax management presents firms with a significant opportunity. In fact, 73 per cent of respondents said their firms could make better investment decisions with enhanced property tax planning. Often viewed as a fixed expense driven by market and government assumptions, property tax has been frequently overlooked as a factor that could drive strategic investment decision-making. Many have adopted the standard practice of implementing a three per cent growth factor when budgeting and underwriting, but an overall assessment of past industry underwriting and transactions shows that most property tax growth assumptions are inaccurate as taxes don’t typically grow at consistent rates. This carries with it a significant risk of inaccurate property tax forecasting, which in turn erodes value.
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Risk of asset underperformance
32% of CRE leaders said that property tax exposure has very little impact on their underwriting assumptions
Key gaps 41% only periodically review assessements to identify appeal opportunities
56% $165 billion USD of (CRE) assets at risk of underperformance ($156 billion U.S. & $9 billion Canada)
do not incorporate property tax refunds into their ongoing valuations
52% lack the tools to analyze property tax information
44% lack the experties and resources to identify property tax data sources
OPPE RA S T R A TI O TE GI N
AL C
A proactive approach to property tax management requires 75% a strategy that incorporates many considerations, outside of of firms surveyed the standard periodic reviews and appeals. While a successful describe their appeal could generate significant tax savings and reduce overproperty tax all operating expenses, firms can be doing more to ensure management as they’re getting maximum value from their portfolios. For expurely or largely ample, whether the property is designated for current or fuopertational and ture development and variations of purchase prices relative to cost reduction assessment values are both crucial in reducing property tax oriented liability. The appeal process alone does not provide the critical insights on current and future investment performance that can come from benchmarked tax information. Efforts to understand a portfolio’s tax liability versus a competitive or comparable set of properties within the market are much less common than appeals, but it is important for owners to know where their property stands in comparison to competing properties for leasing and disposition purposes. Even though benchmarked tax information can provide these critical insights, only 21 per cent of firms surveyed said they use enhanced real estate tax analysis that includes benchmarking to identify exposure of their portfolio compared to the market, and 32 per cent said that $515 billion property tax exposure has very little impact on USD of commercial their underwriting assumptions. Where a propreal estate (CRE) erty stands relative to the market is important asset investmenrt not only in ensuring property tax rates are acsales last year in the curate, but this knowledge also provides highly U.S. and Canada
The current state
25% of firms surveyed incorporate property tax management directly into their investment strategy and decision-making
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strategic benefits to investment decision-making and directly contributes to what, where, when and how assets are bought, sold and managed. In order to implement a proactive property tax management approach, firms must have access to and utilize the right tax data and analytics. While the majority of firms surveyed (83 per cent) indicated that they have the right metrics necessary to optimize their investment strategy, three key inhibiting factors were identified. Tax data comes from a variety of sources including taxing authorities, research reports, market data subscriptions as well as consultants and industry peers which lead to inconsistencies in formats and reporting, and 39 per cent of firms identified the lack of normalized formats as a barrier to utilizing property tax data. Further to this, the data must be properly aggregated, vetted and analyzed so firms can extract meaningful insights, and 52 per cent of firms surveyed said they lack the tools to assist with both data capture and analysis, while 44 per cent lack internal expertise or resources to identify property tax data sources. These gaps in tax planning will only grow if firms continue with a reactive approach, leaving portfolios at risk of underperformance. Rather than treating property tax as a fixed cost, firms that invest resources in strategically managing their property tax expense can realize a high return on investment through reduced operating costs and transactional efficiencies which will lead to higher NOI’s and greater asset values. Implementing proactive forecasting is essential in maximizing asset performance, and as property values and tax assessments continue to rise, so too does the amount of money firms are missing out on by not proactively managing property tax. There is a growing recognition and need for better real estate tax intelligence with the collective majority of executives affirming its significance, but enhanced real estate tax analytics are still underutilized. Firms need to take a critical look at their property tax strategies because with the right investments in process and technology, there is a significant Terry Bishop is Executive opportunity for property tax to play a Vice President, Eastern more strategic role in investment deCanada- Tax Group cision-making. b at Altus Group. building.ca
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Power in Precision Why it’s better to plan your sub-metering installation early.
etween permits, inspections, suppliers, vendors and contractors, some details may fall by the wayside during a new building development. However, one detail that shouldn’t be overlooked is how utilities are allocated among residents, especially for buildings that are a mix of residential and commercial occupants. It may seem like an aspect that can be worked out any time during the building process, but planning relevant utility details in advance should be a major consideration from the start of a building development to avoid potential headaches down the road. For mixed-use residential buildings, sub-metering is key to fair allocation of energy costs among residents and commercial units. For example, the energy footprint of a restaurant is drastically different than a retail store or a residential unit with two occupants. Without sub-metering, property managers are left to estimate utility costs and bundle them into the cost of rent or maintenance, resulting in an imperfect allocation of energy costs. Sub-metering addresses this problem as it allows for utility consumption to be measured based on actual usage by particular occupants, as opposed to estimated usage based on measurements from a bulk meter for the entire building. However, to successfully implement sub-metering into your building development, there are many design, legal and commercial challenges that should be considered sooner rather than later. The ability to allocate and bill utility costs to specific areas of a building is something that requires planning based on the unique project. One benefit of initiating sub-metering design during the planning phases of the build is that a developer has the option to allocate costs right down to a plug in the wall. In contrast, if that same developer waits and involves a sub-metering provider after the electrical system is completed, he or she can only sub-meter the existing circuits. A retrofit does not allow for significant changes, additions or concessions. While a new building development has no shortage of third parties that are involved in every aspect of the project, it’s important during the initial stage to August September 2017
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have your electrical engineers work closely with sub-metering designers that are trusted and have experience specific to your project. These electrical engineers and sub-metering designers will be in a position to plan for base building drawing integration, which is essentially a guide to knowing where all meters are or should be placed throughout the project. Given that one building could house residents, retail, public facilities and shared amenities, it is important to establish these details as soon as possible. With a resurgence of people making the decision to sacrifice square footage to experience life in urban centers, mixed-use developments provide people an opportunity to live and work in neighborhoods that previously would have been designated as purely residential in the past. Because a mixed-use development will involve multiple stakeholders, it’s important to have legal documents and agreements in place in the event of any unraveling of an agreed upon arrangement. This will also help to clearly outline how the sub-metering program and allocations work, eliminating most potential surprises related to energy consumption down the road.
Source: Toronto Star
By Kevin Neild
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ekWh/m2
Energy consumption by dwelling type
258
singledetached house
203
double row house
292
multi-unit residential building (MURB)
120
bestin-class MURB
MURB’s water consumption: annual utility cost
n
17%
MURB’s average energy intensity (ekWh/m2) 500 400 300 200 100 0 1950
1960
1970
1980
1990
2000
Consumption increase for suites not sub-metered and billed individualy
+12%
+15%
Average increase in condo maintenance fees over the first three years
14.8% new condos
7.0% market average
Cost of amenities / sqft
59¢
with
without
45¢
For the shared spaces or common areas of a building project, we also recommend developing and disclosing a shared facilities agreement that considers and formalizes utility allocation arrangements for shared spaces and common areas. This shared facilities agreement should clearly outline the allocation methodology and how rates are established. If you’re operating a condominium, make sure to reference shared agreements in the condominium’s incorporation documents as well. The choices you make during sub-metering installation will impact your business and future property managers. It’s important to choose an organization you trust as a sub-metering partner, since their services go beyond the installation phase. Complex metering and billing arrangements require active and ongoing management by your sub-metering service provider to ensure reliable service for all parties involved. Communication is key to making sure your sub-metering installation runs smoothly now and in the future. All details should be clearly explained to stakeholders, particularly condominium boards. Invest in proper design and legal documentation, as it is very helpful in articulating program dynamics. With that said, education is key. For this reason, we recommend developers include the rationale behind the sharing/allocation formulas as well. For developers, your job isn’t done once the building is finished. To maintain a positive reputation for your brand, it’s important to regularly communicate with property management to ensure a seamless transition and quality of service for the building occupants. This also can help to develop a close working relationship between the property management and the sub-metering service provider. This relationship is important since in the future they will be the ones addressing stakeholder questions and issues. While it’s recommended to build sub-metering installation into your building design plans, it’s never too late to make the switch. Retrofitting a building for sub-metering can be done, but it does present some unique challenges you otherwise wouldn’t encounter with a new construction project. When you engage a sub-metering design expert for a retrofit, the first thing you’ll need to do is discuss feasibility of installations with regard to space, capacity and other similar considerations. This will determine what type of sub-metering allocation your building will allow. Another challenge around retrofit projects is that the costs for retrofitting usually end up being higher and labour more extensive than new build installations for sub-metering in a mixed-use development. You’ll also need to account for transitioning over existing billing allocation models to the new sub-metering model, incurring additional administrative costs. Due to additional construction work, which may include tearing down and reconstructing walls, there may be an impact to normal building operations during installation. You’ll need to minimize the disruption of construction for building occupants, creating additional planning work for you. So while it is worth it to switch over from bulk metering to sub-metering in the long run, retrofitting creates extra work that could have been avoided by addressing sub-metering installation during the building development phase. Remember, sub-metering installation should be conKevin Neild is Director sidered during the early planning stages of a new building of Revenue Assurance development before you break ground. Developers, con& Customer Care sultants, contractors, property managers, condominium Operations at EnerCare corporations all need to be actively involved to smoothly Connections Inc. For implement sub-metering in your building. b more info visit www.
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enercareinc.com building.ca
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2017-08-14 4:35 PM
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s i te
Healthy Heart counterClockwise from Top left:
The six-storey
David Braley Health Sciences Centre is located on a downtown site across from Hamilton City Hall. The public system starts at grade with a two-storey glass lobby that fronts onto a landscaped public entry plaza and extends up via an indoor amphitheater and staircase to a two storey public atrium. Common throughout is a material pallet of stone and wood as well as fountains and planting features that link elevated spaces back to the original ground plane entry spaces. The typical upper floors feature narrow floor plates that encourage views and natural light penetration.
August September 2017
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building.ca
2017-08-14 4:36 PM
A new health centre in downtown Hamilton offers a refreshing and engaging workplace for students and sta ff.
29
Photography by Shai Gil
By Shannon Moore
Located in the heart of downtown Hamilton, the David Braley Health Sciences Centre is a place where wellness, collaboration and teaching collide. Completed in 2015 after an extensive 11-year planning and building process, the centre — named after businessman and philanthropist David Braley — is now home to the University of McMaster Health Care Teaching Program, Maternity Clinic, Family Health Centre, and Hamilton Public Health. Welcoming students, members of the general public, and faculty alike, the Centre seeks to provide a series of interconnected and engaging environments under one roof. “The building is the foundation of the University campus,” said David Clusiau of NORR Architects, who worked as design principal on the project alongside his firm and Ball Construction. “For students and staff, it is an excellent academic and training facility, whereas for patients, it is a convenient clinic located in a previously underserved area.” The 192,000-sq.-ft. building, connecting to City Hall and the adjacent Art Gallery through its modernist massing and details, contains a glass lobby that fronts onto a landscaped public entry plaza. In addition to meeting rooms and classrooms, the second floor contains a 200-seat theatre that doubles as a learning centre and venue for public gatherings and events. An open staircase leads to four more floors containing 48 exam rooms, a clinic, cafe, scholars lounge, and more. The staircase provides fluid circulation as an attractive and healthy alternative to elevator travel. Abundant views of the city, escarpment, harbour and water reveal a strong focus on nature through design, complemented by indoor fountains and trees, an outdoor garden terrace, green walls and roofs, and a general material palette of wood and stone. “Being able to bring the project in on budget using this rich pallette was a triumph for our team,” says Clusiau. Radiant floor heating, greywater collection and reuse, below grade air intake tunnels, and a connection to a district heating network for heating and cooling helped the project to achieve LEED Gold Certification. More than simply pleasing its users and surrounding environment, the Centre is a model for how building design can help refresh a city’s downtown core. “It’s an important investment to the urban quality of life in Hamilton,” says Clusiau. “The Centre has greatly contributed to the city’s revitalization and the civic and cultural precinct at its heart.” b building.ca
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v i e w Walk With Joy ULI Toronto’s Executive Director is ready to shed our typical Canadian humility and call Toronto a world-class city. By Richard Joy
Toronto is not a world-class city. To think otherwise is delusional and un-Canadian. We are a humble, beta-city that knows our place in the world. If you don’t believe me, ask any self-respecting local urbanist. But can we at least allow that we are a global city? It may be semantics, but as North America’s fastest growing city region — recently passing Chicago in population and tracking to surpass Los Angeles by mid-century —is it untoward to acknowledge our international ascendency? We accept that we are the world’s most diverse urban population, with more than 50 per cent of us born outside of Canada. And we celebrate the relative harmony of our fascinating international experiment knowing that Toronto has important lessons for a world of increasingly fractured geopolitics. We agree that we are an economic powerhouse that blew through last decade’s global economic downturn stronger than we entered it, the result of being one of the most economically diverse and technologically advanced economies in the world. We know that while we are behind in building transit (and suffer some of the worst traffic gridlock conditions on the continent), we have built a metropolis that has achieved more transit-oriented urban density than any city in North America outside of New York. And we have North America’s largest, funded, transit expansion plan as we try to catch up. We celebrate our Greenbelt, the world’s largest urban containment boundary, and the progressive development policies that ensure we build “in” more than “out.” Amazingly, the GTHA has about the same urban density as Copenhagen. We have long exceeded all North American cities in high-rise development, and are leaders in the construction of mid-rise and denser townhomes — the so called “missing middle.” Our suburban centres of Markham, Vaughan, Mississauga, Brampton, and Burlington have no continental parallels for achieving transit oriented urban density. Our central business district is almost entirely connected by the world’s largest commercial underground tunnel network (also one of the world’s largest retail malls) moving August September 2017
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a quarter of a million people a day. Add to this our globally leading district energy infrastructure of our deep-water cooling system that services the entire financial district and beyond. We have arguably built the most diverse (and greenest) economic and innovation centres in the world. And as large as it is, we need to keep growing it to meet unprecedented demand. Pearson Airport now connects to 66 per cent of the world’s economy by daily non-stop flights, growing to over 80 per cent in the coming decade. Its passenger volumes are poised to surpass Heathrow within 20 years. The airport is also at the centre of Canada’s second largest employment hub, in the middle of North America’s fastest growing technology corridor. We leverage social and civic infrastructure better than any city. Our public library system as no international parallel, serving as much to provide access to books and digital information as it does to help integrate new Canadians into our city. Our failed social housing projects are being transformed into some of the most coveted mixedincome communities in the city, at a scale not seen anywhere else in North America. International urbanists envy that two of its most famous made Toronto Richard Joy is Executive their home: Jane Jacobs and Richard Director of ULI Toronto. Florida. Can we be proud about that? Previously, he served as Indeed, as we forge ever more deepVice-president, Policy and ly into the century that belongs to us, Government Relations at it is time we take stock of the city we the Toronto Board of have become and the city we are beTrade, and was the coming. We may not want the Olympic Director of Municipal Games or a World Expo, but how well Affairs and Ontario is humbleness serving us? (Provincial Affairs) at Perhaps it’s time that Toronto shed Global Public Affairs. its self-inflicted denial that we are Follow him on Twitter emerging into a great alpha-city. May@RichardJoyTO or email be it is time we embraced it. Success at Richard.Joy@uli.org begets success and Toronto stands ready to further benefit from what it has already achieved. If this means calling our city “world class” I am ready to do so. b
building.ca
2017-08-14 4:36 PM
Tyco Integrated Fire & Security is now Johnson Controls. The combined strengths of two great companies are now under one great name. Making Johnson Controls the world leader in fire protection, security, HVAC, building controls and energy storage. Count on us for innovative solutions that lead to safer building environments and better outcomes for customers. Like advanced Simplex TrueAlert ES solutions with revolutionary notification system self-testing capabilities. Exactly what you’d expect from a leader.
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75841 JCI • Simplex Grinnell • Building Canada • 8" x 10.75" • 7/6/17
2017-08-14 4:36 PM
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Current as of July 18, 2017. Available to Business customers. With compatible devices within network coverage areas available from Bell Mobility; see bell.ca/coverage. One-time connection charge ($25) may apply to all devices. Taxes extra. Other conditions apply. If you end your Commitment Period early, a Cancellation Fee applies; see your Agreement for details. Subject to change without notice; not combinable with other offers. (1) As ranked by PCMag. Reprinted from www.pcmag.com with permission. © 2016 Ziff Davis, LLC. All rights reserved. Largest network based on total square km of coverage on the shared LTE network available from Bell vs. Rogers’ LTE network. See bell.ca/LTE for details. (2) With new activation on a 2-yr. Small Business Premium Plus, Premium Smartphone or Smartphone plan on the same account (min. price plan value of $30/mo.). Applied as a bill credit in instalments over 5 months, starting on the 2nd bill cycle. Credit depends on price of smartphone on a 2-yr. term: ($300 credit for device priced $250 or more. $250 credit for device priced $200– $249.99. $200 credit for device priced $150–$199.99. $150 credit for device priced $100–$149.99. $100 credit for device priced $50–$99.99. $50 credit for device priced up to $49.99). All other trademarks and logos used are trademarks of their respective owners. Copyright © 2017 Bell Canada. All rights reserved.
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