Canadian Apartment Magazine November 2007 Issue by Rick Evangelista

C A N A D A ’ S O N LY N A T I O N A L P U B L I C A T I O N F O R A P A R T M E N T O W N E R S A N D M A N A G E R S

VOLUME 4 / NUMBER 5 / NOVEMBER 2007

Multi-Unit Residential Mortgages

Margaret Herd Vice President, Residential Property Management Park Property Management Inc.

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Taking the Third-Party Route PAN Group to Manage Oshawa Portfolio How to Save Money on Advertising Unhappy Legal Results for Landlords

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28 Cover Story

Taking the Third-Party Route PAN Group to Manage Oshawa Portfolio For building owners, managing a large portfolio of multi-residential buildings is often a time consuming task. For Oshawa-based Halloway Holdings, the answer was to hire a third-party manager, PAN Group Properties.

contents... 8 Insurance Deductibles - Where do we get the Best Return? Increasing the deductible amount on your insurance policy will reduce your premiums, but, how much risk are you willing to assume?

12 How to Save Money on Advertising Todayâ&#x20AC;&#x2122;s advertising options allow landlords to be smarter about where they spend their advertising dollars and how much they budget for each medium.

16 Unhappy Legal Results for Landlords in 2007 Ontario landlords achieved limited success at the Ontario Rental Housing Tribunal, the Landlord and Tenant Board and in the Courts this year.

26 Multi-Residential Tax Ratios Spark Debate Hamilton City Council is looking at recommendations from a committee studying the tax burden on multi-residential property compared to other property tax classes within the city.

36 Are You Ready for the Next Wave? If you want to maintain a full apartment building you have to find out what your tenants expect for their rental dollars.

40 Conducting Commercial Real Estate Transactions Whether you are buying or selling a multi-residential property you need to get the best value for your investment dollar.

42 Plumbing Maintenance and Energy Savings Proper plumbing maintenance can dramatically reduce your water and energy bills.

44 Improving Your Buildingâ&#x20AC;&#x2122;s Bottom Line Most landlords know how to control expenses, but, do you know how to maximize revenue?

20 Regulations 24 Multi-facts

4 Canadian Apartment Magazine

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editor’s note Marketing Your Building

PUBLISHER

Marc L Côté

In this issue our writers are focused on ways to market your building, increase revenue and cut expenses. Jason Leonard, our marketing writer, tells us how we can save money on advertising. Today’s advertising market gives landlords many options on where to spend their advertising dollars. The question is, how much should you budget for each medium. Renters are utilizing a number of media outlets. You need them to be able to find your building. Investment expert Stephen Bronetto takes the tenant’s point of view and asks, do you really know what makes a tenant want to rent in your building? Landlords need to examine what tenants are getting and what they expect. He says landlords need to constantly review their own performance. On the property management front, Anne Meinschenk asks building owners if they are maximizing their revenues. In many cases owners concentrate on controlling expenses and forget that they also need to increase revenue. There are three simple ways to do that: maintaining full occupancy, achieving market rent and collecting on delinquent rents. If you are attending this year’s PM Expo, you can look forward to a seminar program that is focused on a wide range of topics including building envelope solutions, energy efficiency and risk management. The trade show offers a chance to see the latest developments in building management solutions. Our cover story features PAN Group Properties, a new third-party property management company based in Oshawa, Ontario. PAN Group has taken over the assets of Valiant Property Management. The new company is managing a portfolio of over 1,200 apartment units, five self-storage locations and 800,000-square feet of commercial space. PAN’s CEO, Dean Pandurov, is a 20-year veteran of the property management business. CA M Randy Threndyle

EDITOR

Randy Threndyle DESIGN

yidesign inc. CONTRIBUTING WRITERS

Paul Abrams Stephen J Bronetto Terry Burns Barbara Carss Robert Helyar Jason Leonard Anne Meinschenk David G Truscott For sales information call 416.966.HUSH

Canadian Apartment Magazine is owned by MediaEdge Communications Inc. and published six times a year by hush Media

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Reprints: Requests for permission to reprint any portion of this magazine should be sent to Marc L Côté.

Authors: Canadian Apartment Magazine accepts unsolicited query letters and article suggestions. Manufacturers: Those wishing to have their products reviewed should contact the publisher or send information to the attention of the editor.

Quoteworthy “ You put the steps in place to ensure the proper due diligence and you go one step beyond to make sure every cent is spent properly.” – page 30

6 Canadian Apartment Magazine

Sworn Statement of Circulation: Available from the publisher upon written request. Although Canadian Apartment Magazine makes every effort to ensure the accuracy of the information published, we cannot be held liable for any errors or omissions, however caused. Printed in Canada

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risk management

Insurance Deductibles Where do we get the Best Return? by David G. Truscott

Increasing the deductible amount on your insurance policy will reduce your premiums, but, how much risk are you willing to assume?

In an earlier submission to this column, we spoke of risk management as: “The process of making and implementing decisions that will minimize the adverse effects of accidental and business losses on our organization”. In the practice of risk management, one of the methods used to minimize the adverse effects of accidental losses is the contractual transfer of risk to an outside organization. Often this is accomplished by transferring some area of our organization’s financial risk to an insurance company. Examples of this will come readily to mind. Our exposures involving the risk of fire, windstorm, and earthquake, and even a “slip and fall” incident suffered by a visitor to our apartment building are but a few examples that we can easily identify as risks we hope won’t happen, but if they do, we’d prefer to have somebody else clean up the mess and, foot the bill. Thus, we pass these identified risks onto our insurance company. For a pre-determined premium, our insurer agrees to “make good” when things “go bad”. When it comes to transferring this risk to our insurer, where should we draw the line with regard to which risk we transfer, and, of equal importance, how much risk should we actually transfer? It is possible to retain a large portion of our financial risk by employing a large deductible. If we were to consider retaining a larger portion of losses that occur, what would be the advantage in doing so? 1. We enjoy what may turn out to be a significant saving through reduction in the cost of our insurance.

8 Canadian Apartment Magazine

2. We become less reliant on our insurer and we submit fewer claims, thereby enabling our insurer to view our organization as a more attractive risk. (When the insurance market tightens, that’s a very desirable position to be in.) 3. We could re-route some of our capital from “insurance expense” to “in-house loss prevention” which may enable us to “nip problems in the bud” before they become problems.

Why do we have insurance deductibles in the first place? For each component of your insurance program there is a premium to be paid, and, for each loss that you incur, there is a deductible to be paid by the policyholder. As a general rule, the higher the deductible, the lower the premium you will pay. Deductibles were implemented by insurers as an incentive for their policyholders to avoid making relatively small claims. Their introduction enabled the insurer to reduce the number of claims for which they were required to respond, thereby reducing the insurer’s costs, a direct result being a lower premium cost to the policyholder. In theory, the “sting” of having to pay a deductible for each claim should cause a policyholder to think twice before submitting a claim. However, during inﬂationary periods, if deductible levels remain static, the so-called “sting” of having to pay the deductible portion of a claim becomes less and less of a deterrent. Historically, as insurers’ claims handling

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administrative costs rise, their insureds’ deductible levels do not always keep pace. As building values and related insurance coverage limits rise with inflation, sometimes the insurance deductible becomes less and less significant. For example, in 1980 your building may have had a $1,000 deductible to apply in the event of a loss. Through inflation and the evolution of your insurance program, that deductible may have grown to be $2,500 or $5,000 today. If your apartment building was now insured for $2million and you had a deductible of $5,000, you actually have a deductible equal to .25 percent of your asset insured. In the event of a claim, you would retain just a quarter-of-one-percent of the claim. Where is the “sting” in that? How can you determine what dollar limit would be an appropriate deductible for your operation?

Give careful consideration to the frequency of losses experienced by your organization during the last few years, and ask yourself: “Do we feel lucky?” If the answer is yes, you should give strong consideration to raising your insurance deductibles to a level that you could aﬀord to pay out if you had to. If your actual payout was less than what you had set aside in your “funded reserve” you are clearly ahead of the game.

To assist you in conducting your research, don’t forget that your insurer should be willing to provide you with: • Your detailed history of claims; • A loss-prevention report that will give you a head start on identifying what you need to do to prevent losses from happening.

Your goal here is to reduce your insurance premium as much as possible by implementing as high a deductible as your organization can tolerate. Some questions that assist in deciding are: Based on your organization’s past experience, can you predict what your future loss experience might be? Keep track of all incidents that occur at each of your buildings. You should be able to identify trends, and predict with reasonable accuracy the number of incidents in the future that may give rise to claims.

What deductible options are insurers willing to offer you? Insurers do not necessarily read from the same rule book when it comes to deciding on what deductible is appropriate for them. We’re more interested in what deductible is appropriate for you. If your insurer is insisting on higher deductibles without your prompting them to do so, it is likely due to your recent claims history, or your insurer has set a new minimum deductible thereby requiring yours to be increased.

What are the premium discounts that are available related to those deductibles? Your goal here is to reduce your insurance premium as much as possible by implementing as high a deductible as your organization can tolerate. In this regard, the marketplace should be properly surveyed by your insurance provider, giving close attention to the premium savings derived through implementation of higher deductibles. Another way of looking at the situation is to compare how much capital you have available that you could comfortably apply to an accidental loss or to a series of losses during your ﬁscal year. Based on the relatively low number of claims that we’ve had in recent years, and giving consideration to the amount we will save by increasing our deductibles, how many years of “claimsfree” experience does our organization have to achieve before we realize a payback? 10 Canadian Apartment Magazine

Your insurance provider should also be willing to “think outside the box” to assist you in determining where you can derive maximum value through the blending of risk that you choose to transfer, and risk that you choose to retain. Remember, what you save in insurance premium expense deserves to be applied two ways: 1. By setting up a funded reserve to have sufficient capital available to apply to your newly raised deductible limits in the event of a loss or losses. This fund can actually enjoy growth through a low-risk, liquid investment vehicle. 2. By investing a portion of your organization’s resources to proactively reduce your exposures to future losses.

Organizations would beneﬁt by checking their policies to see what their deductible levels actually are, and ask themselves if those deductibles are actually suited to their budget, and to their risk appetite. It may well be that there could be a signiﬁcant premium saving waiting for them. CA M

David G. Truscott, CAIB, CRM is the President of Risk Review Inc., a risk management consulting practice. Their website and contact information for David can be found at www.riskreview.ca

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marketing

How to Save Money on Advertising by Jason Leonard

Today’s advertising options allow landlords to be smarter about where they place their advertising and how much they budget for each medium. I always look forward to this issue as we get to talk about creative ways to save money in your marketing efforts. So to get started, let me ask you, “Do you feel as though you’re advertising budget is balanced in such a way that you’re generating maximum results with the greatest savings possible?” Advertising is sometimes referred to as a necessary evil in this industry. Just as humans need water, food and air to survive, landlords require various forms of advertising to avoid vacancy problems. In today’s competitive marketplace, trying to survive off just one or two forms of media would be like trying to survive off of simple carbs only. You just wouldn’t do it! Advertising is an expense everyone loves to hate. It’s a “can’t live with it, can’t live without it” kind of thing. What today’s advertising options allow landlords to do though, is become smarter about where they place their advertising and how much they budget for each medium. Use the standard formula for calculating your cost per call, per medium and not only will you generate better overall results, you’ll save thousands of dollars every year. Your Prospects want Details It’s a fact that renters today are utilizing a greater number of media outlets to find rental properties and are often using them in conjunction with one another. We’re in the information age after all. In today’s market it’s a question of how much should I budget for each medium. 12 Canadian Apartment Magazine

Here are some of the commonly used media that generate positive results: • Internet

• Rental Magazines

• Newspapers

• Company Websites

• Lawn Signage

• Word of Mouth

• Vehicle Ads

The Balancing Act The list of media I provided is just the cream of the crop. There are plenty of other ways to get your message out to the market but for the sake of this article, let’s focus on that list. The list could be broken into two categories: 1. Advertising with an ongoing weekly/monthly cost. 2. Advertising with an upfront cost and little to no ongoing cost.

I think it goes without saying that advertising with an upfront cost but little to no ongoing cost is advertising worth using. Agreed? Let take a look at how we integrate these media with those that have an ongoing cost. The media with the least cost include lawn signage, word of mouth, vehicle ads and company websites. Ask yourself, can you amplify the medium? Can you make it interactive? Can you capitalize the upfront cost? The answer is “yes” and it’s easier than you think.

These media are critical in any advertising/marketing campaign. The more you can leverage these media successfully, the less you will need to spend on the other three. If you’re not already maximizing the beneﬁts of these media, put your focus there ﬁrst. So how does this save you money? Before I go any further, you should know that the next steps require that you have a website or an online advertising presence. In other words, you need an interactive medium where you can send people for more information.

And then there’s old fashion word of mouth. Never in the history of marketing has it been easier to amplify what people are saying about you. It used to be that someone might be able to tell 10 people something good about you. Now, with the power of personal networks and websites such as Facebook, a good news story about your company can spread to thousands of people within hours. If you don’t have a place for all these people to get more information about you however, all that chatter goes to waste. Amplify word of mouth! Finally the most significant reason for directing all your marketing efforts towards your company website is the free stuff. When you have a website that is properly optimized for the search engines, users will be able to use a website such as Google.com to find you. This is FREE advertising! Imagine thousands (yes thousands!) of people looking at your rental property information and you paid next to nothing for it other than your up front start-up costs and ongoing nominal hosting fees. There is no better way to save on marketing costs than to earn free advertising. Generating free traffic to your website doesn’t just happen by mistake though. It’s a combination of good design, inbound links, AKA referrals and offline promotion. When these elements come together and you watch your traffic grow, your reliance on costly advertising diminishes and the true savings

Funnelling prospects to your website allows you flexibility in how and where you spend advertising dollars. Now, imagine all your advertising working in harmony leading prospects to one common place. The ideal place of course is a company website. The main reason for this is that there is no presence of competitors and you have the prospect’s complete and undivided attention. Did you know that less than 20 percent of newspaper ads include a website address? Do you see the opportunity here to separate yourself from your competitors? Print ads without website addresses are just plain old ads. So little effort is required to make the ad interactive yet so many landlords don’t direct prospects to a website. What an opportunity! Even your advertisements on rental websites should have a direct link to your company website. This way you remove the prospect, at least temporarily, from the site where all your competitors are and get them to focus solely on your information. So back to saving money! Funnelling prospects to your website allows you flexibility in how and where you spend your advertising dollars. Shorter classified ads with a website address actually stand out and cost less! As an experiment, try buying a couple of ads in rental magazines with a focus on directing users to your website - where information on all your properties can be found. The signage in front of each of your buildings and the ads on your vehicles are also great ways to drive even more traffic to your website. 14 Canadian Apartment Magazine

are realized. You will find yourself in a position to redistribute advertising dollars without the fear of watching your vacancy rate rise. You will be able to reach more people by using more media at much lower costs and when your properties are at capacity you can even choose not to advertise at all knowing your website is still working for you! If you follow everything I suggested in this article you can have hundreds, if not thousands of visitors hitting your website within a few months of launch. If you already have a website, you can increase your traffic exponentially almost over night. There are so many ways, many not even discussed in this article, to drive renters to your properties that it’s almost impossible not to find ways to save money on advertising. As always, I’m more than happy to answer any questions you may have about this article or any of my articles in the past. CAM

Jason Leonard is our marketing feature writer. You can get a free copy of his “Landlords Guide to Using the Internet” by sending your name and address to jason@gottarent.com

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landlords and the law

Unhappy Legal Results for Landlords in 2007 by Robert G. Doumani & Tom Halinski Aird & Berlis LLP

Ontario Landlords achieved limited success at the Ontario Rental Housing Tribunal, the Landlord and Tenant Board and in the Courts this year. In the first of two articles the authors describe the major decisions and their implications. Several legal decisions made in the past year will have an impact on how landlords carry out their business. In the following article we outline three of the most important judgments. Rent Increase Without Notice Section 136 of the Residential Tenancies Act, 2006 (RTA) which deems rent to be lawful if the rent or a rent increase is not challenged within a year was narrowed by the decision of the Ontario Court of Appeal in Price v. Turnbull’s Grove Inc. Price’s rent was increased without any notice of rent increase being given. Price initially paid the increase but then reverted to his former rent. Price ﬁ led an application in April 2004 for return of illegal rent collected, which was dismissed. Turnbull then ﬁ led an application with Ontario Rental Housing Tribunal (ORHT) 16 Canadian Apartment Magazine

to terminate the tenancy for non-payment of rent. ORHT granted the application, which was subsequently endorsed by the Divisional Court. Price then appealed to the Court of Appeal. The issue on appeal was whether section 136 of the RTA [formerly section 141 of the Tenant Protection Act, 1997 (TPA)] which deems rent to be lawful after one year, applies where a rent increase was taken without giving a notice of rent increase. Rent increases taken without giving a proper notice are void according to subsection 116(4) of the RTA [TPA, subsection 127(4)]. The Court of Appeal determined that “void” meant that the rent increase was a nullity, not merely unlawful, so there was nothing to “deem lawful” by operation of section 141 of the TPA [RTA, section 136]. The Court also commented that section 141 of the TPA [RTA, section 136] is not rendered useless, because there are other types of rent increases that are

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“ I do not accept that the landlord is reqiuired to specify the exact hour and minute of a required entry...” unlawful, but not void. The Court also left the door open to an argument of laches or estoppel as a defence. This is one of the decisions where the landlord was not represented so that the implications of the Court’s earlier decision in Wolkow v. Dunnell does not seem to have been raised with the Court. In Wolkow the Court determined that a written notice of rent increase was so lacking in suﬃcient particulars as to be no notice at all. So it remains an open question as to what defects in a notice will render it void such that the deeming provision of the RTA is ineﬀective. In addition, the basis on which the purchase price of a property is calculated is put at risk by the decision. In the past, as part of the due diligence, only rents charged in the year immediately preceding the closing date were checked for legality as part of the purchaser’s due diligence. That practice was based on the deeming provisions of the TPA and RTA. Notices of rent increase were checked to a degree. However, in view of the Price decision all past rent increases notices need to be reviewed.

Waiving Statutory Rights The no-contracting-out provisions of subsection 2(1) of the TPA [RTA, subsection 3(1)] were revisited by the Divisional Court in 1086891 Ontario Inc. v. Barber. Barber received a notice of a rent increase that was eﬀective May, 2002. After discussions with the property manager, Barber received a letter stating that after May, 2003 the “rent would be frozen at that amount until you choose to vacate your unit”. The owner subsequently gave Barber notice of rent increase which Barber did not pay and, as a result, an application for arrears was made to the ORHT. The ORHT found that the agreement was unenforceable under subsection 2(1) of the TPA and that the doctrine of estoppel could not override a statute. Barber appealed to the Divisional Court. The Court, in dismissing the appeal, noted that the agreement in this case would have eﬀectively prohibited the landlord from increasing rent until the tenant vacated and that such an agreement would directly contradict the landlord’s right to increase rent under the TPA.

that would have allowed the appeal, ﬁnding that a landlord who contracts out of the right to increase was no longer “lawfully entitled” to increase rent under s. 126.

Notice of Entry The decision of the Divisional Court in Wrona v. Toronto Community Housing Corp. both clarified and added uncertainty to the scope of the 24-hour notice of entry provisions of the TPA and RTA. The Landlord carried out its annual inspection of smoke detectors and gave notice identifying a nine-hour window for entry. However, the tenant was home and let the workers in. Subsequently, the tenant applied to the ORHT complaining about an illegal entry. The Divisional Court found that the landlord was required to give written notice including a specific time of entry within the 8 am to 8 pm window. The Court endorsed the following ORHT finding: “I do not accept that the landlord is required to specify the exact hour and minute of a required entry... I do not find that a six-hour entry period complied with the requirements that the Landlord specify a time of entry...”.

The Court found the landlord’s notice deficient and that the entry, even with permission at the time of entry, was illegal as follows: “In our opinion, by failing to consider the legitimacy of the notice, the Tribunal erred in law and further erred in law in holding that in the face of the defect in the notice, a consent to entry could operate as a waiver of the requirement for notice.”

The Court awarded the tenant $1,000. The decision settles, albeit adversely to landlords, the concern about overly broad notices of entry. A nine-hour window is too broad. However, the Court did not specify the proper length of time to be speciﬁed in a notice. Undoubtedly that issue will be dealt with over the coming year. These are only three of the decisions made by the courts and tribunal over the past year. In the next issue we will summarize three other important decisions and their implications for landlords. CA M

The Court said: “The policy rationale behind ss. 2(1) [now 3(1)] is to treat tenants and landlords equally. The subsection is designed to prevent parties from bargaining away or waiving their statutory rights no matter what the circumstances... To permit a departure would create a signiﬁcant loophole which could dramatically impair the entire scheme of the Act.” The Court also held that the doctrine of estoppel cannot override the TPA. Otherwise, it would allow the parties to do indirectly what they could not do directly - contract out of the statute. The authors had thought the law on this issue was well settled so it is troubling that there was a dissenting judgment 18 Canadian Apartment Magazine

Headquartered in Toronto, Aird & Berlis LLP provides a wide range of legal services. For more information visit the company’s website, www.airdberlis.com

We’ll Treat It Like It Was Ours! Your properties are important investments to be handled with care and respect. You can rest assured, MetCap Living knows this ﬁrst hand. With over twenty years of proven success, the MetCap Living team will ensure your ‘little nest egg’ is safe, allowing you to breathe easy, as well as relaxed and free of concern. We know your world, because we live it on a daily basis. Marketing, leasing, accounting and site management — in fact, anything and everything you require to provide a better living experience — MetCap Living can deliver. We’ll tailor our expertise and well established infrastructure to meet the speciﬁc needs of multi-unit properties. Think of us as a breath of fresh air. Always ready. Always professional.

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regulations

Are You Compliant With Fire Code Regulations? by Terry Bruns

With respect to the emergency planning section of provincial and city fire codes, there are many building owners, owner agents, property managers and building operators who are unaware of the requirements of Section 2.8 of the National Fire Code and as a result may be putting themselves at risk to both civil and criminal liability should a fire occur and they are not compliant.

20 Canadian Apartment Magazine

November 28-30 2007

%eady r al

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90 L D !

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Greening Existing Buildings: Major Focus

Metro Toronto Convention Centre South Building Greening is a major priority for building owners and managers as they seek to develop and implement strategies and practices that will use substantially less energy, ensure that indoor environments are healthy and comfortable, and reduce GHG emissions. SHOW THE MARKET WHAT YOU ARE OFFERING Greening existing buildings will be a one of the major themes of PM Expo 2007 as we respond to the interests and priorities of the real estate, property management and building industry. As an exhibitor, you will be able to showcase your service, product and/or technology to the market and demonstrate how you can help owners, managers and operators meet their needs and priorities for greener buildings and provide a reasonable ROI. The GREEN PRODUCT & SERVICE RECOGNITION and the PRODUCT KNOWLEDGE CENTRE (new to the Show this year) will help you to facilitate higher profile for the effectiveness of your offerings to the market. The National Green Building Conference will be held concurrently with PM Expo. With over 200 speakers, this will be the largest program ever offered in Canada of seminars and presentations on the best practices, most current strategies and the latest technologies for greening new and existing buildings. Be sure that you are a part of this significant market trend!

90% OF EXHIBITOR SPACE IS ALREADY SOLD! With a total attendance of over 22,500, PM Expo 2006 was sold out for the fourth consecutive year. The space rate for 2007 is $28 per sq.ft.

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Section 2.8 of the National Fire Code, which most provinces adopt as their own fire code, requires fire safety plans for all buildings that are required to have a fire alarm system under the building code. This applies to all residential buildings in Canada that have more than 10 sleeping units or more than 10 occupants (in Ontario). The National Fire Code not only requires that fire safety plans be developed, but that they also be implemented and reviewed on a regular basis. The following are some key points to consider when developing or reviewing your fire safety planning program.

Many occupants moving in are not aware that there is a plan in place and what their responsibilities are, or the procedures to be followed during a ﬁre emergency. It is also common that supervisory staﬀ never get appointed and those that do get appointed, never get formal training. It is also common that the plans get misplaced or go out of date shortly after the building is open and occupied. To ensure that you are compliant with the fire code, we recommend that you, as a building owner, owner agent, property manager or building operator make it a priority to:

Section 2.8 of the National Fire Code requires fire safety plans for all buildings that are required to have a fire alarm system • The fire code states that the fire safety plans must be developed in cooperation with the fire department and should have documentation of this cooperation in writing with a review/acceptance/approval letter generated by the fire department. The fire safety plans are required to document the procedures to be followed in a fire emergency, including persons requiring assistance; the characteristics of life safety systems c/w floor plans and schematics; the appointment of supervisory staff; training for supervisory staff and other occupants; the holding of fire drills; and the control of fire hazards.

• Locate your fire safety plan.

• The fire code states that all supervisory staff (those persons whom have duties in the plan) must be trained and that fire drills must occur either annually for low-rise or every two to three months (depending on province) for highrises.

• Ensure you document that you have conducted the required number of fire drills.

• The fire code further requires that instructions to occupants be prominently posted and maintained on each floor area. • The fire code requires that a copy of the fire emergency procedures be given to each supervisory staff member. • The fire code requires that in most provinces, the fire safety plan be reviewed at least once per year and updated if changes to the building or occupancy warrant it.

Because it is a requirement for occupancy, many new residential buildings develop a fi re safety plan during the construction phase. It is rare for this plan to have the supervisory staff identified at this stage because the building is not occupied. 22 Canadian Apartment Magazine

• Locate the letter of approval from the fire department. • Review the plan for accuracy (keep a record log). • Ensure that the supervisory personnel lists are current and that the people on those lists understand that they are indeed assuming the role identified within the plan. • Ensure that your supervisory staff have been trained (either electronically or by a live trainer) and that you can document that the supervisory staff have been trained.

• Ensure you have emergency instructions to occupants signs posted on each floor area. • Provide your supervisory staff with emergency instructions. • Have a mechanism to ensure that the plan is kept current.

Having a compliant, implemented, and current ﬁre safety plan in place in your building will enhance safety; reduce liability exposure (both criminal and civil); increase your image with tenants and owners; appease the authorities; and reduce your down-time should a ﬁre occur within any of your buildings. CAM

Terry Bruns is the CEO of WPS Disaster Management Solutions, Ltd. He can be reached at 1-800-545-9028, on the web at www.wps-plan.com or by email at tbruns@wps-plan.com

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multifacts DTZ acquires J.J. Barnicke DTZ Holdings plc, a global property adviser, has acquired J.J. Barnicke Limited, Canada’s largest independently owned, full-service commercial real estate services company. In an announcement made in November DTZ stated that it is paying $26.6 million for J.J. Barnicke. A further payment of up to $1.6 million is payable if certain conditions are met. J.J. Barnicke Limited, will be renamed DTZ Barnicke and will be headquartered in Toronto. It has 17-owned and affiliate offices across Canada with some 450 employees including more than 300 real estate professionals. J.J. Barnicke Limited provides a comprehensive range of commercial real estate brokerage services. Chris Ridabock, previously President of J.J. Barnicke Limited, has been appointed Chief Executive Officer of DTZ Barnicke. Joseph J. Barnicke, who founded the firm in 1959, will remain as Chairman for a transition period. The acquisition of J.J. Barnicke Limited builds upon DTZ’s other recent acqisitions in North America, including Boston-based DTZ FHO Partners, and DTZ’s acquisition of 50 percent of New Yorkheadquartered DTZ Rockwood. Mark Struckett, Group Chief Executive of DTZ, said: “Today’s acquisition demonstrates the importance we put on the North American market as part of our continuing focus to meet the cross-border needs of our multinational clients. DTZ’s acquisition of J.J. Barnicke Limited is an important step for both companies and one that underpins our longestablished strategy to meet the increasing demands of organizations wanting to take a worldwide approach to procurement, property solutions and service delivery. Our clients around the world will benefit from the additional depth, reach and expertise now available to us throughout Canada, while J.J. Barnicke Limited’s clients will benefit from DTZ’s strong global delivery platform in serving their crossborder needs at a time when Canadian investors are becoming more active globally.” Joseph J. Barnicke commented: “To meet the changing needs of our clients, we have joined a global group that recognizes the importance of

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long-term relationships and shares our core values, beliefs and resolute commitment to service, teamwork and integrity. As a result, clients will benefit from the same high quality service throughout Canada and across the world backed by the expanded service capabilities that DTZ offers.” Chris Ridabock added: “J.J. Barnicke Limited has been servicing international corporations and institutions for decades, and we have affiliated with global networks in the past. However, it was the calibre, global reach and expanded offerings of the DTZ organization that made it the obvious choice for a permanent partner. We look forward to becoming an important part of its worldwide team.”

Copper Stripped From Rental Home A New Brunswick man who evicted a couple renting his home after they used it as a grow-op was shocked to find it was stripped of much of its copper. “I went to the house to find there was no power on, the copper pipes ... all the heating elements were cut out,” landlord Murray Donovan said. There was copper wire cut out of the house, all the wiring part was stripped and laying on the floor.” Police have launched drug and theft-related investigations. “Sometime during the eviction of these people the copper went missing from the radiators,” said Sergeant Pat Bonner of Saint John Police. In July, police found marijuana was being grown inside the house, but it took Mr. Donovan two months to evict the tenants.

CAP REIT and TransGlobe Swap Properties Canadian Apartment Properties Real Estate Investment Trust (CAP REIT) announced in October that it had acquired eight apartment buildings from TransGlobe Property Management Services Ltd. As part of the deal CAP REIT sold 11 buildings to TransGlobe. The buildings acquired by CAP REIT are in Alberta and British Columbia and total 748 suites. The purchase price was approximately $94.6 million, including new CMHC insured mortgages of $61.2 million for a five-year term at a weighted average interest rate of 4.73 percent. Occupancy in the acquired portfolio is currently 100 percent. CAP REIT has regional operating centres and property management teams in Vancouver and Calgary. These new properties will be managed by this existing operating structure. The acquired properties include: • A 12-storey highrise apartment building in Calgary comprised of 139 suites. • A 60-suite property in New Westminster, B.C. • Three properties in Coquitlam, B.C. totalling 178 suites. • Three buildings in Victoria, B.C. totalling 371 units. In conjunction with this acquisition transaction, and to further enhance CAP REIT’s geographic diversification, CAP REIT also announced that TransGlobe has waived due diligence conditions and will purchase from CAP REIT 11 non-core Ontario and Quebec properties totalling 1,478 suites. This sale transaction is scheduled to close in mid-January 2008. Further details will be available at that time. “This creative and strategic transaction will help to achieve our goal of further diversifying our portfolio while expanding in markets with increased growth potential,” commented Thomas Schwartz, President and Chief Executive Officer. “Importantly, while we are strengthening our presence in these strong Western Canadian markets, we are doing so with little increase in our operating costs as these properties will be managed by our existing operations infrastructure.” With the completion of this acquisition, CAP REIT’s portfolio in British Columbia will aggregate 1,488 suites, or approximately 5.3 per cent of the total portfolio. The Alberta portfolio will increase to 1,380 suites, or 5.0 per cent of the total portfolio. CAP REIT owns interests in 27,853 residential suites in Canada, as well as two adult lifestyle land lease communities comprising 1,233 sites in Ontario.

≥

multifacts Eviction Prevention Audit Finds Most Claims Meet Guidelines An internal audit of the Alberta government’s Homeless and Eviction Prevention (HEP) Fund found most claims adhered to program guidelines and procedures. To date the fund has helped thousands of Alberta families and individuals with limited resources that are at risk of losing their homes due to rent increases or arrears, or need help to establish a home.

CMHC & Conventional Mortgages for: Multi-Family Rental Properties Senior’s Housing Projects Commercial Properties Construction Projects

The HEP Fund review randomly selected 239 files from across the province. Only three files were identified for further review and possible referral to the department’s fraud unit. In 14 additional files, overpayments totalling $6,357 were discovered and collection is underway for the overpayments. Fifty-one files were found to have incomplete documentation. None of these irregularities indicate that funds were paid out in error, or to Albertans who did not have a need for financial assistance.

Vancouver Brian D. Kennedy Phone: 604-685-1068 Fax: 604-683-2787 Email: vancouver@peoplestrust.com

“Our staff were given flexibility to respond to individual need, and with a large volume of applications, they made the right decision based on the individual’s circumstances,” said Iris Evans, Minister of Employment, Immigration and Industry. “We believe that the vast majority of Albertans who come to us for financial assistance are doing so out of real need.”

Calgary People’s Trust Ad Dennis Aitken or Chris Hudson Phone: 403-237-8975 Fax: 403-266-5002 Email: calgary@peoplestrust.com

The internal audit covered the first nine weeks of the program starting May 11. It provided six recommendations, all of which the government has agreed to and has begun to implement.

Toronto Michael Lombard Phone: 416-368-3266 Fax: 416-368-3328 Email: toronto@peoplestrust.com

The audit recommended that: 1. The department should ensure adequate documentation is obtained and placed on file by workers as required by HEP Fund directives.

2. The department should clarify how HEP Fund and Income Support benefits are coordinated. 3. Random checks on client accommodations should be performed. 4. Third-party payments should be issued to landlords when clients request funding for rental arrears.

www.peoplestrust.com

5. The department should implement monthly data matching between the HEP Fund and the Municipal Affairs and Housing Direct Rent Supplement Program to ensure no duplication of benefits. 6. The department should develop a recovery policy for HEP Fund overpayments.

Renter Household Growth Declines An analysis of data from the 2006 Census of Canada, conducted by Altus Clayton, has found that robust economic growth between 2001 and 2006 resulted in a shift in housing demand from rental units to ownership units. While Canada’s 3.9 million households that rent account for 31.6 percent of total households, this proportion has been steadily trending down since 1976 when the proportion was almost 40 percent. Over the 2001 to 2006 period the number of renter households declined by some 5,000 units per year. The decline occurred only in Ontario, B.C. and Saskatchewan, which collectively accounted for a loss of an average 11,600 renter households per year. The losses were partially offset by strong gains in Quebec and Alberta which collectively accounted for an average gain of 6,000 units per year.

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The general weakness in renter growth has had a negative impact on apartment vacancy rates which rose from two percent to 2.8 percent across Canada during the 2001 to 2006 period.

november 2007 25

propertytax

Multi-Residential Tax Ratios Spark Debate by Barbara Carss

Hamilton City Council will look at recommendations from a committee studying the tax burden on multi-residential property compared to other property tax classes within the city.

Finance officials in Hamilton, Ontario, argue that a higher tax rate on multi-residential rental properties doesn’t necessarily translate into a disproportionate tax burden for the owners and occupants of rental housing. The average tax apportionment on rental units in the city is about 30 percent less than for the average condominium and 50 percent less than for the average single family home. Nevertheless, Hamilton Council will consider recommendations from a newly established multiresidential property taxation sub-committee during next year’s budget deliberations. The 13-member committee, which includes four City Councillors and representation from landlords, tenants, commercial and residential ratepayers, will study the tax burden on the multi-residential property tax class compared to other property tax classes within Hamilton, and compared to multiresidential and residential taxes in other municipalities. It will also analyze property taxes and rents compared to income levels, and review the impact of provincial tax credits. Hamilton Council endorsed the sub-committee during the 2007 budget debate last March after deciding not to adjust the current tax ratio, which sees multi-residential rental properties taxed at 2.7 times the residential tax rate. At that time, finance staff presented a report arguing that rental properties are not unduly taxed compared to condominiums or single-family housing because the Municipal Property Assessment Corporation (MPAC) uses different valuation methods for the two types of properties that result in lower per-unit assessed values in rental housing. The finance staff report also maintains that provincial tax credits help cushion pass-through property tax costs for eligible seniors and renters with lower incomes. However, MPAC officials stress that lower assessed values reflect the market, not the approach to assessment. “We do use a different approach to value, but the goal in the end is to get to market value,” says Rose McLean, MPAC’s Director of Legal and Policy Support Services. “The fact that we use the income approach on one and sales on the other isn’t to get a different 26 Canadian Apartment Magazine

assessment. Condos sell regularly on the open market so it’s a very reliable way to get the information. Apartment buildings don’t trade as often and when people buy them, they are buying them for their income stream.” Canada Mortgage and Housing Corporation (CMHC) found a vacancy rate of 4.3percent in Hamilton during its annual rental market survey in October 2006 - well above the national average of 2.6 percent. The average rent for a two-bedroom apartment was $796 in Hamilton, compared to $1,067 in the Greater Toronto Area. “I challenge anyone to show that an apartment building in Hamilton is worth the same as an apartment building in [neighbouring] Burlington or elsewhere in the GTA,” asserts David Horwood of the Hamilton & District Apartment Association. “MPAC is not using a net income multiplier; it’s a gross income multiplier. The gross income may look reasonable, but there is not a practical way to achieve it in the market as it stands. Just because we have an occupancy of 93 to 95 percent doesn’t mean we are collecting rent on 93 to 95 percent of the units.” Hamilton is not the only Ontario municipality where multiresidential properties are taxed at a much higher rate. As of the 2006 tax year, only four municipalities in the province had attained the provincial government’s targeted “range of fairness” with tax rates for multi-residential properties at no more than 1.1 times the residential tax rate. “Hamilton is probably an anomaly because the market value of apartments per suite is one of the lowest of the major centres in Ontario,” observes Lorenzo Di Gianfelice, an appraiser and sales representative specializing in apartment buildings with RE/MAX Commercial Focus. “Depending on the actual assessed values, generally speaking, on a per unit basis the apartment building will have a higher annual tax bill than the condo. This discrepancy in actual per unit taxes per annum is one of the reasons why municipalities do not like condo conversions.” CAM

Barbara Carss is the Editor-in-Chief of Canadian Property Management, MediaEdge Communications Inc.

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feature

Taking the Third-Party Route by Randy Threndyle

Developer Sells its Property Management Division For building owners, managing a large portfolio of multi-residential buildings is often a time consuming task. Minor decisions can take weeks and lead to frustrating delays. For Oshawa-based Halloway Holdings, the answer was a third-party management model.

Kristian Pandurov

28 Canadian Apartment Magazine

feature

Earlier this year one of Ontario’s oldest property management companies, Valiant Property Management, sold its assets in an employee-led takeover. Founded in 1922, Valiant both developed and managed a portfolio of 1,215 apartments, ﬁve self-storage locations and 800,000-square feet of commercial property. Valiant, as well as the properties it managed, are owned by Halloway Holdings, a development company headquartered in Oshawa, Ontario. Valiant’s property management division now operates under a new company, PAN Group Properties, and is owned by its President and CEO, Dean Pandurov. For the past ﬁve years, Pandurov was Valiant’s general manager. The new company will continue to manage all the properties previously managed by Valiant. Halloway’s decision to outsource property management to a third-party management company came as part of a move by the company to focus on the development aspect of its business. The company recently completed construction of a new Cineplex theatre complex on Taunton Road in Oshawa, Ontario and is currently developing a Home Depot-anchored shopping centre in Bowmanville, a rapidly expanding community east of Toronto.

Pandurov, a 20-year veteran of the property management business, says his decision to take over Valiant’s property management operations and start his own management company came as the result of a mutual agreement between himself and Halloway’s owners. They wanted to concentrate on the development part of their business, while Pandurov wanted to expand the third-party property management side of the company. “I was pushing in a direction the owners didn’t want to focus on” he says. “After some careful consideration both on a personal and a corporate level, and with the owners fully on board, a decision was made to say, let’s split, but let’s stay together. My thinking was, let’s expand the thirdparty management business introducing a new ownership structure.” Discussions on the new ownership structure were ﬁ nalized earlier this year and the change of ownership was completed in August. Under the new structure PAN Group will continue to manage all of Halloway’s current properties as well as any new properties the company develops. On the multi-residential side PAN Group is managing 11 buildings in two clusters. One is a four-building complex in central Oshawa and the other is a group of seven buildings in the city’s north end. The largest is a 20-storey structure that is the city’s tallest building. As a property management professional who has worked in both the public and private sector, Pandurov says the thirdparty management business model helps to streamline the decision-making process for building owners.

Dean Pandurov

Dean Pandurov is a 20-year veteran of the property management business.

Pan Group Properties’ Senior Management Team believe an astute property manager can improve the bottom line. november 2007 29

In order to ensure the smooth transition PAN Group has retained most of Valiant’s staff. Erika Bradbury, a Senior Property Manager at PAN Group and a former Valiant employee says one of the many advantages the new company offers is that decisions can be made much faster. Historically, she says, when units needed to be renovated or capital improvements were required, you had to plead to the owners and wait for their approval. Because Halloway was in the land development business, the property management business always took second place. The owners, she says, were usually busy working on new construction projects and that meant managers often had to wait in line until the owners could clear up a few minutes to sit down and discuss proposals. “Today, if I decide I want to change something, it takes ten minutes. Under the old system, it could take three or four weeks for the owners to find time to review it and make a decision.”

For example, previously, every bill went through the owner’s desk. With PAN Group every bill goes through both Pandurov’s desk and the finance director’s desk. That, he says, is the kind of financial control you find in owner-managed companies. “You put the steps in place to ensure the proper due diligence and you go one step beyond to make sure every cent is spent properly.” Helping to ensure that money is spent properly is the job of John Bain, Director of Finance. A former employee of the property management software company Yardi, Bain specializes in implementing software solutions to property management problems. And, software solutions can create real savings in both time and money. At the end of each month, for instance, the owner receives a read out of all the income and expenses. Reports can be customized to meet both the owner’s and the property manager’s needs. With over 20 separate properties to manage, customizing

On the multi-residential side PAN Group is managing 11 buildings in two clusters. One is a four-building complex in central Oshawa and the other is a group of seven buildings in the city’s north end. Pandurov says an improved decision-making process combined with the in-house expertise that his new and improved team could provide was one of the reasons behind the switch to a third-party management model. A third-party manager, he says, can make decisions faster without going through unnecessary delays. But he also had to prove that an independent company like PAN Group would be as good as or better than the ownermanaged company. That meant proving that the new company would manage the assets as diligently as an owner would. “You have to keep in mind, a lot of third-party management companies want to sell the idea that they have ownership style management,” he says. “Since our employees worked for an owner-managed company, PAN Group still operates under that principle,” he says.

30 Canadian Apartment Magazine

reports can be a real advantage, says Bain, as it allows the owner or the property manager to see a made-to-order report for each property. Each property has its own account, so anyone checking the books can easily see a rundown of what it cost to operate each property and what income it earned. As any property manager or owner can attest, one of the most important aspects of property management is reducing vacancies. To that end, Pandurov has reduced vacancies in the multi-residential portfolio to well below the Oshawa average of 3.9 percent, the most recent vacancy rate published by Canada Mortgage and Housing Corporation. The vacancy rate is so low that PAN Group has actually increased all market rents for the third time this year while cutting its advertising and marketing spending by half, something few property managers are able to say.

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As PAN Group Properties continues to excel as one of Durham Region’s most recognized Property Management Companies, the Rogers Consumer Major Accounts team would like to extend to you our best wishes for success.

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Student Loans Lead to a Career in Property Management When Dean Pandurov, the CEO of PAN Group Properties, immigrated to Canada from Eastern Europe over 20 years ago he didn’t foresee a career in property management. The then university student saw his future in engineering and fully expected to become a practicing engineer. Along the way a couple of things changed his career path. As young student with a family to support, Pandurov took on a job as a building superintendent. What appeared then to be a practical part-time job was in fact the start of his career in property management. This year Pandurov launched the newest phase of his career with the start of his own property management company, PAN Group Properties. Shortly after completing his engineering degree in the early 1990s, Pandurov landed his first job in construction management working on a new condominium complex in Toronto. As construction progressed, economic conditions reduced the demand for new housing and the complex morphed into a rental building. Pandurov’s experience as a building super came into play as the building’s developers suddenly needed someone to rent and maintain an apartment building. What Pandurov had thought would be the start of his engineering career, once again served to further his involvement in property management. That experience lead to a job as a property manager with the South Waterloo Housing Authority and later for Waterloo Region Housing. During his time with the public housing authority, Pandurov continued his studies, eventually earning a Master of Public Administration (MPA) degree, the public sector equivalent of an MBA, from Queen’s University in Kingston. He is currently working on his Doctorate in Business, DBA degree. Pandurov says while working on his master’s degree he began to reassess his career in the public sector and, while he had always enjoyed his work he had found that as time went on the bureaucracy of public housing was somewhat limiting. “As much as you tried to cut through the red tape, the bureaucracy was still very restrictive.” Still in his early 30s, he wanted to move forward and take on challenges that he couldn’t do inside the public sector. Plus, his years in university had left him with a number of student loans that needed to be paid off. Leaving the public sector he joined COGIR Management as its Regional Director for South-Western Ontario. Five years ago he moved to Valiant Property Management in Oshawa, Ontario, where he was the General Manger. This year he acquired Valiant’s Property Management division and renamed it PAN Group Properties. The new business has allowed him to bring his son, now 20 into the business. Kristian Pandurov, a second year student in Urban Land Economics at the University of British Columbia, is also a contract administrator and business development liaison for PAN Group. While the business of property management, raising a family and improving his academic credentials has taken up a large amount of his time, Pandurov has still found time for volunteer work. In Cambridge, he was the first Chairman of a newly formed group, Cambridge Immigrant Services. For his volunteering accomplishments with the centre, he received awards from both the federal and provincial governments. Currently, in Oshawa, he is once again doing volunteer work as part of a committee to recruit new doctors to the community. “I am strong believer in volunteering for charitable causes. This is where everyone benefits from the return on investment.” CA M 32 Canadian Apartment Magazine

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Pandurov says the key to keeping vacancies low is in constantly molding your marketing model to effectively rent units while keeping your current tenants fully satisfied. “We track all inquiries and visits to buildings. PAN Group has a central rental office that tracks every call and the source of advertising that prompted the call.” he says. “This is constantly monitored and constantly tweaked. For instance, you have to know where your customers are coming from. Is it from referral or advertising, Whitby or Markham? When a new source of advertising is added, we isolate that particular source of calls to get the real sense of return on investment. We also track the geographic region where the calls are coming from. If one particular area or source can be identified, then it can be targeted for marketing and advertising” says Pandurov. “For example, we advertised and tracked one new storage banner in the new hockey arena through our residential rental office line. This is seemingly mismatched, but our residential rental agent would not only be 100 percent certain about the origin of the call, but it would also further follow through to track the outcome from the storage site without bias commonly associated from the site reporting. Each rental is a success story shared by the team.”

increases above the guideline have to be approved by the Ontario Landlord and Tenant Board. Pandurov asked the board for the above guideline rent increase spread over three years saying that the improvements were necessary in order to maintain sound building integrity and improve energy conservation, and not simply an attempt to raise rents. “It’s actually giving back to tenants and making buildings safer, better and warmer, and yes there is a cost to that.” The company’s case succeeded and the increase, based on the improvements, was granted to the company. Pandurov says if the board had not allowed the increase, it’s unlikely that he, or any other landlord, would be able to make a business case for spending on capital improvements, other than those required to ensure the safety of the tenants. “Ultimately, we would have all lost, but mostly tenants.” However, any capital improvement is a multi-year payback and many property managers are reluctant to invest if the return on investment is going to extend beyond 10 or 15 years, he says. “A lot of companies are short-term in respect to ROI, so 15 years, they don’t know who will own the building in ﬁve years, let alone 15 years, so they aren’t spending anything.” Pandurov maintains that building improvements are money well spent if, as in his case, it increases tenant satisfaction and

“If the only way you are monitoring is if someone actually rents, then you are not monitoring.” But the key to effectively renting units, says Pandurov, is monitoring all calls and monitoring each and every visit to a building by a potential tenant. “If the only way you are monitoring is if someone actually rents, then you are not monitoring. If you are missing calls and not tracking if a potential renter walks into the building then you are missing some pretty important data,” he says. “Building occupancy is the other side of the vacancy coin which requires different polish treatment: the highest level of tenant satisfaction. We at PAN Group believe that an astute property manager can improve a building’s bottom line by investing in timely maintenance and capital improvements,” says Pandurov. Given that most multi-residential buildings are more than 30 years old, maintenance and capital improvements are an increasing part of any budget. Two highrise buildings in the company’s portfolio recently underwent a $1.2 million overhaul. Work involved installing a new exterior insulated finishing system (EIFS), new windows, as well as roof and balcony repair. Before starting work Pandurov carried out an analysis to determine the cost and the return on investment that could be expected from the improvements. He calculated a 12-year return on investment based on energy savings and a rent increase that was about 10 percent above Ontario’s rent increase guideline. Ontario’s Residential Tenancies Act sets the rent increase guideline each year. Rent

34 Canadian Apartment Magazine

maintains high occupancy rates. Only two residents in the 153-unit complex left as a result of the rent increase. There was no vacancy loss as the units were immediately re-rented. While the rent increase made the work feasible, Pandurov points out that different markets and different regions might react differently. In a more volatile market with higher vacancy rates, an above guideline increase might raise rents to a level that would serve to increase, rather than reduce vacancies. Especially in areas of the province where landlords are reducing rents to maintain acceptable vacancy rates. Eventually the PAN Group will be looking for new clients, says Pandurov, but before that happens he says the company needs to focus its resources on making certain that the company’s relationship with Halloway is not compromised. To do that, he says PAN Group needs to prove that the decision to hire a third-party management company was a winning solution for both companies. So far, he says, the experience has been positive for both sides, but he adds, “I want to hear those comments a year from now and two years from now.” If that’s the case he will be looking for new clients to expand PAN’s management portfolio. “If at that time an attractive opportunity becomes available, I want to let Ontario know that PAN Group will be there looking for potential business.” CAM

“Yardi Voyager streamlines our operations and provides customized reports to fit our property management needs.” Dean Pandurov, CEO PAN Group Properties

Yardi congratulates PAN Group Properties and wishes them continued success. For the fourth year in a row, PAN Group Properties was voted “Best Property Management Company” by Durham Business Times. Yardi is proud to be part of the infrastructure that helps PAN Group Properties provide their clients with superior service. Using Yardi Voyager™ and Yardi ASP Hosting Services, PAN Group Properties expertly manages residential, commercial, and self-storage properties in Ontario, Canada.

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11/7/2007 9:46:14 AM

investment counsel

Are You Ready for the Next Wave?

by Stephen J. Bronetto

Reaching out to your tenants to maintain a full apartment building

You may think that you know what your tenants and prospective tenants want, but do you really? It is not necessarily the features that will entice a person to want to rent an apartment in a particular building, but rather the benefits perceived of living in that building. By nature people ask, “What will I get from my rental dollars?” Landlords need to review what value tenants are receiving for the money that they are paying every month and need to consistently review how they, as landlords, are performing in the following areas: • Solid building and company reputation • Ideal location offering a variety of conveniences both within the building and in the immediate area surrounding the building • Esthetically appealing and clean common areas and grounds • Additional features such as fitness areas, meeting rooms, convenience stores located in the building, etc.

The number one reason tenants choose a building is because of its location. The second reason is because of the amenities of 36 Canadian Apartment Magazine

the building and the surrounding area. What others are saying about the quality and maintenance level of the building and the owner is a guide tenants go by when choosing a place to live. Tenants want to be assured that maintenance issues are dealt with in a timely manner. The old saying of “walk the talk” says a lot about your building. It’s not enough to simply tell them it is a good building, you need to show them proof. Gather testimonials from satisfied tenants and provide them to your potential tenants. You could take a different approach and let your tenants speak with prospective tenants directly in order that they can check the validity of the testimonial. However, always remember to have written permission to disclose personal information about the tenant beforehand. Basic marketing practices follow the price, product, promotion and place principles. Landlords need to consistently review any shift in demographics and changes to the marketing mix and make any necessary changes. This will ensure that their efforts will generate a solid return on their investment. Paint a picture for potential tenants of what it would be like to live in your building. Natural light is considered to be healthier by today’s standards. For example, show them how

the windows in your building allow the natural light to engulf the rentable area. Does your building offer social events? Organizing events for your tenants creates a community feeling and provides an opportunity for tenants to get to know each other and enhances the chances that they will make an effort to look after the common areas as if they were their own property. Find out what amenities are conveniently located near your building and communicate your findings to your tenants through newsletters delivered to their door or by keeping updated information on your website. Show prospective tenants how you have kept the building up to date. Let them know what upgrades you have completed recently such as the installation of new washers, dryers, dishwashers, microwaves and air conditioners. Have you recently changed the toilets or bathroom fixtures? Keeping washrooms upgraded can keep you a step ahead of your competition. In the eyes of the tenant these additional amenities all contribute

Toronto that are within walking distance and closer to many amenities are in higher demand. Rents are perceived as being higher but that is not always the case. Central Toronto is where most people still work, however because people still favour driving to work it has increased the commuting time as well as the congestion. The suburb perimeter of the GTA where most new multi-family communities are located sometimes offer better rental rates for their apartments, but tenants may have to contend with longer travel times. Having better access to the city by mass transit can make commuting easier, but not necessarily faster. Commuting times are increasing each year. What took an hour only a few years ago is stretching to almost one-and-one-half hours for a one-way commute by car. Being close to work is important for tenants. As a result of the upcoming demographics many metropolitan area residents are finding their way back into the downtown areas. Greater importance is being placed on lifestyle, flexibility, and convenience.

Today the focus has shifted from basic shelter to increasingly upscale residential choices and lifestyles. to the desirability of your building. Sometimes even adding a ceiling fan in the apartment at no extra charge can increase the interest of the prospective tenant. Make it convenient for tenants to do business with you. Give them the option to pay by credit card or pre-authorized payment. If you offer a variety of options, it will be perceived as a benefit to those busy individuals that do not want to have to worry about remembering to write cheques. It will also reduce the time involved with the collection of rent each month and trying to keep track of post-dated cheques. Thousands of people relocate to the Greater Toronto Area every year for various reasons. For those tenants finding an apartment to rent in a large city like Toronto can be very intimidating. Pet-friendly apartments, trendy apartments, and studios or penthouses are available but are not always easily found. If you offer these types of accommodations, then gear your advertising and marketing programs towards reaching these types of people. From the tenant’s point of view the range of prospective buildings are compared and a decision is made after the tenant considers the location in conjunction with the surrounding amenities that are offered. Your building can be advertised on the Internet showing the building’s location, the existing floor plans and what apartment sizes are available which will give the prospective tenants the basic information that they need before they actually visit your apartment building. Also, newspapers have exclusive rental columns but by comparison are not as effective or interactive as the Internet. Simply put, make your apartment building and its services easy to locate. Toronto is growing and becoming more spread out as compared to other cities in Canada. As a result, apartments in 38 Canadian Apartment Magazine

Today the focus has shifted from basic shelter to increasingly upscale residential choices and lifestyles. Now more sophisticated urban tenants are driving landlords to alter the landscape of multi-family designed projects. While most of these people could afford to own a home in the suburbs, they prefer the apartment or condominium-style living within the big city. As a landlord you are faced with the challenge of keeping the building fully occupied and at the same time making the building safe, comfortable, and fully functional. The trend is for the baby boomers, that are becoming empty nesters, to downsize from a 3,000-square-foot, single-family home to a townhouse, condominium, or an apartment. Don’t assume that prospective tenants will find you and that you do not need to do anything to attract them to your building. Keep your competitive edge. You need to reach out to them and anticipate what they will be looking for in the years to come and provide it to them now. Often people don’t know what they are really looking for until they see it right in front of their eyes. Don’t wait until the trend happens and then make changes. Be proactive and be ready to ride the wave with them. CAM

Stephen J. Bronetto is President of BonaMax Realty Inc. and is a real estate advisor with 23 years experience in the commercial, industrial, retail and real estate investment sectors. He has completed a wide range of acquisition/disposition, and leasing arrangements for North American clients. Stephen can be reached at 416-817-4377 (Mobile) or sbronetto@bonamax.com

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what’s hot what’s not

Conducting Commercial Real Estate Transactions by Bob Helyar

Whether you are buying or selling a commercial property, you need to get the best value for your investment dollar. A real estate brokerage can be instrumental in bringing qualified buyers and sellers together. Whether you are interested in buying or selling a commercial property there are always two options available to you – using a brokerage house or completing a private transaction. If you are selling your building and already know someone interested in purchasing it or if you are interested in buying a specific building and have the contacts for it a private transaction may be in your best interest. If, however, you would like to sell your building and attract the highest possible offer or if you are interested in getting the best investment possible for your funds; using the services of a brokerage would be to your advantage. 40 Canadian Apartment Magazine

A brokerage or a brokerage firm is a business that acts as a broker. A salesperson working for a brokerage firm is popularly (but incorrectly) called a “broker.” A broker in that context is, strictly speaking, an exchange member who actually executes the purchase or sale as a service to the client of the firm for which that sales representative works. A real estate brokerage attempts to do the following for interested buyers of real estate. • Find real estate in accordance with the buyer’s needs, specifications, and cost.

• Takes buyers to and shows them properties available for sale. • When deemed appropriate, prescreens buyers to ensure they are financially qualified to buy the properties shown (or uses a mortgage professional to do that task). • Negotiates price and terms on behalf

A brokerage may specialize in specific markets such as land opportunities or they may have sales representatives that specialize in these markets or can provide expertise in various geographical locations. Using the services of a brokerage will certainly increase the exposure and opportunities provided to you! CA M

Robert Helyar is the President of DALA Group of Companies and has held a number of executive positions with development and real estate holding companies. He holds a number of professional credentials including Registered Property Manager and Senior Certiﬁed Valuer.

of the buyers and prepares standard real estate purchase contract by filling in the blanks in the contract form.

Upon signing a listing contract with the seller wishing to sell the real estate, the brokerage attempts to earn a commission by finding a buyer for the sellers’ property for highest possible price on the best terms for the seller. To help accomplish this goal of finding buyers, a real estate brokerage commonly does the following. • Listing the property for sale to the public. • Preparing necessary papers describing the property for advertising, pamphlets, website listing, etc. • Advertising the property. Advertising is often the biggest outside expense in listing a property. A brokerage has a marketing team that is able to prepare an effective marketing campaign customized for your property. • Ensuring there is a contact person available to answer any questions about the property and to schedule showing appointments. • Negotiating price on behalf of the sellers. The seller’s agent acts as a fiduciary for the seller. This may involve preparing a standard real estate purchase contract by filling in the blanks or assisting in preparation of a purchase and sale agreement that is acceptable to both parties. • In some cases, holding a deposit cheque in escrow from the buyer(s) until the closing. november 2007 41

maintenance

Plumbing Maintenance and Energy Savings Aandlittlewatereffortsbillsreduces energy by Paul Abrams

Regular building maintenance is a hassle. It’s easy to postpone or convince yourself it’s not always necessary. While it’s true that maintenance can be costly, it’s important to recognize that you’re likely to spend substantially more money in the long run if you ignore a maintenance regimen and wait for something to go wrong. This is especially true in the case of plumbing. It’s easy to neglect your plumbing. The pipes are hidden in walls and buried underground so we don’t think of them until the drains won’t drain or the water won’t turn on. With very little effort, you can make sure your plumbing provides years of trouble-free service without costly surprises. Faucets take lots of abuse, whether in the sink, shower or on the side of a building. Faucets have moving parts that will eventually wear out or require adjustment. The most obvious sign of trouble is a dripping faucet, which can waste up to 80 litres of water each day. Imagine the water bill if you have two or three leaking faucets in a building. If the faucet leaks hot water then you’re also wasting the energy required to heat the water that you’re allowing to simply flow down the drain. You might as well poke holes in your water heater or boiler tank! Leaky faucets are easily repaired. Modern faucets use a cartridge system that can be quickly and easily replaced with only a screwdriver. Older faucets use washers or O-rings to provide a tight seal. These too are easily replaced. Some manufacturers offer parts schematics on their websites and if not, your local hardware store can probably help. When all else fails, you can’t beat a professional plumber. 42 Canadian Apartment Magazine

After you’ve taken care of the leaky faucets, turn your attention to leaky toilets. Some of us call them “running toilets.” If you thought leaky faucets wasted a lot of water, consider that one leaking toilet can waste up to 800 litres of water a day. At that rate you could fill two large swimming pools in a year. Sometimes toilet leaks are silent but you can test for leaks with a bottle of food coloring. Remove the tank lid, add five drops of food coloring to the tank and wait fifteen minutes. Do not flush. If coloured water appears in the bowl then the toilet is leaking. Leaks can be caused by an improperly aligned chain or guide wire on the flush handle or by a worn flapper valve. Replacement kits are easy to install and can be found at hardware stores or home centers. Even after you’ve repaired all of the leaks, there are a number of things you can do to cut down on water usage and save yourself a bundle of money. Remove old toilets and replace them with newer models that use only 6.4 litres of water per flush. Toilets made before 1994 used anywhere from 14 to 24 litres per flush. That’s as much as 80 litres per person per day. An apartment with three occupants will save up to 86,800 litres per year and you’ll also save big bucks on the wastewater portion of your bill because you’ll have a lot less going down the drain. You may have heard that 6.4 litres toilets aren’t as good as the old models. The earliest models had some drawbacks but manufacturers have made great strides in recent years and the toilets are not only efficient, they’re powerful too. Depending

on local water rates, a low-flow toilet can pay for itself in as little as two years. Another simple thing you can do to cut down on water usage is to make sure all sinks are equipped with aerators. These screens in the faucet head add air to the spray and cut water flow without any noticeable loss in pressure or volume. The most efficient aerators cut bathroom sink water flow from eight to 12 litres per minute down to just four litres per minute. Bathroom sinks without aerators use between nine and 24 litres per minute. Kitchen sinks require more water flow than bathroom sinks so most plumbers recommend a 6-lpm aerator. Over the course of a year, sink aerators will cut water costs up to 7 percent per household. Aerators are also one of the least expensive retrofits you can make as they cost only a couple of bucks each

A shower can be retrofitted in minutes with only a crescent wrench and a roll of sealant tape. One of the most controversial water-saving tools is the lowflow showerhead. The newest heads don’t seem like low-flow devices at all, even though they use less than half the water of an unrestricted showerhead. In an apartment with three occupants you can plan on saving about 64,000 litres of water per year. A shower can be retrofitted in minutes with only a crescent wrench and a roll of sealant tape. Appliances such as dishwashers and washing machines can use a lot of water and energy. A common dishwasher uses about 60 litres of water per cycle. By comparison, washing dishes in the sink uses about 80 litres per session. The good news is the machines are getting more energy efficient all the time so you may want to determine whether an upgrade is in order. Washing machines are probably the biggest water users. Some conventional machines use as much as 220-litres per cycle. The new front-loading washers cost quite a bit more out of the box but they use less than half as much water and electricity per load. If you want to realize major savings in a short period of time, consider upgrading to a more efficient water-heating unit. New gas units are about 30 percent more efficient than older units and their electric counterparts. The average water heater will last about twelve years. They’ll last longer with annual maintenance that includes draining the tank and allowing corrosive mineral sediment to flow out of the unit. The sediment also reduces heating efficiency, which means it’s using more gas or electricity. Set the unit’s temperature setting to 49ºC, the optimum setting for saving electricity and reducing the risk of scalding a tenant. C A M

Paul Abrams is the public relations manager for Roto-Rooter Services Company, the largest provider of plumbing and drain cleaning services in the U.S. and Canada. For more information, contact Stanley J. Collini the owner and operator of Roto Rooter Plumbing and Drain Service in Toronto. To contact Stanley, visit www.rotorooter.com or call him at 416-503-4444.

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november 2007 43

property management

by Anne Meinschenk

Improving Your Building’s Bottom Line Generating Maximum Revenues

There are two ways to make your building more profitable. Controlling expenses and increasing revenue. Most landlords know how to control expenses, but, do you know how to maximize revenue? Frequently when we talk to apartment building owners they are concerned about controlling expenses. This is understandable as controlling expenses is absolutely necessary if you want your multi-residential building to be profitable. But, controlling expenses is only one way to increase your bottom line. The other way, and one that is often underestimated by landlords, is maximizing the revenue your building can generate. The need to control expenses comes naturally to many landlords as, for many years they operated under rent controls which limited their right to raise rents to market levels. These landlords had little choice but to control expenses to ensure that their apartment property would be profitable. Where an owner-manager will often be focused solely on controlling expenses, a third-party property manager knows this is only half the battle. Not only do you have to control expenses, you have to generate the maximum revenue from every unit. What has changed today is that when a unit becomes vacant the owner or property manager can set rents at a market rate. This is a source of revenue that many building owners fail to maximize to the fullest potential. 44 Canadian Apartment Magazine

As third-party property managers, we take the view that if you are not both controlling expenses and adjusting rents to market levels, you’re not maximizing your revenue growth. Here are three key areas where a third-party property manager can maximize revenue growth. • Maintaining full occupancy. • Achieving market rent. • Collecting on delinquent rents.

Maintaining Full Occupancy As property managers, we know that maximizing revenue requires that an apartment building maintain as little vacancy as possible, ideally less than two percent. However, some apartment owners will let a unit sit vacant for a month or two while they fix up the unit for the next tenant. Suppose you had 1,000 units in your portfolio. If 20 percent of those units turn over in a typical year, that’s 200 units. If your average rent is $1,000 per month and each unit is vacant for one month, that’s a loss of $200,000 every year.

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Boardwalk is Canadaâ&#x20AC;&#x2122;s largest residential landlord, with over 35,000 apartment units. For more information contact: Western Canada Lisa Russell, VP, Acquisitions ph: 403.206.6770 fx: 403.261.9251 e: lisa@bwalk.com

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november 2007 45

A professional manager aims to rent the apartment as soon as it is vacant and carry out simple renovations like painting and sanding floors while the new tenant is living in the unit. Of course, you have to manage the tenant’s expectations by explaining this to them in advance and by agreeing to have the work completed in a reasonable amount of time. If the work can be done in two weeks, most tenants are agreeable to having the work done while they are living in the unit. One of the reasons a third-party property manager can do this is because they have contracts with professional trades. Their crews can start work on several units within the same building and get the work done much faster.

In a case where a building has an extremely high vacancy rate of 20 percent or more, it may take two years to stabilize a building. In the first year a third-party manager will concentrate on making sure the units are rented. In the second year they will concentrate on bringing the units up to market rent.

Delinquent Rents The third way that a property manager can help drive revenues in your building is by going after tenants who aren’t paying their rent. This is an area where owner-managers often let things slide. A tenant might be a month or two in arrears before they take action.

Another area where a third-party property manager can increase revenues is by going after tenants who have skipped out on the rent. Often, when we deal with building owners, they want to use their own tradesmen because they believe they will do the job for less money. That may be true, but if it takes them longer to do it, and the apartment is vacant while they complete the work you are being penny wise and pound foolish.

Achieving Market Rent The second thing that a professional property manager can do to help you increase your revenues is by achieving market rents when suites turn over. A professional property manager should know what the market rent is in the areas where they operate. Suppose you are renting a three-bedroom apartment. A third-party manager should be able to tell you what the market rent is for that particular type of suite. If, for instance, there is a shortage of three-bedroom suites in the area that month, the rents can be adjusted upward. The increase might be only $20, but you have achieved the maximum market rent for that unit. Any new building added to a third-party property manager’s portfolio becomes part of that adjusted rent process. Professional property managers realize that the market is constantly changing. At MetCap, we meet every week to set the rents for every suite in our portfolio that is about to become vacant. By keeping your rents at the market rate, you will have by Randy Threndyle both full occupancy and maximum revenue generation.

If the tenant moves or skips out on the rent, that’s lost revenue. A full-service property management company will have paralegals on staff. If a tenant fails to pay, collection’s staff will ensure the immediate distribution of the proper legal forms and follow through with evictions if necessary. Typically, a third-party manager doesn’t want the super to be involved in serving papers as it can create tension between the tenants and the super. Another area where a third-party property manager can increase revenues is by going after tenants who have skipped out on the rent. A property manager can go after tenants that owe money, even if the debt is 10 years old. If the property manager uses a registered collection agency a debt can be registered with a consumer credit reporting agency such as Equifax without having a judgment. Once the debt is registered your former tenant will have to settle it before being approved for a loan, a car lease or a mortgage. As you can see, implementing ideas aimed at maximizing revenues can be an effective way to increase your bottom line. CAM

Anne Meinschenk is the Director of New Business Development for MetCap Living, a company that specializes in managing multi-unit residential buildings. For more information, please contact Anne at 416-993-4305 or anne.meinschenk@metcap.com

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46 Canadian Apartment Magazine

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