Canadian Apartment Magazine - CAPREIT

CAPREIT adds value from coast to coast

By Amie Silverwood

CAPREIT is one of Canada’s largest REITs and possibly the only one whose investments reach from the Eastern coast in Halifax to the Western coast in Victoria with all the major Canadian cities in between represented in its portfolio.

Tomas Schwartz, President and CEO

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Congratulations to CAP REIT on many years of Outstanding Success.

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Mark Kenney, Chief Operating Officer

Corinne Pruzanski, General Counsel and Corporate Secretary

According to Mark Kenney and Tom Schwartz, their success comes from having a strong and talented team that understands the value of investing in CAPREIT employees and the buildings they acquire. Many of their senior people have been with the company for more than ten years – some starting off as frontline staff and growing with the company into positions of seniority through education and experience.

“The executive team is made up of myself as CEO,” explains Tom Schwartz, “Mark as Chief Operating Officer, and below that we have a group of Vice Presidents. Mark has got three VPs reporting to him.

We have an experienced management team with a lot of depth and we have the best team in the industry. We have certain areas of specialty that most companies of our type don’t have. We have a very deep HR department, we have an extremely talented marketing department,

we have a very focused purchasing department, we have energy management in house today.”

“And a dedicated fire and life safety department which is to our knowledge one of a kind in Canadian apartment management,” adds Mark Kenney. “It’s a group that’s dedicated exclusively to the safety of our residents.”

The fire and life safety department is a good example of how the CAPREIT team goes above and beyond what is expected to provide residents with value. This added value translates to higher rents that make the CAPREIT buildings more profitable than many of their competitors. Instead of relying on external experts to come in and find safety issues with their buildings, they have their own experts who do their own internal safety audits and do extensive training with site staff and managers to prepare them for emergencies.

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Scott Cryer, Chief Financial Officer

“It’s pretty simple. If we have the best buildings, our tenants are going to pay the top rents and we’re going to make the most money.”

Maria Amaral, Chief Accounting Officer

“We have external experts come in,” says Kenney, “we just do deeper dives. And it really helps with the education – staff and resident awareness.”

Some of the steps they’ve implemented have been noticed and appreciated by residents. For example, they often have their management office on the ground level which allows staff to keep an eye on what’s happening in the lobby and at the front door. In buildings where there are lots of families with school aged children, they’ve had a staff member stand by the elevators when kids get home from school to make sure there’s no pushing or fighting on the elevators.

“It’s pretty simple. If we have the best buildings, our tenants are going to pay the top rents and we’re going to make the most money,” explains Kenney.

Their attention to detail has given them many years of financial success that they expect to continue. Because they’re a public company, their focus is on maintaining a steady cash flow for investors. They claim it’s their commitment to quality and innovation that allows them to grow an increasing stream of income for unit holders.

“We operate at record occupancies across the country,” says Schwartz. “Today, our occupancy across the country is at 98.4 per cent. For a portfolio our size, that’s virtually full occupancy and what I can assure is that’s occupancy at

the highest rents available in the market. Our marketing team focuses very much on looking at each building, looking at the competitive environment that it operates in, and making sure that we’re priced right and maximizing our revenues.”

They give an example of a street in Scarborough where there were four buildings of which two were owned by CAPREIT. Shortly after they first bought the buildings, all four looked similar from the street but upon entering the buildings, the CAPREIT underground garage was bright with freshly painted walls and good lighting so that it was a safer garage for residents. The office was moved to the lobby to give staff eyes on the street and so that they’d be available when the kids returned from school to monitor the elevators. Flowers were planted and the overall landscaping was improved.

“That qualitative difference got us $25/month more than the buildings next door and every couple of months somebody would move from one of the neighbouring buildings into one of ours. So that $25/month represents a premium a modest blue collar family would pay for a safer, more comfortable environment,” explains Schwartz.

Years have passed and that $25/month premium has grown significantly allowing for hallway renovations, balcony restorations and other work that has made those buildings the gold standard of the area today.

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Feedback from tenants For CAPREIT, each community is unique and each building’s needs can best be understood through interaction with tenants.

Moving the management office to the ground floor is one way staff can regularly interact with residents but surveys and letters also play a big part in getting to know tenants.

Schwartz recalls a letter that he had recently read that was sent in by a resident of one of the CAPREIT buildings. “It was a very simple letter but was basically complimenting our staff in the building. We’re very proud. We do a lot of staff training. And it’s not just at the executive level, it’s at all levels. We actually have a director of education in house and that gives our staff a certain amount of pride and it comes across in the way we handle our residents. When we get a letter complimenting a staff member, it’s important to CAPREIT.” They survey residents on a regular basis to get honest feedback from tenants. They want to make sure residents are happy, they don’t want to assume anything. They hold regular resident events to reinforce the community and they have a dedicated newsletter that goes to every resident in the CAPREIT portfolio on a quarterly basis.

“We’re a strong believer in resident communication,” explains Kenney. “It’s just about listening to the needs or what people want in the building.”

Added value When speaking with tenants, the CAPREIT staff members are trying to learn what kinds of improvements would be most beneficial to the building and its community. They’ve found that in many of their buildings, residents are looking for adequate daycare for their kids. So instead of adding convenience stores or gyms, they’ve found that often daycares are a more appropriate use of any extra space they have in their buildings.

“That’s all part of listening to what our residents want and it’s an amenity that people really want,” says Kenney. “ It’s a lot of work to get the zoning done and to get this thing organized but that’s the kind of commitment we’re prepared to make for our residents and it’s good for the business.”

Kenney is currently involved in a project that is adding a daycare to a site on Yonge Street in Toronto. They took an

unused storage locker on the ground floor of one of their apartment buildings and they’re in the process of making significant renovations to allow the school to be there.

Originally comprising of large storage rooms, the unit has large windows and enough space for them to change the use to house an educational facility for preschoolers which includes an outdoor play area. The tenants appreciate the effort CAPREIT puts into making changes to their buildings and finding a good daycare provider for it.

“It’s also creating more of a sense of community,” says Schwartz. “CAPREIT’s a long committed landlord. We think of each building as a community and the more we can do to reinforce that community, the stronger the community becomes and the more profitable CAPREIT is.”

They strive to have the best buildings, which allow them to charge the highest rents and bring in the most money for their investors.

Investing in staff CAPREIT invests in its buildings, adding value according to community needs but they also invest in their staff from the top executives to the frontline staff.

“We think we have the most experienced team in the business,” says Kenney. “Our team has been with us for a long time and we don’t see turnover at the building level, property manager level and senior level that a lot of organizations struggle with.”

CAPREIT keeps its staff happy by investing in them financially and through training. Such a large company with a diverse portfolio has much to offer a promising employee. Four of the top six executives in Kenney’s office started off as frontline staff. They have advanced through the ranks with training and experience.

“A lot of young people are looking to work for a company they can grow in and move,” says Kenney. “We have a lot of people who grew up in Ontario but moved to Quebec and we’ve moved them back to Ontario from Quebec. We’ve moved people from Ontario to Quebec who have wanted to be closer to their families. We’ve moved people to Alberta.

We’ve moved people to BC and to Halifax.”

This mobility within the company keeps employees Buyers’ Guide 2011 13

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“Our team has been with us for a long time and we don’t see turnover at the building level, property manager level and senior level that a lot of organizations struggle with.”

Left to right: Nadia Georgis (VP Accounting), Maggie Chin-Sang (VP Business Process Improvement), Corinne Pruzanski (General Counsel and Corporate Secretary), Perry Rose (VP Procurement and Energy Management), Thomas Schwartz (President and CEO), Mark Kenney (COO), Scott Cryer (CFO), Maria Amaral (CAO), Yann Lapointe (VP Operations), Trish MacPherson (VP Sales and Marketing).

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challenged so that they aren’t tempted to leave, explains Schwartz. “We don’t have a lot of turnover at the top and I can’t think of a time when a senior operations person actually left us for a competitor.”

Innovation CAPREIT keeps a leg up on its competitors through innovative websites and the use of social networking.

They’ve recently developed a mobile website that can be accessed through mobile devices. Prospective renters can go on their mobile website as they’re driving through an area and find out which buildings belong to CAPREIT and whether there are any vacancies within their chosen area or building. It’s a way of advertising to potential residents, says Kenney.

“It will tell you how many units are available and you can go right through the process of renting an apartment on a mobile device. You can be driving anywhere in Toronto and the mobile website will tell you the proximity of CAPREIT buildings and what’s available right on your device. You’re part of the apartment community; all CAPREIT apartments will show up, give you directions and tell you availability across Canada.”

They also use Facebook and Twitter to attract new tenants. According to Schwartz, their print advertising has been halved since they started seriously using social media to connect with renters. There’s a full team working on it in their marketing department.

Prospective tenants can use the CAPREIT website to find an apartment in a desired location, find out if there are any Buyers’ Guide 2011 15

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coverstory vacancies, get in touch with staff and even tour the apartment online before physically visiting the property. There’s an online chat feature on their website allowing curious minds to ask and have their questions answered in real time.

“For all of our floorplans across Ontario, we’re rolling out video floorplanning. Because once someone has seen an apartment, especially if you’re shopping around, it can be difficult to remember what you saw. So you can go back and revisit the floorplan and see where you’ll lay out your furniture. We have 3D floorplans on the website that are available to print out as well as the video floorplan.”

The websites and video floorplans are also ideal for those who are moving outside of their province. Through the websites, they can find out all they need to know about an apartment unit so that they can settle their living arrangements before moving without having to travel to spend a few days driving from building to building.

This is especially beneficial to students who often attend university or college outside their local region and may not have the time or money to make multiple trips to find accommodation before school starts. CAPREIT has a website designed especially for students that allows them to find vacancies in buildings close to educational facilities.

Green initiatives Like many landlords, CAPREIT is committed to both 11035_Roma_2011_FINAL.pdf 1 11-02-18 12:02 PM green initiatives and energy management initiatives;

they just take it one step further. Many landlords replace water hogging toilets with three litre water savers and replace light bulbs throughout their buildings with energy saving bulbs and fixtures but CAPREIT believes a lot more can be done and reaches far past these low lying fruit. They’re investing time and research into sustainable energy production and other income sources derived from these energy sources.

“We’ve moved on to biomass heating as a possibility, we’re looking at solar power generation as an income source, we’ve explored wind power opportunities and we were the force that met specifically with the City of Toronto to implement sensored light fixtures in common areas in apartment buildings,” says Kenney.

Biomass involves specially designed boilers that use wood chips as an alternative to oil or gas. It’s a cleaner burning fuel and it’s more efficient. It’s a technology that is popular in Europe, especially Germany, and they’ve found that it holds promise here in Canada. There’s ample pellet supply throughout the country since Canada is the world’s second largest producer of wood pellets.

The pellets are made of compressed wood that is fully renewable since they come from specialized tree farms grown for this purpose. The pellet facilities grow poplar trees, a fast growing species, to plant and replant on a constant basis.

Schwartz explains, “the emissions from the wood chips

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coverstory are no different from a gas furnace so they meet the highest, California emission standards. And we see it as an alternative to gas. Today, gas prices are very low but gas prices have been volatile and there have been periods in our history that natural gas has almost doubled in price because it’s a more sustainable source. A couple years from now, we may be able to define a very strong program in this area. We’ll do our first demonstration hopefully this year.”

Biomass is a fully automated system that holds a lot of promise but it requires a great deal of storage for the pellets. Some CAPREIT buildings, however, have plenty of storage capacity that would suit the boilers and the pellets. The automated auger feeds what is required to the very, very clean burning boilers so it doesn’t require very many chips. It’s in compressed chambers that give off a glow, not a flame.

Biomass is a new technology that isn’t well known but Schwartz and Kenney have also looked into more familiar green technologies such as solar and wind power. Unfortunately, wind power doesn’t hold much promise but because CAPREIT has such a diverse portfolio, there are many cases for which solar power makes sense as an investment.

“We investigated wind, the technology is not there yet,” explains Schwartz. “It’s something we looked at and we decided at this point there’s more merit looking at biomass

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and solar but the point is we’re constantly looking at green initiatives. They have to meet certain criteria and one of the criteria is that they have to be profitable to CAPREIT. They have to save energy. Saving energy is good for us, good for our tenants, good for our shareholders and good for the environment.”

CAPREIT also works with various municipalities to allow for other ways to save energy. They were behind the City of Toronto’s recent acceptance of sensored lighting in parking garages and stairwells. In the parking garages, they’ve sensored all the parking bays but not the main drives.

When a resident drives into the garage and pulls into their parking spot, the lights around their parking spot go on. This saves a lot of energy since lights are no longer on 24 hours a day. Residents have been happy with the changes.

In everything they do, CAPREIT pushes for quality.

They’ve gone from a REIT with primarily affordable units to one that specializes in the luxury market and they’ve expanded to reach all the major metropolitan cities in Canada. In every building in their portfolio, they look to add value.

Kenney explains that every building serves a unique marketplace but that people are willing to pay for quality.

“We bring in these energy initiatives and marketing initiatives and improvement initiatives like no other landlord we know of in Canada can.” CAM

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