By Brian Burton

In Part 1 of this series e talked about the background and potential benefits of adaptive re-use of buildings.

Definition: Adaptive re-use of buildings is a term used to describe the process of modifying older buildings to perform new desired functions. [The occupancy usage will often be fundamentally changed.] Adaptive: Derived from the Latin word “apt are” (to fit).  The process is a means of obtaining additional usage for buildings that are outmoded.

Background: The orgins of adaptive re-use of buildings as we know it today began in the Soho district in New York City (NYC) in the 1960s.The SoHo district, named after a trendy district in London, England contains approximately 250 buildings with cast iron exteriors*. (Cast iron was employed as a relatively inexpensive decorative “front” over existing buildings. By “overcladding” older industrial buildings with this material the buildings were able to attract new commercial clients during the the late 1800’s.)

(*Cast iron, which replaced bronze, which was a more expensive façade material, provided designers with a versatile material that was able to provide intricate and often orrnate façade design patterns. Classical French and Italian architectural designs were often used to model, or simulate if you will, these European facades.)

In the mid 60’s NYC was contemplating building an raised expressway much like Toronto’s Gardiner Expressway. The construction of this proposed expressway would have threatened a substantial portion of the Soho stock of historical buildings and although many of them were obsolete manufacturing buildings, numerous artists in NYC united to in an effort to save the buildings. They were sucessful in blocking the construction of the proposed expressway thereby preserving the historical buildings.  Over time many were converted into artist lofts and art galleries*. [* I read one story about an artist that literally lived in a tent inside one of the buildings while he laboured away trying to restore what he could with limited funds!]

Today however, the entire district is a popular tourist attraction and there are so many trendy stores and restaurants that the artists were eventually forced out  as the rents gradually rose. (The same trend has occurred in many cities around the world as industry was “suburbanized” and motorized vehicles, [mostly 18 wheelers], replaced railroads. Soho however served as an excellent model.

Canadian Connections: Although Canada is a young nation relatively speaking we have a very large stock of historical buildings. There are many examples of successful adaptive re-use and re-purposing buildings projects that have been completed.

In Toronto for example, Maple Leaf Gardens which was constructed in 1931, sat empty for 10 years after the Air Canada Center was built in 1999, has now been successfully re-purposed to serve in a different role.

This classic arena, the last hockey ‘cathedral’ still standing of the 6 original NHL teams can boast of the most incredible sports and entertainment attendance record in the world: between 1946 when you could purchase a upper tier seat for .95 cents and 1999 - there wasn’t a single unsold seat in the house. In total more than 100,000,000 patrons have witnessed events in the building. Image supplied by Brian Burton.

In a similar manner the well known Tip Top Tailor Building, originally built to accommodate the company’s manufacturing and retailing requirements is considered an excellent example of the Art Deco style that includes an impressive facade, a 2-storey front entrance with brass doors and a very attractive decorative façade.

The 5 storey building was primarily constructed of concrete with windows on all sides. Tip Top Tailors Ltd. was sold during the Great Depression and the building soon suffered from deferred maintenance and over the years the general condition of the building gradually declined.

In 2002 however the building was converted into more than 250 residential condominium units with 6 additional floors added. (The developers managed to preserve most of the original look and feel of the building however it’s only a few meters away from the Gardiner Expressway.)

Consumer’s Gas Purifying House: The Consumer’s Gas Purifying House built in 1899 is another excellent example of adaptive re-use. Located at the the corner of Front and Parliament it is now the home of Toronto Police Services 51 Division.

Railway expansion eastward along the waterfront in the late 1800´s brought industry to this neighbourhood and in 1884 Consumer’s Gas developed the area as its principal gas purification and distribution site in Toronto.

The original industrial building is of exceptional quality and refurbishment designers retained  as much of the existing building as possible. The interior space between the new building and the existing shell passively mediates the enviromental conditions of the facility.’s facade.

Wellesley Building Another excellent example is the Wellesley Building at 299 Queen St. W. which was constructed in 1913 to house a religious publishing firm. The building’s terracotta cladding was repaired and the building is now home of City TV.

Summary: These heritage buildings represent are valuable aesthetic, cultural and economic assets. It is important to keep in mind that they are non-renewable resources.

Next Installment: Building Science Forum © — Adaptive Reuse in the Next Decade.

Brian Burton has specialized in building science for over 30 years. Brian is a regular columnist for Glass Canada Magazine and author of Building Science Forum. He recently served on the Personnel Committee for the CSA’s Certification Program for Fenestration Installation Technicians. His current interests include overcladding technologies and adaptive reuse of buildings . You can contact him at brianburton@live.ca or brian.burton@artruval.ca Visit www.artruvaltesting.com for more details regarding “in situ” testing of building facades.

SolarDuct® Modular Rooftop Solar Air Heating System uses the suns energy to pre-heat ventilation air for almost any type of commercial property.

SolarDuct® is based on the highly efficient and award-winning SolarWall® system. The technology has been specifically engineered for roof settings and for applications in which a traditional wall mounted system is not feasible.

Heating can typically be one of the largest expenditures in the building industry.

Like the original SolarWall® technology, SolarDuct® is a solar heating system that heats ventilation air before it enters the air handling units. The patented system uses an all-metal collector panel (transpired solar collector) and is suitable for commercial, industrial, and institutional facilities. Perforations in the panels allow the heat that normally collects on a dark surface to be uniformly drawn through the SolarDuct® panel and then ducted into the conventional HVAC system.

The SolarDuct® system is optimized to meet site conditions in terms of orientation towards the sun and proximity to rooftop air handling units. The modular arrays are sized according to the energy requirements of the building.

SolarDuct® Features & Advantages

• Heats ventilation air using the highest performing and lowest cost solar collector on the market
• Collector efficiency up to 80%
• Easy to install modular rooftop units
• Optimized to meet site conditions
• Internally ballasted or fastened system which is quick to assemble and simple to integrate into existing air intake system
• Individual units are 6’ by 4’ and each produces 1000 watts of thermal energy
• Typical string length is 48 feet long (8 units) with no limit to array size, and will deliver up to 2000 CFM of heated ventilation air and 8kW of heating
• Substantial CO2 displacement

For more information please visit Conserval Engineering Inc.

Q: The vacancy rates in my mid-century, mid-sized professional and office buildings and small malls have been steadily on the rise over the last twenty years, while my apartments enjoy a steadier rate of return. I’ve thought about converting some, but construction is not my field. Should I hold on and wait for the commercial rental market to bounce back?
A: The market for retail, office and light industrial properties is evolving. Many commercial property owners are taking advantage of developing markets in order to guard the bottom line. Most notably, many stakeholders and developers alike are now offering mixed-use properties to meet society’s changing needs and, as our population of post-World War II baby boomers ages, assisted living and forms of elder residential care, in particular, are booming into one of the fastest growing industries in Canada.
With approximately 27% of Canada’s population falling into the category of baby boomer, a burgeoning market and solid returns has developers flocking to meet their changing housing needs. Many companies have both formed and expanded for the purpose of long-term operations in the residential care industry, and are actively seeking suitable properties for conversion. Both commercial and residential properties may be adapted for this type of facility.
Commercially-zoned properties are often ideal acquisitions for both Government and the rapidly growing assisted living private sector. Properties previously considered viable for only non-residential tenants are often of a size and location that is highly desirable for conversion to a residential care facility. A combination of internet sales and a large population aging passed the point of typical mass-consumption has created a downturn in brick-and-mortar retail activity that may be beneficially addressed by a growing demand for commercial properties adaptable as retirement, supportive housing, or long-term care homes.

Survival of the Fittest Commercial Real Estate

Darwinian in its scope for the real estate industry, commercial-to-extended-care senior housing is an industry adapting to changing markets. As a result, rather than eventually falling into obsolescence, many apartment, retail and mixed-use properties may survive because a large swath of similar stock is being excised from available properties for assisted living conversions to meet the need of a retiring population of baby boomers. Together with the rise of mixed-use structures, we are seeing some important changes in the construct of what constitutes the Highest and Best Use of certain types of commercial real estate. Any investor with mid-sized properties would do well to consider whether any of their portfolio might make a fairly cost-efficient conversion to an assisted care facility, being one of the highest demand types of property currently being traded in North America.

Assisted Living Conversions

A wide range of buildings may be deemed suitable and culled from multi-residential, condominium, retail, office, or even industrial sectors. Apartment complexes, motels, and hotels may be favored for converting to residential cares facilities. Additional factors that will help determine suitability may rest with your existing structure. Outstanding features, like wide hallways or staircases, and extraordinary features like large-capacity elevators, give an extra boost to desirability. Each property is unique, and so may have specific advantages and disadvantages as an elder care residence. Savvy agents recommend acquiring two or more estimates from construction firms now specializing in this type of conversion. Most are happy to provide free estimates that can then become valuable sales tools for your property, and potential referrals for them which, of course, is the motivation for providing such estimates.

Determining the appeal of your property to an assisted living facility operator is largely a matter of location and interior potential. Easy access to hospitals and support services enhance desirability. Properties located near any specialized medical facilities, such as a centre for cancer care or dialysis, top the list of desirable properties. For both visiting relatives and to attract top caregivers, nearby transportation hubs are also considered. Not to say that the more rural property does not offer its own benefits, but such properties are often only suited to basic retirement homes that function as senior apartments without assisted care, and a hospital nearby will also remain as a major deciding factor when housing vulnerable populations.

Statistically, more Canadians are now leaving than entering the workforce. Naturally, we must all adapt to societal changes. Properties converted to assisted living facilities are now enjoying noteworthy occupancy and success rates, and so suitable real estate is in demand, and will remain so until the next historical shift in population demographics. Out of our 5 million retirement-aged population, those reaching age 65 during the last five years rose by 14% with no sign of abatement since, according to Statistics Canada, we are home to one of the largest and youngest baby boomer populations of the G-8 countries. By the same token, retirees are slowly but surely replacing first-time home owners as a target market at the forefront of real estate in Canada today.

Tarun Gupta is a full service real estate agent with Royal LePage Real Estate Services Ltd., Brokerage in Toronto. You can visit him online at Toronto Real Estate Invest . This article is an excerpt from his site and the original article can be found here.

The Cost of Doing Nothing:

When I used to run large outsourcing contracts, one of the single most important keys to successfully meeting your budget cuts was to get started as early in the year as possible so you can take advantage of the savings achieved ASAP.

It makes sense that if you implement a 10% savings in month 1 vs month 8, creating savings sooner means more direct cost savings.

So why don’t more companies focus on energy conservation?  And why does it take so long to implement conservation measures?

The list of excuses is long but consider this: You are paying for conservation whether you implement it or not.  In fact, you pay substantially more by not getting on with your conservation projects.

Let’s take a look at what I mean.  To keep the math simple, let’s assume that a facility paid $100,000 in electricity costs in 2012.  There is lots of evidence that points to the rising costs of electricity with no end in sight so assume an 8% annual increase.

5 years from now, that same electricity will cost almost 50% more.  And that does not include increased consumption from additional devices and old ones that don’t work properly.

So now let’s take a look a implementing electricity conservation and it’s impacts on costs.  We will start at the same point and continue to assume the 8% annual  cost increase.  Further, we’ll add in some capital costs for sub-metering and HVAC controls costing, assume $16,000.  We did just this in one of our clients and yielded >25% savings.  The table below shows what is possible.

So what does this really mean?

Simply put, doing nothing will cost you more than implementing any energy conservation measures.  It also means that the more aggressively you pursue your conservation strategy, the more you will save.

And, if you finance your initial capital costs, your early savings years will look even more attractive.

But is it all roses and sunshine?

Like any program there are a number of factors that will impact your ability to execute and achieve these kinds of results.  They range from executive buy-in, adequate finances, and timely implementation of the measures selected.

Conclusion

Executing your conservation programs with diligence and urgency will yield substantial cost savings for the long run.

Or, if you choose not to do anything, be prepared to pay, LARGE!!

Wondering what your next step should be?  Contact an organization that is motivated to improve your bottom line in an honest and transparent way.

Paul Körber is President and Co-Founder of Third Planet Energy based in Hamilton, Ontario. Third Planet services clients locally and across Canada. For more information, please visit Third Planet Energy or contact them at sales@thirdplanetenergy.ca

Multi-Residential Housing is not a Passive Income

In Part One we discussed the 10 good reason you may want to consider becoming a landlord. Now here are some reason you may not want to.

Many investors don’t realize the financial and legislated responsibilities landlords must accept, especially in Ontario, arguably the most heavily regulated rental housing market in the world. No one reason will discourage you from becoming a rental housing baron or baroness, but just a few small mistakes could turn your dreams into a nightmare.

1. If you’re not a people-person, hire an amiable but firm property manager or stay out of this business. Otherwise, you’ll alienate your tenants and cause no end of misery for yourself.

2. If you’re not a master of cash flow, again, stay out. You must plan ahead for everything from property taxes and insurance to major repairs. Maintenance costs come in big chunks. You may have nothing for a time and then suddenly get hit with a roof, boiler, or other major repair.

3. You’ll have vacancy. You don’t always achieve full rental income from your property. Lenders average vacancy at 3% to 5%. And, the less units you have, the greater the financial impact.

4. Bad legislation and inappropriate tax rules have created thin profit margins, especially for smaller operators, forcing them into nominal programs, thus eroding property quality, lowering tenant quality of life, and producing very little new rental housing stock.

5. Government and mainstream lenders have made it increasingly difficult to purchase rental housing, despite shrinking rental housing inventory and low vacancy rates.

6. Know the law or become a potential victim of it. If legal technicalities drive you crazy, stay away from rental housing. Among other things, you need a solid rental agreement and you must understand it completely.

7. You may inherit the previous landlord’s problems. You have legal recourse for undisclosed latent defects, stigmatisms, etc. but you may still end up financing the remedies until you can collect.

8. Be prepared for unpleasant life experiences like dealing with the passing away of a tenant, (by natural or unnatural causes), or dealing with tenants conducting illegal activities.

9. If the police or fire department kicks in a door or otherwise damages your property in the commission of their job, you pay for the repairs.

10. Tenants may call you at all hours of the night, sometimes for repairs, other times for emergencies, and still other times for domestic disputes.

11. You may have to be a mediator between neighbours who don’t get along.

12. Government eliminated security deposits that would otherwise discourage tenants who disrespect or even trash your property, and you’ll have a hard time collecting the cost of damages from tenants who have moved away.

13. Bad government policies and procedures created a new kind of sophisticated parasitic “professional tenant” whose goal is to continuously bilk landlords out of their rent.

14. You must visit your rental properties often. One landlord never checked up on his renters. The property was seized by police because it was used as a grow-op. The landlord did not get back possession because he was expected to have knowledge of this kind of obvious use and to report it.

15. Ontario government has put a 2.5% cap on annual rent increases. Landlords are already prevented from passing on many types of legitimate operational and capital costs. Getting no profit is a recipe for potential systemic industry failure, especially among less sophisticated and/or small operators who are not masters of their cash flow.

16. LTB has imposed harsh rules on landlords for applications where any error requires the landlord to start the application over.

17. Ontario has the longest eviction proceedings process in Canada.

18. The Ontario Landlord & Tenant Board (LTB) spends $28 million per year of taxpayer and landlord money, mostly on staff salaries, who spend two-thirds of their time processing landlord applications for tenants who refuse to pay their rent. Nine out of ten complaints are from landlords. According to the Federation of Rental-housing Providers of Ontario, a rent collection dispute costs the landlord about $5,200.

19. According to the Advocacy Centre for Tenants Ontario

• There were 39,070 fewer private rented units reported in the 2006 Census than in 2001.
• Between 1995 and 2005, there were 13,061 fewer rental units in 21 Ontario municipalities
• Rental Housing Tribunal received 509,827 eviction applications from landlords between 1998 and 2006. 84% were for non-payment of rent.

20. Be prepared for tenants who care about nothing except themselves, who look for every opportunity to make a quick buck at your expense, or who blame others for whatever is upsetting them.

21. Hoarders who violate the rights of their landlord and neighbours, and can create notable health and safety issues are nevertheless protected from eviction by the Human Rights Code.

22. Some municipalities have abused their power by taking the right to add a non-paying tenant’s utility bill to the landlord’s property tax. This is like holding police accountable for the crimes of the criminals they don’t catch.

23. Capital Gains tax and Recoverable Capital Cost Allowance (depreciation) discourage longtime landlords from selling their property(s) to new investors, who statistically spend the most on building renovations.

24. Landlords cannot compile a list of bad tenants. In case resolutions, the LTB makes a landlord’s name public but the tenant’s name is hidden; an odd interpretation of privacy legislation.

25. The landlord is charged for a Fire Code violation committed by a tenant.

26. Statistically, tenants who have their utility bill included in their rent consume substantially more energy than those tenants who pay their own utility bills.

27. Government requires landlords to provide new tenants with one year of utility consumption history for a rental unit. Privacy Act prevents landlords from obtaining this information from utility companies if the previous tenant paid their own bill.

28. Government requires landlords to accommodate mentally-challenged tenants to the point of a landlord’s “undue hardship,” at the landlord’s cost. Few landlords have the schooling to handle the irrationality of a mentally-challenged tenant. I am not aware of any courses or classes to help landlords meet this huge responsibility. As president of the Landlord’s Association of Durham, I made a “Public Education Request” to the Ontario Human Rights Commission in April 2012. They declined.

29. Government expects landlords to foot the bill for damage and foul odours caused by pets. While there are legal recourses, the practical application of those recourses is onerous and often fruitless.

30. Your toughest challenges could come from the most unlikely places—your customers, all levels of government, and all political parties. The latter two pander to the large base of tenants, passing tenant-biased legislation in exchange for “easy votes”, to the detriment of all landlords.

31. Landlords carry the stigmatic stereotype of the “rich landlord.” Uninformed people believe that landlords “can afford” to carry the ever-increasing financial burden heaped upon them by oppressive housing legislation. One mayor of a large Ontario city said that he has to find the money from somewhere and landlords can afford it.

32. You must know the Fire Code. Some updates can create unexpected capital costs such as installing bullhorns in every unit.

33. Finding reliable and honest trades people who perform acceptable quality work at a fair price AND have people skills that respect your good tenant relations can be a real challenge.

34. Municipal property taxes can take 15% to 20% of your rental income.

35. Some municipalities have cut back on the services they provide, such as garbage removal, but your property taxes continue to rise.

36. Government requires that the rent of a tenant switching from a single bulk meter to an individual meter be reduced by the amount of energy consumed over the previous twelve months. Therefore, the most energy-abusive tenants receive the greatest rent decreases while energy-conscious tenants are penalized.

37. Government limits landlords from passing on certain costs, and those costs that are permitted can’t be more than 3% of the rental income above the rent increase guideline per year for a maximum of three years. This limits what a landlord can spend on improvements.

38. Landlords are punished by the LTB process for working with a temporarily financially-distressed tenant. The LTB eviction process only begins when the landlord files an application, so the long LTB eviction process forces landlords to file as soon as the tenant fails to pay the rent.

39. Mainstream lenders will not finance rooming house-like properties, regardless of function, client base, or proven income stream.

40. Being a residential landlord is definitely not a passive income investment.

Treat your investment like a business, your tenants like valued customers, know your rights and those of your tenants, maintain tight control on your cash flow, count the pennies, act promptly in everything you do, surround yourself with high quality industry professionals, and you’ll experience the success you’ve dreamed was possible, especially if you can expand your holdings. There are definite advantages in this business from economies of scale.

Christopher Seepe is President and Broker of Record at Aztech Realty Inc., Brokerage and maintains www.multiresidentialexpert.com , a website dedicated to providing expert advice and sharing his personal investment and ownership experiences to those investing, or looking to invest, in multi-unit residential, income generating properties in southern Ontario, Canada. You can contact him directly at cseepe@aztechrealty.com

What’s a client to do if “location, location, location” doesn’t match “availability, requirements and cost”?

Smaller companies can struggle to find suitable, affordable office space that gives them easy access to their clients (and vice versa). Building owners may own or want to invest in a property that scores high for location, but needs potentially costly interior upgrading to provide 21^st Century amenities and the flexibility to cost-effectively meet changing tenant demands.

Custom prefab can be the common middle ground that meets and even exceeds the needs of both parties.

Small tenants get affordable flexibility

If you’re a small tenant, the flexibility of custom prefab opens up a world of possibilities. You can choose a location that’s close to your clients, perhaps in a part of town with good access and less expensive rents. An older building might offer a character and charm that both your team and clients will appreciate; prefab ensures the data and electrical requirements that power today’s businesses are easily at hand.

You’re also not locked in to fitting your team’s structure and working style into an inflexible series of walls, windows and doors … and, if your company is a growing concern, you can modify your workspace instead of paying for unnecessary empty offices, or hoping that additional space will open up and you won’t have to relocate.

If you already have that great location but need to upgrade or expand, custom prefab is faster and cleaner than traditional rebuilds, reducing the noise, dust and disruption of remodeling.

Building owners can affordably offer more to tenants

Custom prefab’s flexibility also opens doors for building owners. It makes it easier and less expensive to adapt your commercial space, putting you in the sweet spot of being able to give your tenants the customized layout they need, in a shorter time frame. That will keep existing tenants settled (and good tenants are a valuable commodity), and could open the door to a new clientele and possibly a different demographic: perhaps a boutique-style environment instead of relying on a few larger tenants to occupy your space.

While custom prefab is a flexible solution, it definitely isn’t a temporary one: prefab is durable enough to last and grow with your client or company, and it can transform a Class B space into a Class A environment.

An added bonus to both parties is that custom prefab solutions allow adjacent spaces to be tailored to mix and match the needs and aesthetics of any corporation or business sector: a healthcare clinic could share a building with an up-and-coming software development firm, an IT support call centre and a traditional company headquarters; each space reflecting the culture and business style of its occupants.

Financial flexibility benefits both parties

The financial benefits of custom prefab extend to both sides of the balance sheet as well. The costs of creating or adapting a work environment can be estimated much more accurately and quickly, and updated to meet change requests far more easily, than in traditional construction methods, avoiding nasty surprises partway through a project.

The “whole environment” approach of customized prefab solutions – integrating sliding doors, data and power access, furniture and office amenities (even planters) into a framework of interior curtain walls – maximizes usable space, and provides tenants with a better per-square-foot value for their space.

Move-in times are shorter, and prefab’s cost-effectiveness opens up several ownership possibilities. Tenants can own their office “layout” and take it with them when they need to relocate to meet business demands, avoiding the expense of building again from scratch and keeping drywall and perfectly good office amenities out of landfills. Building owners can capitalize on the “whole environment” approach and lease interior components to their tenants as a customized and updateable turnkey office solution.

It all comes down to creating choice

Think of it as the difference between designing your own home and buying an existing property. You can start with a blank sheet of paper (or four exterior walls) and create a space customized for your needs. Or, you can try to re-shape your needs to fit pre-existing spaces, possibly having to re-build some of those spaces in the process.

Which offers choice … and which suggests compromise?

Donna Shirley is Southern California Sales Team Leader for DIRTT Environmental Solutions, a Calgary, Alberta-based provider of agile interior construction solutions.

By Lloyd Cornett and Michael Ventresca

Multi-Residential Housing is not a Passive Income

In this, Part 1, we will present 10 reasons why you may want to consider becoming a landlord.

Obvious, and seemingly impelling, reasons to invest in the rental housing industry include:

1. Multi-residential investments are arguably the most stable, depression/recession-resistant, and relatively secure type of real estate investment you can make. Everyone needs a place to live. Not everyone needs a place to work. Buying a place to live is not possible for many young people and remains elusive for many adults too. Some adults choose the apartment living lifestyle for its freedom from housing-related issues.
2. Use tenants’ money to pay your mortgage and build your equity. You can raise the rent each year (with restrictions) and adjust for current market rent rates when a property becomes vacant. Long-term investors buy real estate that generate positive cash flow and either hold it until the tenants have paid off the mortgage or until there’s a compelling reason to dispose of the income stream in return for a lump sum; for example, to buy something bigger/better or to create a retirement annuity income stream.
3. Real estate assets can be leveraged to bargain for additional real estate investments. Unlike stocks, mutual funds, term deposits, etc. you do not have to pay for the whole real estate investment yourself. Tens of thousands of lenders will give you the extra money you need (mortgage) in exchange for receiving interest and the property as collateral if you default on the scheduled payments. When the property’s value has increased enough, some lenders will let you borrow against that value (your equity), which you can use as a down payment to buy another property.
4. Real estate is tangible and is more easily collateralized than most other types of investments. Ask ex-shareholders of Northern Telecom, Enron, Bre-X and other “blue chip” failures. Lenders generally offer a higher ratio of loan amount versus the value of a real estate property than they would offer on a portfolio of stocks, for example. The building and/or land will still exist if the worst should happen. Mainstream lenders also love the low-risk appeal of CMHC-insured rental housing properties and offer very attractive interest rates.
5. A modest increase in rental income and/or decrease in operational costs can have a significant positive impact on property value.  For example, increasing net operating income (by reducing costs and/or increasing rent) by $1,000 per year and applying a 6% capitalization rate (better-than-average in today’s southern Ontario market) can add about $16,650 to the value of a property, using the Income Approach. This does not include appreciation for other reasons such as high demand for, and low supply of, rental space, improvement in the neighbourhood, etc.
6. Several current tax policies (RCCA, capital gain, etc.) discourage long-term owners from selling their rental housing properties because the proceeds of a sale may only equal the cash flow they would receive from keeping the property for a few years. Combine this with the discouraging rent control policies which make investors/developers unwilling to tie up their money in building a rental property. They may have to wait a decade or more for return of their investment, when they can build a condominium and get their money back—often with a huge profit—in just a few years. So what’s good about that? Rental housing inventory is shrinking (see point 19 below), resulting in high investor demand and high sale prices for existing inventory (seller’s market), and increases in average rent rates (low vacancy).
7. A well-maintained and fully-occupied rental property rarely depreciates unless they have been damaged by stigmatism or an eroding neighbourhood (eg. increase in crime).
8. If the very worst should happen, you still have a low (or no) cost place to live.
9. Legitimate and reasonable expenses reduce your taxable income including mortgage and credit card interest, depreciation, a reasonable salary with employment deductions, a percentage of your local travel expenses, relevant long distance travel (eg. trade show), portion of home office and workshop, etc
10. Despite the perceived stereotype, there is an abundance of landlords who enjoy the satisfaction of helping provide good quality housing to self-sufficient people in need.

In Part 2 we’ll examine many of the reasons you may not want to become a landlord.

Christopher Seepe is President and Broker of Record at Aztech Realty Inc., Brokerage and maintains www.multiresidentialexpert.com, a website dedicated to providing expert advice and sharing his personal investment and ownership experiences to those investing, or looking to invest, in multi-unit residential, income generating properties in southern Ontario, Canada. You can contact him directly at cseepe@aztechrealty.com

By Harvey Haber, Q.C. J. D.

In the chapter entitled “Commentary on a Landlord’s Form of Sublease”, which appears in my book “Assignment, Subletting and Change of Control in a Commercial Lease: A Practical Guide”, I gave the following example, which explains why the difference between an “assignment” and a “sublease” is so important:

“Some years ago, a national public company leased a number of locations and then assigned all their leases to their franchisees. A number of the franchisees ran into financial difficulty and vacated their premises. The respective landlords then went back to the original tenants and claimed payment of the outstanding rent arrears, which the tenants paid. The tenants then advised the landlords that since they had paid the arrears, they were then going to retake possession of the respective premises. The landlords, however, advised the tenants that the tenants did not have the right to do so.

The Landlord’s position was that the original tenants, having transferred all their right, title and interest in the leases to their respective franchisees, could not get back into possession, but nevertheless they continued to remain liable under the terms of the leases under what, in law, is called “privity of contract” between the tenants and the landlords. As a result, unless the tenants had built a provision into their leases whereby, in the event of a default by their franchisee, the original tenants were entitled to retake possession of their premises, the tenants were “stuck”. The original tenants could not get back into possession, but nevertheless continued to be bound to pay the rent under their leases.

If, however, the original tenants had sublet (rather than assign) the premises to their franchisees, in the event of a default by the franchisees (as subtenants), the original tenant could terminate the subleases between themselves and their franchisees (i.e. subtenants) and take back their premises.

It was a costly venture for the original tenants in this case because they then had to arrange with their respective landlords to terminate the leases with the tenant’s franchisees, and enter into new leases for the same premises with each Landlord – a costly venture, indeed.”

Harvey Haber, Q.C., J.D., LSM, DSA, C. MED., C. ARB., B.A.  – He is senior partner at Goldman Sloan Nash & Haber LLP in Toronto. He specializes in Retail, Office & Industrial Leasing, Mediation and Arbitration and can be reached at haber@gsnh.com or by phone 416-597-3392.

When looking to create efficiencies and reduce costs, organizations face the difficulty of deciding which energy management initiatives will bear the most fruit: change the lights, implement a new control system, purchase more efficient equipment or make adjustments to certain processes. The options are endless. It is difficult to understand the overall impacts without information and even more difficult to determine the success of the project if the information is not understood.

Usually, organizations will fail to plan an energy management program and will execute short-term energy reduction strategies that address only a small portion of the overall energy use. Energy has multiple benefits and impacts and failing to understand the entire energy dynamics and how you pay for energy may result in marginal benefits or poor results.

An Energy Coach will help you understand the energy use complexities of your environment and work with you to develop and measure a plan for success. The coach will work with you to assess the overall progress of your organization and provide additional tools that fit an organizational skill set and structure.

Responsibilities of the Energy Coach may include;

• Assisting the organization in the development of corporate goals, strategies and overall investment required to achieve specific ongoing energy reduction targets;
• Assisting in the design, implementation and commissioning of energy monitoring, analysis or management systems;
• Analyzing energy related usage patterns and data to determine savings opportunities;
• Providing mentoring and or training to individuals within an organization to develop skills or manage an energy plan and related programs;
• Provide assistance to determine eligibility for local, provincial or federal incentive programs.
• Verifying savings generated from changes to processes or equipment;
• Assisting with the development or management of a corporate communications program related to energy reduction, Green, sustainability or Corporate Social Responsibility and;
• Acting as a temporary energy manager;

Assessing the performance of the program

Overall Benefit of an Energy Coach

The Energy Coach’s role is to assist with the creation of a sustainable energy management plan and to asses the performance of relevant programs. The goal of the program is to identify and measure energy savings generated from the changes made in operations or from capital investments.

Depending on the state of the facility and organization prior to the design and implementation of an energy management program, the savings results will vary. In most cases, the use of the Energy Coach in combination with the energy monitoring, analysis and management solutions have resulted in savings from 10% to 35%. The return on investment ranges from 12 to 24 months and is dependent on the overall investment strategy and capital tolerance of an organization to drive results.

The purpose of an Energy Coach is to provide the right tools, solutions and education to the customer. By providing a customized solution the Energy Coach will help organizations to identify the low hanging fruit and to identify key elements for improving the energy performance and overall improved profitability for the organization.

Technical Brief

The Energy Coach will devise solutions that work best for an organization and may utilize the following:

• Monitoring and Targeting (M&T) solutions
• Metering and sub-metering solutions
• Temperature, light and motion sensors
• Measurement and Verification (M&V) tools
• Return on Investment (ROI) tools and assessments
• Meteorological tools or databases
• Incentive programs
• Facility production systems
• Building Management Systems

Demand Management Systems and relevant technologies

Paul Körber is President and Co-Founder of Third Planet Energy based in Hamilton, Ontario. Third Planet services clients locally and across Canada. For more information, please visit Third Planet Energy or contact them at sales@thirdplanetenergy.ca