CPM October 2014

F O R B U I L D I N G O W N E R S , A S S E T A N D P R O P E RT Y M A N A G E R S

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VOL. 29 NO. 6 • OCTOBER 2014

STALWART

SERVICE

Retirement Accolades for an Industry Innovator

PA R T O F T H E

P A R T

O F

T H E

TALENT MANAGEMENT SUCCESSION PLANNING WORKPLACE FRAUD DETERRENTS PORTFOLIO SUSTAINABILITY STANDINGS COMMERCIAL PROPERTY TAX BURDEN

editor’snote

VOL. 29 NO. 6

OCTOBER 2014

Editor-in-Chief Barbara Carss barbc@mediaedge.ca

MOST MAJOR ECONOMIC sectors generate and distribute wealth on more than one platform as producers of products/services, employers and investment vehicles. Real estate, however, uniquely contributes the venue where all this activity occurs, making it something of a Renaissance player in the economy.

Not surprisingly, then, it relies on wide-ranging skills to finance, design, build and operate capital assets, maintain a service industry within them and strategically deliver returns on investment. Perhaps it's not so much that the talent pool is shallow – although human resources expert, Veronica Pastor, tells us that's among employers' chief concerns – as that the demand is so expansive.

Our feature stories examine the real estate workforce from a few different angles, beginning with Pastor's report on how major Canadian companies are nurturing current and future executives, and grooming them to step into critical positions.

Notably, she relays how institutional investors increasingly expect their realty advisors to proactively manage internal talent.

Similarly, environmental, social and governance (ESG) requirements underpin a dynamic new career path within the industry. It's a good guess that many of the job titles held by attendees at the recent release of the 2014 Global Real Estate Sustainability Benchmark (GRESB) results did not exist 10 years ago. A room full of sustainability directors, managers and coordinators provides evidence of new priorities, opportunities and professional development trajectories.

From a wider business perspective, Gary Whitelaw, Chief Executive Officer of Bentall Kennedy Group (a holder of a more traditional job title), also noted the positive impact and outcome when ESG commitments are in line with employees' own goals and principles.

"That kind of engagement is a catalyst to attract and retain the best employees," he maintained.

We also mark an exemplary career in real estate, as Bill Partridge, President & Chief Staff Officer of the Building Owners and Managers Association of Calgary, closes out 34 years of service to the industry, his membership and his city.

Barbara Carss barbc@mediaedge.ca

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STAY CONNECTED Sign up for our free E-Newsletter at www.reminetwork.com/e-news-form 4 October 2014 | Canadian Property Management

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contents

Focus: Business Operations 8 Talent Management: Cultivating the ability to attract, develop, retain and deploy the best people.

14 Property Tax Fairness: Commercial-toresidential tax ratios narrow, but remain distinct in major Canadian cities.

16 Workplace Fraud: A triangle of financial need, opportunity and rationalization underpins perpetrators' actions, but the threat of detection can be a significant deterrent.

20 Sustainability Benchmarking: Survey results plot real estate portfolios' performance in environmental policy, management, implementation and measurement.

Articles: 10 Billy BOMA's Career Highlights: An eminent industry advocate & Calgarian readies for retirement.

26 Glass Advancements: New technologies bolster energy performance.

30 Detecting Paint Deficiencies: Application controls and inspection instrumentation provide quality assurance.

34 Carpet Maintenance: Scheduled cleaning extends asset lifespan.

Departments 4 Editor’s note

6 October 2014 | Canadian Property Management

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TENDING THE TALENT POOL Strategic Management of Human Capital Provides Competitive Edge

By Veronica Pastor LEADERS OFTEN SAY that people are their most valued asset. However, many companies struggle with identifying an optimal system that connects corporate strategy with talent needs in order to recognize, support and develop those individuals who will achieve organizational excellence.

Andy Pellant, founding director of Emergentedge, an organizational development and change management firm, defines talent management as: “A meaningful, shared, conscious and deliberate approach undertaken to attract, develop and retain people with the aptitude and abilities to meet the defined current and future organizational needs in terms of capability, behaviour, attitude, knowledge and style.”

Fundamentally, talent management is an organization’s ability to attract, develop, retain and deploy the best people. And it is becoming increasingly more important to have proactive plans to anticipate human capital needs in order to compete and increase profitability.

“Without [a formal plan] every change in needs is a surprise, and the only solution is to rush to the outside labour market to hire someone to fill vacancies,” says Peter Cappelli, Director at the Centre for Human Resources at the Wharton School.

Talent management programs have become a differentiating factor for companies that are implementing them in a meaningful way. Crombie REIT, for example, has moved away from a traditional and transactional human resources model to one that is “really thinking about how the strategy of people can drive Crombie’s future,” explains Cheryl Fraser, Chief Talent Officer at Crombie REIT. Similarly, Kim McInnes, President and CEO at Triovest Realty Advisors, notes that shareholders and clients are now “drilling down deep,” inquiring about the company’s talent management activities 8 October 2014 | Canadian Property Management

businessoperations with respect to depth charts, leadership development and succession plans.

“We manage assets on behalf of pension funds and these issues have become extremely critical to them in terms of choosing their service providers,” he says.

Succession planning in the real estate industry presents some unique challenges. In speaking with some of the industry’s key executives it quickly becomes clear that an increasing number of retiring executives coupled with a talent gap of 40- to 50-year-olds makes for a shallow talent pool in Canada.

“You’ve got a missing generation – some of the talent that is coming up to meet you is missing in action,” advises John O’Bryan, Chairman at CBRE Limited, which employs more than 1,800 people in Canada. “If you don’t pay attention to [talent management], you’re sowing the seeds of your own failure.

Ignore it at your peril.”

MATCHING SKILLS TO REQUIREMENTS One of the initial important steps in creating a talent management program is to identify the required skills to support corporate strategy and key deliverables.

This helps in evaluating the internal talent pool against the external market.

An internal talent review provides a snapshot of an employee’s strengths and weaknesses. This review takes the form of a combination of various approaches including: formal interviews, 360 assessments, review of performance evaluations, self-assessments and feedback from the senior management team.

“We have a deep and detailed succession planning and annual review process, using nine-box systems to assess every employee across all of the platforms," reports Oxford Properties CEO Blake Hutcheson. "The only thing better than having great real estate is having great people, and we’ve been able to achieve that.”

To conduct a successful internal talent review, talent management leaders need to get to know their employees personally, not just on paper. Crombie REIT’s Fraser confirms that meeting her employees was a key priority when she accepted the position two years ago.

“Talent management is about understanding and being able to put to use the full arsenal of talent that everyone brings with them when they come to work every day,” she says.

COMPONENTS OF A TALENT MANAGEMENT PROGRAM 1. Determine human capital requirements in relation to corporate strategy and key deliverables 2

Identify critical roles within the organization

3. Specify talent gaps 4. Conduct internal talent reviews 5. Assess external talent available 6. Establish succession plans 7. Attract and hire external candidates as required 8. Establish individualized development programs for high-potential and high-performing employees 9. Measure the performance of the talent management program on an ongoing basis

“The only thing better than having great real estate is having great people, and we’ve been able to achieve that.”

There are many ways that companies are preparing their internal talent to step into critical positions. These include mentorship programs, job shadowing, assigning employees at various levels to work closely with senior executives on special projects, regular 360-degree reviews, ongoing training and educational opportunities, and job rotations and secondments to cross-train employees in all aspects of the business.

“Within OMERS we share senior talent conversations so that we have the ability to cross-pollinate our businesses with the best people and give people opportunities not just within Oxford but within the whole OMERS family,” Oxford’s Hutcheson adds.

In terms of external talent, companies need a broad contextual view of who is working within competitive organizations, what their deliverables are, what their reputation is in the market and what value proposition they bring.

This is where an external consultant can

be of great assistance, because he or she works with numerous organizations in the same field and can see what and who is impacting the industry.

“You rank, for example, your sales force against competitors’ sales forces and you do an analysis of wins and losses,” notes CBRE’s O’Bryan. “We recruit a lot of our own and we train a lot of our own, but obviously you also want outside people coming in, too.”

This commitment to human capital is increasingly becoming the norm, required by all organizations to retain the trust of stakeholders, clients and both current and prospective employees. zz Veronica Pastor is a partner at W|P|Osborne Executive Search. She has successfully placed senior executives in all sectors of the real property industry and partners with real estate firms of all sizes. She can be reached at VPastor@ WPOsborne.com or, for more information, see the website at www.wposborne.com.

Canadian Property Management | October 2014 9

industryleadership

TURNING Career into L E G A C Y Bill Partridge Leaves a Long List of Industry Accomplishments

Photo courtesy of BOMA Calgary

By Barbara Carss

10 October 2014 | Canadian Property Management

DURING HIS 34-YEAR WATCH OVER the Calgary commercial real estate industry's interests, Bill Partridge has seen seven mayors and seven provincial premiers cycle through office – one of whom coined his memorable Twitter handle. First dubbed "Billy BOMA" by none other than Ralph Klein, the affectionate nickname is a perfect fit for a man who embodies the Building Owners and Managers Association (BOMA) and its objectives in one of Canada's most dynamic cities.

Partridge will retire as BOMA Calgary's President and Chief Staff Officer in December 2014, closing out a prolific career that has taken him from the public to private sector, and from a hometown in Canada's original capital, Kingston, Ontario, to his chosen home in what many project as the country's inevitable capital of commerce.

"I'm an Albertan who happens to have been born in Ontario," he says.

Change and adaptability have been consistent themes in guiding a growing organization, which is Canada's second largest BOMA local association, through an era of evolving social values, rapid technological advances and a seesaw of economic booms and busts that have defined the city.

"When I walked in the door, there were about 85 members and now we're just below 600. I think there was one female on the roster and now the split is about 50-50," Partridge says. "Even with my own home, there were still cows grazing nearby when we moved in and now it's considered almost inner-city."

It's a story familiar to many other Calgarians who have moved to the city, more than tripling its population over the past 40 years. His 1973 arrival – with a Master's in Urban & Regional Planning from Queen's University (and skis) in hand – to take a job in the City's planning department was perfectly timed to catch the first OPEC-triggered oil crisis and subsequent boom times in Alberta.

"The population had just ticked over 400,000 and, in many respects, Calgary had preserved its small town

industryleadership mentality. It was sort of cozy. You'd see [then Premier] Peter Lougheed walking down the street all on his own and you'd say: Good morning, Mr. Lougheed," Partridge recalls.

"Now we are at 1.3 million, but we have still, in some ways, retained that close-knit feeling. It's still pretty tight in our industry."

Preparatory experience with the City of Calgary, a private planning consultancy and the development industry helped build a foundation of knowledge and contacts for the next stage of his career with BOMA Calgary. Signing on in November 1980, he initially envisioned staying in the role for about five years.

Since then, he has promoted professionalism, education and innovation on multiple fronts, whether in advocating for Calgary's real estate and development industries within the political system, devising and supporting training for industry practitioners, or joining to organize BOMA associations as a network of strong and connected voices across the country.

"Bill is so passionate about this city and about this industry, and it just shows," observes Jay de Nance, the founding chair of BOMA Calgary's Next Gen committee and a current member of its Board of Directors, who calls Partridge a mentor and role model.

"Bill is going to leave a wonderful legacy in BOMA of ideas, projects, efficiencies and ways of thinking about things," concurs Rod Kauffman, President and Association Executive of BOMA Seattle, who has worked with Partridge over the past 20 years on various BOMA International and Building Owners and Managers Institute (BOMI) committees and collaborative efforts among local associations in the Pacific Northwest region. "He's one of those people who everybody likes immediately upon meeting him, and he's known within BOMA as someone who will step up and lend his expertise."

INNOVATION & PROFESSIONALISM One of the earliest projects of his tenure, the BOMA Calgary Building Guide, is an entrenched and annually anticipated overview and update of the city's commercial real estate portfolio – in

BOMA Calgary staff, December 2013

“When I walked in the door, there were about 85 members and now we're just below 600. I think there was one female on the roster and now the split is about 50-50.” which both the mayor and premier enthusiastically extend welcoming messages to prospective space seekers.

"When we introduced it in the early '80s, it was the first publication of this type in the country," Partridge says.

"That has been an important element of promoting the industry, promoting our members and promoting Calgary as a place to do business."

Under Partridge's guidance, BOMA Calgary was also an early adopter of once pioneering forms of communication now seen as the status quo. "We had the first BOMA website in the country. We had a website when people were still saying: the interWhat?" he reports.

Likewise a frontrunner in employing Twitter, his contemporaries – and their younger counterparts – express admiration for Partridge's open embracing of new concepts and emerging innovations.

"Bill is very techie for one of us kind of older guys. He understands the technological tools a lot better than most people who have been around in the business as long as we have," Kauffman notes. "He is also very entrepreneurial. Bill started a lot of good stuff and had a lot of the ideas that others have now successfully taken up."

Notably, BOMA Calgary conceived and hosted the first BOMEX® – Canada's national conference and exposition, which will mark its 25th anniversary in 2015 – where the National Building Awards also debuted.

"At the time, there was nothing on the scene that was a unifying event for the industry," Partridge says. "BOMEX® was something of a linchpin that started bringing the chapters together nationally."

Later, BOMA Calgary was a key proponent of adding the EARTH Award category, which recognizes leadership in

Canadian Property Management | October 2014 11

industryleadership sustainable management and best environmental practices, to the National Building Awards. As a certified association executive (CAE), Partridge also epitomizes professional standards both in the classroom as a former instructor for the Canadian Society of Association Executives and simply by example.

"Watching him in action for about 20 years, I've come to really appreciate his calm, deliberate and succinct manner in

explaining and interpreting Board issues related to constitutional and bylaw matters," says Paul LaBranche, Executive Vice President of BOMA British Columbia. "Association governance is a complex art and he's the master craftsman."

MENTORSHIP & SUCCESSOR PLANNING For his part, Partridge calls the 2012 launch of BOMA Calgary's Next Gen committee, specifically for members

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no older than 35, one of his favourite and most satisfying projects. It's aligned with ongoing efforts to broaden the membership base and attract and nurture successive generations of leadership that the industry needs.

"We have worked hard to encourage the corporate members to sign up their younger people. The Millennials are driving change in our society, and the generations have something to learn from each other," he asserts.

Jay de Nance has experienced that belief in action, recounting how Partridge sought him out as a tentative new attendee at an industry event, asked his opinions and encouraged him to get involved.

"I stumbled into commercial real estate as a student," explains the 26-year-old who is now Director of Tenant Services with Fairfield Commercial Real Estate in Calgary. "Bill was interested in my career and would touch base with me all the time."

That philosophy is also reflected in BOMA Calgary's own staff: Lia Robinson, Vice President, Communications & Client Relations; Lloyd Suchet, Director of Government & Regulatory Affairs; Aydan Aslan, Events & Marketing Coordinator; Ashley Grennier, Administrative Assistant; and Liz Krill, Accounting.

"I have learned a great deal from Bill about commercial real estate and association management," Robinson affirms. "He has been a mentor to me and created the space for me to grow my career at BOMA Calgary."

In the course of building his own career, Partridge married Marg — the Education Coordinator with the Real Estate Council of Alberta and a fellow émigré to Calgary (via New Jersey) — they raised three children and now look forward to the arrival of their fourth grandchild.

"My next career is to perfect the way I spoil my grandchildren," he quips.

Immediate post-retirement plans include relaxation and a trip to Scotland, with volunteer work beyond that. "The phone has been ringing," Partridge acknowledges.

Meanwhile, as the lengthy job posting illustrates, BOMA Calgary's board of directors has begun the task of finding a successor with the myriad skills on which it has relied for so many years.

"It's hard to replace the irreplaceable," de Nance says. zz

Call today at 1-888-298-3336 or CarmaIndustries.com c 2013 CARMA Industries Inc. All rights reserved.

12 October 2014 | Canadian Property Management

Follow Bill Partridge on Twitter, @BillyBOMA. His last day on the job is December 19, 2014.

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Property Tax Burden Shifts Slightly Commercial-to-Residential Rate Gap Narrows in Most Major Cities COMMERCIAL TAX RATES IN Toronto and Montreal continue on inverse trajectories even though ratepayers in both cities carry a disproportionately higher share of the overall property tax burden than do their peers in most other major Canadian cities. At the other end of the scale, Saskatoon and Regina boast the most equitable split.

Recently released results of the Real Property Association of Canada's (REALpac) annual property tax survey reveal that Montreal, Vancouver and Toronto once again have the widest commercial-to-residential tax ratios, with commercial properties in Montreal taxed at a rate nearly 4.5 times greater than that applied to residential. The average commercial-to-residential ratio across the 10 surveyed cities was 2.79-to-1.

"Tax fairness nationwide is a core pillar of REALpac's policy agenda. Excessive property taxes on commercial and industrial properties will make Canadian cities less competitive and ultimately reduce the property assessment base and jobs," maintains REALpac's Chief Executive Officer, Michael Brooks.

This year marked the 10th consecutive year that Montreal's commercial-toresidential tax ratio has increased in the 11 years since REALpac launched the survey in conjunction with its r e s e a r c h p a r t n e r, A l t u s G r o u p .

Toronto's ratio has steadily decreased in the same period, registering at 4.01to-1 in 2014, as city administrators press toward the stated goal of lowering the ratio to 2.5-to-1 by 2020.

Edmonton and Halifax were the two other cities to see notable decreases in 14 October 2014 | Canadian Property Management

their ratios. Edmonton's ratio dropped from 2.33-to-1 in 2013, to 2.25-to-1 this year, while Halifax's ratio dropped from 2.94-to-1 to 2.81-to-1.

Even so, Halifax joins the big three cities with an above-average spread between commercial and residential tax rates, as residential ratepayers in the city also benefited from a slightly diminished tax rate compared to 2013.

The survey also calculates estimated commercial and residential taxes per $1,000 of assessed value. By this measure, commercial ratepayers in Montreal, Halifax and Ottawa had the highest payout, and Toronto and Winnipeg were also above the average of $24.25 per $1,000 of assessment.

Notably, Montreal reaped $37.12 per $1,000 of commercial assessment versus $8.27 per $1,000 of residential assessment.

Calgary, which sits midway among the 10 cities with a commercial-to-residential ratio of 2.31-to-1, collected $14.11 per $1,000 of commercial assessment compared to $6.10 per $1,000 of residential assessment.

Commercial ratepayers in Toronto paid $29.98 per $1,000 of assessment.

Meanwhile, residential ratepayers were taxed at $7.23 per $1,000 of assessment — less than the average of $9.51 per $1,000 of residential assessment across the 10 surveyed cities.

Vancouver recorded the second highest commercial-to-residential tax ratio at 4.33-to-1. Yet, reflective of the city's property values, taxes per $1,000 of assessment were among lowest of the surveyed cities. Commercial ratepayers paid $15.91 per $1,000 of assessment, while residential taxpayers paid $3.68 per $1,000 of assessment — a stark contrast

to homeowners in Regina and Saskatoon, who paid $13.69 and $12.58 per $1,000 of residential assessment respectively.

Even when accounting for widely varying property values among some of the surveyed cities, Saskatoon and Regina's narrower commercial-toresidential tax ratio is also a significant factor. Saskatoon is committed to maintaining the 1.4-to-1 ratio, which was the lowest among the cities, while Regina's was second lowest at 1.56-to-1.

Commercial ratepayers in Saskatoon paid $17.62 per $1,000 of assessment, while their contemporaries in Regina paid $21.37. Nevertheless, these were the only surveyed cities where the commercial tax rate increased in 2014.

"Most Canadian cities have extended the ongoing trend of decreasing commercial tax rates to promote business growth, but residential taxes have continued to decline over the past 11 years at a faster rate than commercial tax rates," the introduction to this year's survey results states.

Winnipeg offers the best illustration of that trend. Although the commercial tax rate declined by 6.5% in 2014, the residential rate dropped by an even more significant 8.3%.

Cuts to the residential tax rates in Calgary, Montreal and Ottawa also surpassed those to the commercial taxes.

Montreal's commercial tax rate was 3% lower than in 2013; however, the residential tax rate dropped 4.8%. Residential rates in Calgary dropped 3.5%, while the commercial tax rate fell 1.3%. zz For more information about the 2014 property tax rate report, see the Real Property Association of Canada website at www.realpac.com.

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Safeguards Discourage Workplace Fraud Opportunity is Key Factor for Prospective Perpetrators Occupational fraud takes an indisputable financial toll – a median loss of $145,000 reported in the Association of Certified Fraud Examiners' (ACFE) 2014 global fraud study – while more insidiously creating distrust and undermining morale in the workplace. The recently released biennial overview of investigations worldwide provides a picture of the perpetrators and the ways in which their illicit activities were detected. The following is an excerpt of some of the findings – Editor.

ACCORDING TO THE FRAUD TRIANGLE THEORY – that those who commit occupational fraud tend to have a perceived financial need, opportunity and rationalization – the threat of likely detection is one of the most powerful factors in fraud prevention because it all but eliminates the fraudster’s perceived opportunity. When comparing the initial detection method to other information, such as the fraud’s duration and the financial damage caused, examiners found substantial differences among the various ways frauds were uncovered.

Nor is the manner by which frauds are detected purely incidental. The data suggests that the likelihood of discovering fraud in particular ways can be shaped by the procedures and controls that an organization has in place. This information can help organizations detect frauds more efficiently.

Tips are consistently the most common detection method for cases of occupational fraud by a significant margin, which has been an observed trend since data was first tracked in 2002. Management review 16 October 2014 | Canadian Property Management

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and internal audit are next most successful methods.

Frauds that were discovered by accident tended to last the longest, with a median duration of 32 months, and had a median loss of $325,000.

The five detection methods with both the shortest duration and lowest loss – surveillance/monitoring, account reconciliation, IT controls, internal audit and management review – involved proactive efforts to discover fraud. In contrast, detection methods that are not the result of efforts within the organization to detect fraud – c o n f e s s i o n , n o t i fi c a t i o n b y l aw enforcement, external audit and by accident – tended to last longer and cost more.

Large and small organizations often allocate resources differently for antifraud measures and the distribution of detection methods at these two types of organizations also varies. Small organizations with fewer than 100 employees differed most from large organizations in the percentage of cases detected by tip (34.2% and 45.1%, respectively) and internal audit (9.8% and 16.5%). These findings are not surprising, given that small organizations are much less likely to h ave h o t l i n e s o r i n t e r n a l a u d i t departments.

TIPS, AUDITS, ACCIDENTAL EXPOSURE Canada is something of an anomaly in that internal audits did not rank in the top three modes of detecting fraud, as they did in all other regions. However, Canada's top two – tips and management review – are consistent with the most successful (top 3) detection in methods in the eight other surveyed regions.

Accidental detection and account reconciliation were the equally ranked third most common modes in Canada, each credited with 8.8% of the fraud cases discovered, whereas an internal audit was the detection mode in just 3.5% of cases.

Survey participants identified which of 18 common anti-fraud controls were present at the victim organization at the time the fraud occurred, revealing that external audits were the most common control. Yet, although more than 80% of victim organizations e m p l oy e d ex t e r n a l a u d i t s , s u c h

measures were the source of fraud detection in just 3% of cases.

External audits serve many important functions, but this suggests they should not be strongly relied upon as a fraud detection tool.

Meanwhile, tips accounted for more than 42% of discoveries, suggesting that hotlines ought to play a critical role in organizations’ anti-fraud programs. Of the victimized

in Southern Asia and the Middle East and North Africa.

SMALL BUSINESS VULNERABILITIES Small businesses (defined as those with fewer than 100 employees) were victimized in the greatest percentage of reported cases. Median losses for small businesses and the largest entities (those with more than 10,000 employees) were the highest, at

Canada is something of an anomaly in that internal audits did not rank in the top three modes of detecting fraud, as they did in all other regions. organizations in the study, only 54% had a hotline mechanism in place and less than 11% provided rewards for whistleblowers.

Survey results show interesting regional variations and trends in organizations’ approaches to fighting fraud. For example, internal audit departments tend to be less common in Canada and the United States than in all other regions. In contrast, employee support programs are much more common in Canada and the United States than in all other regions.

Fewer victim organizations in Western Europe had job rotation and mandatory vacation policies than their counterparts in other regions. The proportion of victim organizations in Southern Asia that had formal m a n a g e m e n t r ev i ew p r o c e s s e s , surprise audits and management certification of financial statements was notably greater than in other regions, and nearly half the organizations in Sub-Saharan Africa had a dedicated fraud department, function or team.

There is also a gender divide. While Canada and the United States had relatively even distributions of male versus female fraudsters, more than 90% of fraud perpetrators were male

$154,000 and $160,000, respectively.

While the absolute median loss for the largest entities is slightly higher than that for small businesses, it is important to note that the overall impact of a $154,000 loss for many small businesses is much greater than the relative impact of a $160,000 loss at an organization with more than 10,000 employees. Organizations with fewer than 100 employees also tend to face different fraud risks than larger organizations.

For example, check tampering schemes occurred in 22% of small business cases, but only 7% of cases in larger organizations. Payroll and cash larceny schemes were found to occur twice as often in small businesses as in larger businesses. Corruption remains a significant threat to larger organizations, occurring in nearly 40% of reported cases; in contrast, 33% of the incidents at small businesses involved corruption.

Some of the controls analyzed require a significant investment and likely are not feasible for many small businesses to implement. Nevertheless, many of the controls – such as a code of conduct, an anti-fraud policy, management review procedures and anti-fraud training programs – can be Canadian Property Management | October 2014 17

businessoperations enacted with relatively little cost and could greatly enhance small businesses’ ability to protect their resources from fraud.

In the 2014 data, owners/executives accounted for less than one-fifth of all frauds, but the median loss in owner/executive cases was $500,000, approximately four times higher than the median loss caused by managers and nearly seven times that of employees. Authority tends to be strongly correlated with loss because high-level fraudsters generally have greater access to organizational assets and are better able to evade or override controls than lower-level employees.

BEHAVIOURAL CLUES Overall, perpetrators exhibited at least one behavioural red flag in 92% of investigated frauds and, in 64% of cases, the fraudster displayed two or more such red flags. Approximately 44% of fraud perpetrators were living beyond their means while the fraud was ongoing and 33% were

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e x p e r i e n c i n g k n ow n f i n a n c i a l difficulties. Other red flags were an unusually close association with a vendor or customer (22%), displaying control issues or an unwillingness to share duties (21%), a general “wheeler-dealer” attitude involving shrewd or unscrupulous behaviour (18%), and recent divorce or family problems (17%).

Employee-level fraudsters are much more likely than their c o u n t e r p a r t s t o s h ow s i g n s o f financial difficulties while a fraud is o n g o i n g . M e a n w h i l e , ow n e r s / executives and managers are more likely than employees to exhibit “wheeler-dealer” attitudes, to have unusually close associations with vendors or customers and to display control issues. There is also a much higher rate of owner/executive fraudsters who were under excessive pressure to perform within their organizations.

The data indicates that women are much more likely than men to commit fraud while undergoing

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financial difficulties, experiencing divorce or other family problems or showing signs of instability in their life circumstances (such as frequent job changes, residence changes, etc.). In contrast, male fraudsters more commonly engaged in an unusually close association with an outsider or displayed “wheelerdealer” tendencies.

The most common type of non-fraud misconduct was bullying or intimidation, which one-sixth of the fraud perpetrators in the study displayed. Another 14% of cases involved individuals who were excessively absent from work. Fewer than 5% of cases involved fraudsters who had engaged in sexual harassment or who had a history of visiting inappropriate websites (such as pornography or illegal gambling) at the office. zz The preceding article is excerpted from Report to the Nations on Occupational Fr a u d a n d A b u s e , 2 0 1 4 . F o r m o re information about the Association of Certified Fraud Examiners, see the website at the www.acfe.com.

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Special Supplement to Canadian Property Management

Taking the Lead on Tenant Retention

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Taking the lead on t Colliers International

They’re the lifeblood of the industry. The currency of the trade. Whether suited up for work or powered down at home, it’s the tenants who determine the prosperity – and profitability – of any given property. Yet as new trends and competition pull at today’s residents and office workers from all directions, it’s fallen on property management leaders like Colliers International to hone the art of tenant retention.

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n tenant retention “Tenant retention has always been critical, but it is more complex now than it ever has been,” says John Duda, Colliers International’s Senior Vice President, Eastern Canada & National Accounts, Real Estate Management Services. “Owners want 100% occupied buildings and they want those spaces valued at market rates. Balancing those needs is our top priority because it’s possible to have a full building and still be losing money, and that’s never a good scenario.”

Striking that balance is a challenge–especially in an industry at the mercy of ever-shifting tenant demands, cultural trends, and intensifying competition. One need only look to Toronto’s skyline to understand why property owners across the country are now more focused than ever on preventing tenant migration.

“Naturally, with all of these new buildings going up, there’s a lot of concern about what we, as an industry, are doing to retain tenants in existing

www.collierscanada.com/rems

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▲ Upper Harbour I & II, a 147,000 square feet office site in Victoria, BC ▼ 120 Bloor Street East, Toronto, ON, a 220,000 square feet office building

BUILDING BLOCKS In 2014, Colliers asked tenants to identify what features mattered most in an office environment. The top five responses were as follows:

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Critical

Important

Security

39%

46%

High indoor air quality and temperature (HVAC/air)

34%

51%

Floor plan efficiency

33%

51%

Quality of common areas (washroom, lobby)

21%

57%

Quality of building management, service levels

17%

55%

buildings,” says Antoinette Tummillo, Colliers’ Executive Vice President of Real Estate Management Services, Canada. “This isn’t just an issue in Toronto, either. There’s a lot of movement going on in major markets across Canada, so tenant retention is something we’re really focusing on from coast to coast, and we’re always working to stay ahead of the curve.”

With offices across the country and a legacy dating back to the company’s inception in 1898, Colliers International is well positioned to tackle this challenge. As well, with over 700 properties under its portfolio representing over 46 million square feet of managed space, the Colliers team is equipped with nation-wide insights and perspectives from multiple inhouse real estate service lines.

“Our size has allowed us to observe tremendous activity across all major markets, and we recognize it’s our job to help owners of existing buildings position their properties in the best light possible so tenants aren’t looking at the new products coming on board, but instead are looking at the benefits and economics of staying in their existing space,” says Michael Bishop, Senior Vice President, Western Canada, Real Estate Management Services.

The allure of new developments is, however, just one factor affecting tenant retention.

Indeed, one’s decision to relocate to another commercial or residential property can be influenced by any number of considerations.

Every three to four years, Colliers International commissions a nation-wide survey to determine these very motivators. This year’s report, entitled the 2014 Tenant Survey, reveals the top drivers for relocation among office tenants; some of which can be addressed, and others less so.

For example, when asked to list the top reasons behind a company’s most recent move, 52% of the study’s respondents cited “business growth and expansion” as a “critical” consideration, while 27% indicated it was “important”. In the same question, “cost control and efficiency” was the second-most factor, with 47% of respondents listing it as “critical”, and 38% saying it was “important”.

Similarly, when asked what factors would motivate a tenant to consider a future relocation, “cost control and efficiency” moved to the top spot (58% “critical” / 29% “important”), while “business growth and expansion” slipped to second – albeit by a small amount (52% “critical” / 29% “important”).

The takeaway from this is that some aspects of tenant retention are ultimately beyond an owner’s control. That is, while action can be taken to maximize existing spaces, identify sub-leasing opportunities, or otherwise increase the value of an existing property, the reality is that some tenant loss is unavoidable.

Colliers International

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It’s important to work with owners and educate potential employees on what’s available outside their building, because that’s what they’re concerned about. They’re wondering things like ‘How will this job affect me in my daily life?’, ‘Can I pick up something to take home for dinner?’, and, ‘How easy is it for me to get back home?’

-John Duda, Colliers International’s Senior Vice President, Eastern Canada & National Accounts, Real Estate Management Services “We conduct these surveys regularly, and the two top numbers every year concern cost and access,” explains Duda. “Sometimes, a tenant simply outgrows their space and needs something larger for their own business reasons. In other cases, their business dynamic changes and the property no longer reflects the right price point for their location.

In both cases, those factors are largely out of our control.”

Yet while cost and access are traditionally the top reasons behind tenant relocation, what has changed over the years is their desire to see property managers take a more visible role at their buildings. Specifically, notes Duda, “This year, ‘management of the building’ went from being traditionally ranked between 11 and 12 up to number 5 – and that’s understandable.

With all the significant growth that’s occurring in Canada, we’re finding there are less qualified managers available in the industry, which is resulting in more and more issues taking place at the building level. Understandably, this is making tenants anxious, so property management is becoming more and more important to them.”

LOCATION, LOCATION, LOCATION While some elements of tenant retention are beyond an owner’s influence, there are many others where a difference can be made.

According to the same 2014 survey, a property’s location and surrounding amenities can play heavily in a tenant’s decision to stay or move on to what they may perceive as greener pastures. Access to transportation, for instance, was identified as one of the chief concerns for office workers, with over 71% of respondents saying they would not consider employment in locations outside of a 10-minute walk from transit; 44% answering that they would be unwilling to walk more than 15 minutes to underground local or regional public transit; and over half (53%) responding that the longest they’d be willing to drive to work is between 20 minutes to one hour.

What’s more, as today’s employees seek a greater work-life balance, the desire to work closer to social and recreational amenities is growing. “More and more, this is becoming

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Antoinette Tummillo, Executive Vice President, Real Estate Management Services, Canada, Colliers International John Duda, Senior Vice President, Eastern Canada & National Accounts, Real Estate Management Services, Colliers International Mike Bishop, Senior Vice President, Western Canada, Real Estate Management Services, Colliers International

an important factor, and yet when people are looking at a building they won’t typically know that there’s a gym five minutes away, a bus stop a couple minutes down the road, or even a coffee shop next door,” says Duda, explaining, “What we’ve learned is that it’s important to work with owners and educate potential employees on what’s available outside their building, because that’s what they’re concerned about. They’re wondering things like ‘How will this job affect me in my daily life?’, ‘Can I pick up something to take home for dinner?’, and, ‘How easy is it for me to get back home?’”

Addressing this concern head-on, Colliers takes the time to meet with potential tenants and provide information on surrounding amenities, such as nearby restaurants, entertainment venues, and transportation options. It also generates a walkability index for its properties, and implements initiatives like its bike program to encourage tenants to explore their surroundings.

“Our free bike program at Mississauga Executive Centre (MEC) has been a huge

success. The tenants love the fact that they can hop on a bike, head out to somewhere like the lake, and be back in time for work,” says Duda. “These are important little things we are trying to do and it’s really making an effort to understand what things are meaningful, affordable, and impactful.”

No doubt, location is a top-of-mind tenant consideration. “The good news is that it’s a concern that can be addressed through increased awareness, monitoring, and one’s ability to think outside the bricks and mortar,” says Tummillo. “As a property manager, you have to look at how a property is positioned, find out what’s really important to the tenants, and then come up with a solution that makes the most sense for them.”

THE EVERYDAY EXPERIENCE A tenant’s day-to-day experience inside of a property can be just as influential to their retention as what goes on outside its doors.

“Ensuring tenant satisfaction starts with the people on the ground,” affirms Bishop.

▼ Lansdowne Centre, a 605,000 square feet enclosed mall in Richmond, BC

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“Whether it’s the cleaners, the service desk personnel, operations staff, or whoever our tenants see on an everyday basis, these are the people who get to know the tenants and welcome them into the building every morning.

Their service goes a long way to developing long and healthy relationships.”

Providing a superior experience is a goal Colliers pursues at every property, and at every opportunity. It’s also something it encourages throughout the company via corporate-wide staff training, comprehensive service evaluations, and extensive follow-ups for every issue.

“Service, expertise, strong communities, and fun are the core values of Colliers, and we work them into all aspects of our business to ensure we’re hitting all our investors’ requirements,” says Tummillo. “It’s all about making that service experience the best the client can have, and making sure we have the right experts at the table to help them reach the best possible outcomes.”

Putting words to practice, Colliers invests upwards of $3 million annually on training programs for all staff. Among its educational opportunities include a Harvard program for managers; a Colliers University curriculum for team members across the globe; and over 37 safety courses for technicians every year. Additionally, Colliers has committed its resources to supporting employees who are pursuing industry related education and certifications, including Certified Property Manager (CPM), Real Property Administrator (RPA), Chartered Professional Accountant (CPA), and others.

“The question we always ask our people is ‘How do you think you make people feel when they leave?’” says Tummillo. “We need to remember that everybody touches the tenant in a different way; whether it’s an accountant working with an owner on recoveries or the person at the other end of the phone at a call centre. Because of this, everyone within our organization needs to ask, ‘What does great service look like, and what’s my role in the equation?’”

Cultivating a high level of service also demands open and consistent communication.

Understanding this, Colliers keeps its property stakeholders apprised at all times through

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monthly performance updates, tenant meetings, and external client team sites which provide real-time updates.

“Communication is about more than emails and phone calls,” adds Duda. “Speaking with our clients, tenants, and contractors face-to-face is very important for us, so a lot of us spend a considerable amount of time on the road travelling to our locations and communicating with our team and clients up front.”

Colliers’ multifaceted approach to communication also fosters a sense of community in each property. After all, tenants want to know their property owners and managers view them as something more than numbers on a page. To that end, Colliers’ calendar is packed with property-specific promotions, parties, and other events designed to forge greater ties with all stakeholders. At some events like the MEC barbecue, for instance, even the commercial and residential neighbours are invited to attend, creating a friendly, street party environment which strengthens local ties.

“We want to make sure we’re doing things that make us part of the community, so we’re always making an effort to reach out and understand our community and do something we think will be meaningful,” notes Duda.

RETENTION BY THE NUMBERS While word of mouth and on-the-job anecdotes are one way of measuring tenant satisfaction, it helps to work with cold, hard data.

No Cookie-Cutter Solution If there’s one thing Colliers has learned in its years of business, it’s that there’s no one size fits all solution to tenant retention.

“You really do have to take some time to figure it out and there is no cookie cutter solution,” says Tummillo. “Whenever we talk to our property managers, we tell them they are the CEO of that building. We give them the flexibility and freedom and authority to take on that responsibility and come up with their own ideas and solutions, all within the bounds of the contracts we have in place.”

This rings true for properties throughout Canada, says Bishop, who emphasizes that while each market may house its own unique challenges, it ultimately falls on property managers to apply their expertise and creativity to each new situation.

“There are certainly nuances in markets across Canada, but the fundamental principles of customer service are the same. It’s about being out in front of your clients and making sure you have great people and great training in place. Those principles will never change.”

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CASE STUDY:

Mississauga Executive Centre In 2012, Colliers International assumed management of the 1.1 million square foot Mississauga Executive Centre (MEC) complex, inheriting one of the most promising business venues in the GTA, yet one plagued by chronic vacancy.

The issue was simple. Although feature-rich and more than accommodating, there was a perception that the centre was too far away from the action, leading some tenants to consider other options.

Acknowledging this, Colliers International’s full service team, including its brokerage and project management service lines, embarked on a 5-year program to reposition the entire node and introduce new perks to its tenants, such as a bike program, facility upgrades, and smaller touches such as arranging for gourmet food trucks to set up shop over lunch.

“It’s interesting how it’s sometimes the little things that really make a difference now,” says Tummillo. “With the food trucks, for instance, people line up and chat, and it created this whole new sense of community. We’ve received very positive feedback from the tenants. They love it.”

Indeed, with a population of 100,000 within a 2-kilometre radius, scenic grounds, and closeness to numerous amenities, Colliers slowly applied a shift in perspective in the real estate industry and implemented property-wide enhancements to not only keep all existing tenants in the building, but raise the centre’s occupancy from 87.5% to 92.9% with more than 356,000 square feet of leasing since 2012.

“Everyone was viewing this as something in the suburbs, but when we took out all the metrics in terms of local theatres, demographics, shopping, transportation, and the airport, people’s attitudes started to change,” recalls Duda. “We were able to package it up in a different light, and it suddenly became far more attractive. So not only did we retain every single large tenant in that site, but we’ve also increased occupancy.”

▼ Mississauga Executive Centre, a four tower, 1.1 million square feet complex in the heart of downtown Mississauga, Ontario

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In addition to conducting regular surveys, and encouraging both tenants and owners to come forward with their ideas and concerns, Colliers turns to its Net Promoter Score (NPS) program to gather real-time feedback concerning its tenants’ overall experiences.

“With NPS, we can determine what’s going on in a building and if those tenants are happy to a high degree of accuracy, and that kind of feedback is very useful when we’re approaching owners with new ideas or suggestions for capital investments,” explains Tummillo. “It also gives us feedback as a service provider, so we can get a better sense of how we’re managing that asset and how our people are performing.”

The data is collected by Greenwich Associates, a third-party company that produces reports which can then be shared and assessed by the Colliers team. Tummillo says this feedback has helped identify what matters most to its tenants, noting, “We’ve noticed a very distinct trend in the feedback from our NPS, which is this idea of responsiveness. Tenants want to know what’s going on, who they can talk to, and that if they have an issue the people on site will be responsive, even if they don’t necessarily have an immediate solution.”

“The importance of responsiveness is what we hear the most from our building feedback, and that is the single most critical thing that we do.”

NEVER STATIC As the industry evolves, so too is the role of the property manager. Indeed, with activity in most major markets in Canada on the incline, companies like Colliers International are being tasked with adjusting to new trends and overseeing both the short-term and long-term goals of their properties.

“In the past, property managers were just there to look after the building; to keep the lights on and keep everyone happy. It was less about what was happening over the long-term and what was shifting in the market,” says Duda.

“Over the last five years, however, owners have started putting more responsibilities on the property management firm to oversee long-term goals. This has resulted in what we call an ‘asset management light approach’.”

Other trends affecting the industry include changing business hours, and a trend amongst owners to hire security personnel who not only oversee the safety of a property, but the needs of its tenants and visitors.

“In many of the Class A office developments now, we’re seeing that security isn’t the traditional security that we’ve had in our minds for all these years, but more of a concierge-type service where these security

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professionals aren’t just there to patrol the property, but to also assist visitors and occupants of the building in whatever they need,” observes Bishop.

On a larger scale, he adds, property managers are playing larger roles in assisting new owners with building optimization. “These new products coming out of the ground right now are being built with the intent to pack a lot of people into smaller square footage as effectively as possible, reflecting what tenants are demanding. That has a direct impact on the effectiveness of heating, ventilating, and air conditioning systems, as well as elevators and other essential equipment. As a result, part of our job today is educating owners with the plans and the directions they need to make sure all of that works, especially when planning capital expenditures.”

All combined, it’s clear the industry is shifting. And as property managers assume greater responsibilities in the day-to-day (and yearto-year) performance of their properties, the need to keep tenants satisfied, informed, and empowered remains a top priority. With forward-thinking, constant communication, and a little creativity, Colliers is rising to the challenge while raising the bar for tenant retention.

There’s a lot of movement going on in major markets across Canada, so tenant retention is something we’re really focusing on from coast to coast, and we’re always working to stay ahead of the curve.

-Antoinette Tummillo, Colliers’ Executive Vice President of Real Estate Management Services, Canada.

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benchmarks

BENCHMARKS SERVE OWNERS, INVESTORS AND OCCUPANTS Real Estate Sustainability Survey Results for 2014

By Barbara Carss CANADIAN PARTICIPANTS are largely in line with their international peers in a 2014 accounting of portfoliowide real estate sustainability. Results of this year's Global Real Estate Sustainability Benchmark (GRESB) survey, released last month, draw on a database of 637 respondents, encompassing 56,000 properties collectively valued at $2.1 trillion, and demonstrate an overall improved score from 2013 despite the influx of 156 firsttime participants with the lower scores typical of beginners.

"I do believe in markets and market transformation," Nils Kok, GRESB's Amsterdam-based Executive Director, told a Toronto gathering in late September as he summarized the recent results prior to a panel discussion on GRESB's relevance for Canadian owners, managers and investors. "Our goal is 20 October 2014 | Canadian Property Management

creating light in an area where I think there is still a lot of darkness."

Thus far, the annual survey has exhibited impressive momentum, growing from a database of just three European pension funds when launched in 2009. Oxford Properties was an early Canadian adopter in 2011, and this year was identified as the North American leader in the diversified office/retail properties category.

"I think GRESB has been successful because it has really filled a gap in the market, and it is customer driven," Darryl Neate, Oxford's Director of Sustainability, observed in opening remarks to the afternoon session.

and Green Stars. This offers an easily grasped sketch of performance that has been derived from a more complicated mix of differently weighted factors, dubbed sustainability aspects, and gleaned from an extensive questionnaire.

The upper right Green Stars quadrant represents the best outcomes in both the management & policy (vertical axis) and implementation & measurement (horizontal axis) categories – a status that 36 per cent of this year's participants obtained. That's up from 22 per cent in 2013.

Notably, 70% or 30 of 44 investors and companies based in Australia and New Zealand were Green Stars. Australia/NZ's average score of 61 also significantly PLOTTING PERFORMANCE outdistanced average scores in the other GRESB results plot participants within regions, which were 47 for Europe, 46 for the four quadrants of a line graph labelled Asia and 44 for North America.

Green Starters, Green Talk, Green Walk Nevertheless, the trailing regions' higher

benchmarks

POLICY PROMPTS BEST PRACTICES

numbers of participation translated into a greater portion of Green Star achievers.

"A lot of the global sector leaders are actually from North America and that's something that's really different from a few years ago," Kok said.

Although Canada's nine respondents are somewhat overwhelmed in a North American pool of 151 and are a small fraction of the entire database, the value of their holdings amounts to a much more substantive presence. This reflects the relative strength of major pension funds and the lesser role of fund managers compared to in the U.S..

"Canada is little bit of a paradox. This is also due to investment structure and pension fund structure," Kok reflected. "I believe Canada is a little bit like Australia."

Panellists – representing GRESB participants and a blue chip tenant of some of their buildings – welcomed the comparison.

"I would like to see us in the top right quadrant with Australia. I think Canada can be," said Gary Whitelaw, Chief

Scoring for the Green Real Estate Sustainability Benchmark (GRESB) gives varying weights to seven different aspects of sustainability. These are further categorized as either Management & Policy, accounting for 30% of the total score, or Implementation & Measurement, encompassing four aspects including two – performance indicators and stakeholder engagement – which represent nearly 50% of the available points.

Although the Management & Policy aspects fall largely into the less flatteringly labelled Green Talk quadrant of GRESB's performance graph, they are identified as the launching point toward Green Walk or Green Star status.

"Things start at the management level. It starts with the C-suite and somebody having responsibility," observed Nils Kok, GRESB's Executive Director, at the 2014 Canadian results presentation in Toronto. "Policy does matter. Without policy, you cannot fully implement a sustainability program."

This year's results demonstrate an overall improvement in the Implementation & Measurement category, significantly due to early participants actively turning their policies into tangible initiatives and outcomes – providing evidence to back Kok's assertion.

"You have to identify and articulate it as a core value or else it's not going to resonate," agreed Gary Whitelaw, Chief Executive Officer of Bentall Kennedy Group, taking part in the associated panel discussion. "What it really needs to be successful are the people on the front line."

Upholding that frontline, stakeholder engagement is the most heavily weighted sustainability aspect, at 25% of the available points. Building certification represents 11%, giving credence to best practices and continuous improvement approaches ahead of highperformance design.

Illustrative of that reasoning, Kok pointed the European Union's highly ambitious requirement for net-zero energy consumption in new construction beginning in 2018.

"Codes are slow to transform the building space: great idea, but slow effect," he said. "We believe a Class B portfolio can also be a sustainably managed portfolio."

Complementarily, participating real estate managers see GRESB as a best practice. For example, Whitelaw sees efforts to improve sustainability scores carry into the mindsets of other management practices, operational procedures and approaches to problem solving.

"It is such a catalyst for innovation," he said.

"Really, what we've learned is the value of benchmarking in any context," concurred Darryl Neate, Director of Sustainability with Oxford Properties Group, which emerged as the North American leader in the diversified office/retail properties category of the 2014 survey – the only Canadian company among 11 designated North American leaders.

Although GRESB is not currently applicable for tenants within their own spaces, prominent tenants see it as a potential tool in leasing and/or decisions about staying in or a leaving a space.

"Right now, decisions are more based on individual buildings," acknowledged Roger Johnson, Head of Enterprise Real Estate with TD Bank Group. "But we are also interested in the landlords and GRESB provides a picture of that entity."

Executive Officer of Bentall Kennedy Group (U.S. and Canada), which emerged as the global leader in the diversified property category in this year's survey.

STAKEHOLDER ENGAGEMENT From the property owner/manager's perspective, Whitelaw commended GRESB's applicability to both investors' and many tenants' ESG (environmental, social and governance) obligations, as well as the company's own operations, employee recruitment and retention.

While Kok earlier acknowledged that some participants and observers may dispute GRESB's attention to stakeholder

engagement, which is allotted a value of 35 points or approximately 25% of the absolute score, Whitelaw agrees proactive employees and tenants are a fundament of market transformation.

From that, comes a drive for continuous improvement that can spur innovation and invigorate the corporate culture, adding to its talent-attracting arsenal. The same dynamic holds in attracting tenants.

"There is not much, generally, that a landlord can do that can help TD Bank be better in its core business, except sustainability," Whitelaw maintained.

Roger Johnson, Head of Enterprise Real Estate with TD Bank Group, backed that hypothesis.

Canadian Property Management | October 2014 21

benchmarks

“I think GRESB has been successful because it has really filled a gap in the market, and it is customer driven.”

"We truly believe one of our core values is to be an environmental leader.

We do strive to embed it in everything we do," he affirmed.

Turning to relationships on the other side of the corporate equation, Whitelaw noted that GRESB data is now figuring into investors' due diligence, particularly in the case of pension funds.

"I think it's the fact that they actually feel a responsibility as the custodians of our capital to reflect our social values," he suggested.

ANALYTICAL TOOL The observation resonated with Joy Williams, an environmental and

responsible investing specialist with the Ontario Teachers' Pension Plan (OTPP), who endorsed GRESB data as an analytical tool. She noted that other components of ESG, particularly governance, are more longstanding concepts, which investors approach with more established questions. " We h ave t e n d e d t o l o o k a t environmental issues in a more ad hoc fashion," Williams said. "We want to be more systematic about it."

Meanwhile, for the boutique investment manager, Presima, GRESB provides guidance in largely uncharted territory.

"When we are questioning management teams on sustainability issues, we often get

the response, even today, that 'You guys are the first ones who are asking about this'," recounted Portfolio Manager, Vince Felteau. "The biggest issue we had in the past was getting information at the portfolio level, but we are seeing that sustainability is really a key aspect in generating good returns, affecting share price."

Panellists' and presentation attendees' enthusiasm is perhaps to be expected.

"We've got a self-selected crowd here and almost all have chosen to opt in," observed Michael Brooks, the discussion moderator and the Chief Executive Officer of the Real Property Association of Canada (REALpac), one of GRESB's partner organizations.

However, GRESB's adoption rate over just five years illustrates how quickly ideas can spread, as Kok observed in crediting his first three survey respondents.

"These investors single-handedly changed the way a lot of portfolio managers and a lot of REITs were thinking about sustainability," he said.

"Now we need to get the conversation beyond this room."zz

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Energy Managers: Leading the Way for Energy Many businesses believe that an effective sustainability strategy is a necessity—and managing electricity consumption is a key component of that strategy. Reducing their energy consumption is considered very important to 68% of surveyed businesses in Ontario.

The benefits of integrating a business’ energy conservation and sustainability goals include increased productivity with lower operating costs, enhanced brand value, proactive risk mitigation against future energy costs, as well as increased employee satisfaction, improved working conditions and competitive differentiation.

Only 17% of the companies surveyed indicate they have a fully implemented energy plan. For many companies, the main barrier to improving the energy efficiency of equipment and operations is that they simply do not have the time or technical expertise to establish the business case. Many businesses that have successfully implemented energy conservation and sustainability strategies have hired in-house Energy Managers to lead the way.

What is an Energy Manager?

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maximum of $100,000 per year--for a full-time Embedded Energy Manager. Smaller organizations interested in energy management services can benefit from a part-time Roving Energy Manager—a position that is fully funded.

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exteriors

GLAZING WORTH APPRAISING

Energy-efficient Technology Getting More Cost Competitive

By Rebecca Melnyk

Operations and maintenance insight at

26 October 2014 | Canadian Property Management

SINCE THE INTRODUCTION of legislation, like the Ontario Building Code’s SB-10 supplementary standard for large buildings and the B.C. Clean Energy Act, what once was considered energyefficient glass – double glazing with low-e coatings, argon fill and thermally broken aluminum framing – is now the norm in real estate. Yet, with Europe outperforming North America in terms of emerging technologies, and Canada not yet fully embracing newer trends, glass industry insiders see opportunity to advance energy efficiency.

“Areas like Vancouver, Ontario and Alberta are the leaders in Canada in terms of good energy productivity,” says Rich Porayko, a marketing consultant for Vancouver’s Hartung Glass, freelance writer and glass consultant. “But compared to Europe, Canada is about 10 to 15 years behind on glazing trends.”

He maintains evolving technologies like dynamic glazing, triple glazing and vacuum glazing are the future of glazing and construction in North America, but some market obstacles

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“Particular technologies that offer further energy efficiency gains can be implemented without much cost. It’s a matter of educating professionals from architects to fenestration designers.” discourage widespread use. For instance, dynamic glazing incorporates building-integrated photovoltaics to optimize a window’s tint to selectively change transmission of light and heat and enhance performance. Yet, unlike parts of Europe, government grants are not offered to developers who wish to include such glazing in a building’s façade.

Regulation remains a proven force behind installation. “At the end of the day, it’s the building codes and legislation that’s the ultimate carrot making it happen,” Porayko says. “It’s very clear: the areas that have tight building legislation have significantly higher energy performance. It’s not driven by developers and owners trying to do the right thing; they have to hit these codes.”

Along with lack of incentives and a high cost differential comes the question of where responsibility lies throughout varying steps in the installation process, like wiring or maintenance. As a result of such uncertainty, glazing contractors are now being urged to become leaders in developing and installing dynamic glazing, as few Canadian companies know how to install it.

Other trends like triple glazing, which can offer a solution to the growing demand for energy performance and sustainability, are seen in only about 10% of buildings in Canada. Although they may be cost effective in the long-term, they

Explore industry trends at

28 October 2014 | Canadian Property Management

remain expensive and can be used only with certain types of framing, strong enough to hold three layers.

EMERGING TRENDS WITH POTENTIAL Despite lower pace of adoption within Canada, there are available trends worth investing in, but they are not embraced by everyone in the commercial sector. Michael Barclay, an engineer and Manager of fenestration services with the green building design specialists, MMM Group Limited, suggests lack of awareness of these newer trends thwarts installation. Not only do people think the cost is higher, but they also prefer what they know.

“Particular technologies that offer further energy-efficiency gains can be implemented without much cost,” he says. “It’s a matter of educating professionals from architects to fenestration designers.”

For example, new warm edge spacer bars that reduce the amount of heat lost through a sealed unit are more sustainable than aluminum spacers, but people may mistrust the durability factor since warm edge spacer are made of foam or plastic and metal combination.

“The norm over the last decade is to use aluminum because it’s strong and cheap and people have always used that,” Barclay observes. However, he expects to see growing confidence in warm edge spacers as more buildings incorporating the technology are completed.

Other trends include high-performance framing: like aluminum with glassreinforced fibreglass thermal breaks, which are more efficient; careful design to avoid thermal bridging; the use of passive solar gains; and the reduction in glazed areas.

Besides the low cost to implement some of these design strategies, occupant comfort and a reduction in interior condensation can be persuasive arguments. Warm edge spacers and

high-efficiency glazing can reduce occupant discomfort that comes from being next to a cold window.

Condensation, which usually forms around the edges of the glazing, can cause myriad problems such as rotting, corrosion and mould. Since the interior surface of high efficiency glazing is warmer, the tendency of condensation to form on the inside is significantly reduced.

Energy-efficient glass also adds value to a property. Although mandated building codes may drive owners and developers to create sustainable properties, the perceived value of a building is another motivating factor.

“If they have a property that is more energy-efficient than the property next to them, in theory they can charge more,” Porayko says.

BATTLE FOR THE WALL Whether the real estate industry embraces such trends as a whole, or encourages accessible use of developing technologies coming from other parts of the world, the glass industry recognizes the active role it must play in the future of sustainable building, that Porayko calls “the battle for the wall”.

“We have two options in the glass industry. Either we can stay status quo and the size of the window will shrink and opaque building materials like brick or wood will take over the façade of the building and what you’ll have is a trend towards a box," he warns. “Or, to win the battle for the wall, we need to stay on top of energy performance and do what we can in order to reverse that trend.” zz Rebecca Melnyk is Online Editor of Building Strategies & Sustainability and Canadian Proper ty Management. The preceding article is reprinted from the REMI Network. See www.reminetwork.com.

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SHABBY PAINT = CONSUMER BRUSH-OFF

Coatings have Dual Roles in Performance and Appearance

By Kevin Brown BUILDINGS ARE PAINTED to create and reinforce the owner's, tenant's or retailer's brand, as well as to preserve the asset by preventing corrosion or substrate deterioration and moisture intrusion. When not maintained, applied coatings can be aesthetic hindrances – peeling, blistering, faded or dirty – possibly discouraging patrons from walking in the door.

Many factors can lead to paint problems, including deficiencies in the roofing system, flashing, walls or sealants, but the most common is poor application of the coating itself. An analysis of the data from more than 40 problem retail locations from one retail chain reveals that coating application deficiencies were a major contributor to the

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problems that 95% of the stores were experiencing, including: • poor surface preparation practices; • failure to seal wall cracks; • application under unsuitable weather conditions: temperature, dew point and immediately prior to rain events; • application over damp walls; • application of the wrong material; • application of a single overcoat when two or more were required; • insufficient thickness • excessive pin-holing of the film; • skips and misses (particularly notable when looking down from the roof); • insufficient sealer on non-painted walls; and • other workmanship issues.

This undermines building performance through inadequate resistance to winddriven rain leading to moisture intrusion, the formation of mould and biological growth.

Dis-bonding and blistering of the film, fading and chalking likewise create significant aesthetic issues.

APPLICATION CONTROLS Inspection instrumentation can help prevent the occurrence of the majority of these

30 October 2014 | Canadian Property Management

problems. The quality of cleaning and painting should be monitored while the work is in process, at least on a spot basis. Key areas of concern include: proper ambient conditions; surface preparation; moisture content; coating mixing application; and coverage.

The prevailing conditions of air temperature, relative humidity, dew point temperature (the temperature at which moisture condenses on a surface) and the temperature of the surface must be monitored during the application process.

If coatings are applied outside of the coating manufacturer's acceptable ranges, the integrity, appearance and long-term performance can be jeopardized. Digital equipment is available for monitoring all of the conditions simultaneously at the push of a button.

Surface cleanliness involves the removal of loose, deteriorated substrate, loose paint, efflorescence, corrosion chalk and surface dirt and debris. The soundness of the substrate and the existing coatings can be examined by knife probing and adhesion testing, and surface cleanliness examined by wiping a cloth across the surface. Industry standards are also available to define various degrees of

health&safety

exteriors cleaning over a variety of substrates and for assessing the removal of chalk.

Cementitious substrates must be dry prior to applying the coatings, or proper film formation can be compromised and the trapped moisture can disrupt the coating film over time as it attempts to escape. A number of instruments are available for both destructive and non-destructive measurement of moisture content.

The coating materials must be within the shelf-life stated on the container and mixed and thinned properly. Methods of application are listed in the coating material product data sheet and should be followed.

Back-brushing or back-rolling concrete surfaces is a critical step in order to work the material into the texture of the surface to assure complete coverage. Backbrushing also assures that the scores of scored block or other crevice areas are not being bridged with paint, which when dried, provide pockets for the collection and retention of water.

The thickness of the coating should be monitored during application using wet film thickness gages. Non-destructive gages are also available for the

measurement of the dry thickness of the film on metallic substrates (magneticbased and eddy current) and non-metallic substrates such as concrete (ultrasonic).

D e s t r u c t ive t e s t i n g i nvo l v i n g microscopes or micrometers can also be used. It is common to find that film is too thinly applied, resulting in unsightly coverage and splotchy appearance. It is also common to find that one, rather than two finish coats, as specified, are being applied. This results in poor coverage and poor wind-driven rain resistance.

Incomplete applications, especially to the top sides of block and joints, can be another problem. Poorly applied films that exhibit misses and excessive pinholes lead to moisture intrusion, blistering and peeling and can provide opportunities for unsightly efflorescence to form.

Back-rolling and back-rushing as part of the application process will help to prevent excessive pin-holing.

QUALITY ASSURANCE A few simple quality checks and inspections during each phase of the installation process can extend the life of the coating by simply

assuring that the technical requirements of the project are followed. The contractor should be required to have instruments on site, conduct quality control inspections each day and document the results.

A few quality assurance (QA) spot-check inspections of the work by a knowledgeable owner's representative should also be required. The inspections will pay for themselves resulting in increased coating performance, longer life expectancy and more consistent looking brand image.

Coating projects that include quality control/quality assurance inspections can add years of life to the performance of the coating system simply by verifying that the contractor is performing the work as specified. zz Kevin Brown is Commercial Services Manager with KTA-Tator, Inc., specializing in project design, construction, post-construction and maintenance management. The preceding article is reprinted from the Professional Retail Store Maintenance Association (PRSM) 2014 Best Practices. For more information, see the website at www.prsm.com.

32 October 2014 | Canadian Property Management Untitled-2 1

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MAINTENANCE EXTENDS CARPET LIFESPAN Replacement Savings Provide Payback on Cleaning Costs

By Sean Martschinke A TYPICAL LIFE CYCLE of about six years means that commercial carpet is often perceived as a major investment, but the costs of installing and maintaining hard surface floors can also be expensive in the long run.

An effective maintenance program can increase carpet lifespan to further even out the costs.

A major North American insurance company offers an illustration. About 20 years ago, cleaning expert Steve Spencer was approached when the company was looking for ways to cut the annual costs of replacing about 5 million square feet of carpeting in its various office locations, which each had about 90,000 square feet of carpeting worth about $350,000. With a very basic cleaning and maintenance program in place, costing about $0.15 per square foot, the cost of ownership of the carpet was nearly $72,000 annually, or about $0.79 per square foot.

Wi t h S p e n c e r ’s g u i d a n c e , t h e company implemented a much more effective carpet maintenance program, which doubled the amount of money it spent on maintaining the carpets to 34 October 2014 | Canadian Property Management

$0.30 per square foot. However, there was a dramatically improved payback as the lifespan of the carpets doubled to nearly 12 years. This lowered the annual cost of ownership to just over $56,000 per year, including carpet maintenance. Added steps to effectively maintain the carpets delivered a 22% reduction in the cost of ownership.

A carpet maintenance program generally has four elements: • Installation of high-performance mats at all building entries; at least 15 feet of matting is necessary.

• Scheduled vacuuming using vacuum cleaners with the latest technologies that have a proven track record of environmentally responsible high-quality performance on a variety of carpets.

• Scheduled interim maintenance to clean carpets using encapsulation, bonnet or shampoo methods.

• Scheduled hot-water extraction.

cleaned. However, waiting until this point may actually be too late.

Without regular maintenance, soils can become embedded and cut and abrade the carpet fibres. When this happens, it can change the way light reflects off the carpet, making some areas look darker and less clean than others.

Beyond cost savings, there are huge environmental paybacks in extending the lifespan of carpets. More than 3 million tons of carpet are manufactured in North America every year, while it's estimated that about 2 million tons are discarded – often ending up in landfills.

A recent report in the Journal of Cleaning, Restoration & Inspection suggests nearly 90% of all discarded carpeting ends up in landfills, where synthetic fibres can take as long as 1,000 years to degrade naturally. zz

Cleaning on a set schedule is crucial for carpets to look their best and to enhance their lifespan. Often carpets are cleaned on a subjective basis: if it looks dirty, it is

Sean Martschinke is Product Manager with Tornado, a marketer of professional carpet cleaning equipment. For more information, see the website at www.tornadovac.com.

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