Canadian Apartment Magazine October 2019

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Apartment CANADIANVOLUME 16 / NUMBER 4 / SEPTEMBER/OCTOBER 2019FORWARD THINKING HOUSING SOLUTIONS FOR A BETTER TOMORROW plusPA R T O F T H EQ3 SALES ACTIVITYCO-LIVING PM#40063056CREDIT TRENDSP A R TO FT H ECoast to coast commercial expertiseCanada’s Real Estate Finance Experts Founded in 1974, CMLS Financial is one of Canada’s largest independently owned mortgage services companies with offices across the country. Some of Canada’s most respected banks, investment managers, insurance companies and pension funds rely on CMLS Financial for a variety of critically important mortgage services. Consult with a CMLS Financial Real Estate Finance Expert and see how our competitive rates and range of solutions can be put to work to meet your commercial financing needs.Customer Forward Thinking.™1.866.426.2657 | cmls.caSTABILITY AND BALANCEAT THE TOP!As a sister company to ACE Painting, Cranfield General Contracting was formed in 2004 to further meet the remodeling demands of all our clients. Delivering superior quality and cutting edge solutions Cranfield provides major renovation services to include interior, exterior, in suite and common area upgrades.UPGRADES | ELECTRICAL PLUMBING | MILLWORKW W W. A C E G R O U P G TA . C AACEGROUP OF COMPANIESACEGROUP OF COMPANIESEDITOR’S NOTE>>Apartment CANADIANEVERYBODY WANTS MORE OPTIONS/cammediaedge /cdnapartmentmag /mediaedgecamIt’s no secret that rental apartments are in demand in Canada’s biggest cities. With low vacancy rates, limited rental supply, and rising immigration levels contributing to the nation-wide glut, forward-thinking housing solutions are desperately needed now. And adding to that need, renters want options. They also want key features—which it seems they’re willing to pay for. The Canadian Multi-Res Tenant Rental Survey, conducted by and Bullpen Research & Consulting shows that 36% of tenants would pay more rent for a renovated space. In terms of dollar values on average, tenants would pay $11 more per month for an en-suite bathroom; $12 more for a kitchen renovation; $14 more for a balcony/outdoor space; and $15 more for a covered parking spot. Meanwhile, $18 said they would pay more to live in a brand new rental building. This, of course, is only good news for the apartment industry, as long as the reward on investment is worth it. In this issue of Canadian Apartment, we look at all sides of the housing story, and showcase some great new projects. And with the upcoming federal election keeping us all on the edge of our seats, we can only hope that the future includes policies that support and nurture new development. After all, it’s what everybody wants.Editor Erin RuddySenior Designer Annette CarlucciProduction Manager Rachel SelbieContributing Writers Roman Bodnarchuk, Lorenzo Gigianfelice Chris Seepe Graeme Huycke Andy SchwartzeNational Sales Kelly Nicholls Melissa ValentiniDigital Media Director Steven Chester Circulation Anthony Campbell For sales information call (416) 512-8186Canadian Apartment Magazine is published six times a year by:5255 Yonge St., Suite 1000, Toronto, Ontario M2N 6P4 E-mail: info@mediaedge.caPresident Kevin Brown Group Publisher Sean Foley Copyright 2019 Canada Post Canadian Publications Mail Sales Product Agreement No. 40063056 ISSN 1712-140X Circulation 416-516-8186 ext. 234Sincerely, Subscription Rates: Canada: 1 year, $50*, 2 years, $90*, US $75 International $100, Single Copy Sales: Canada: $12* * Plus applicable taxes Requests for permission to reprint any portion of this magazine should be sent to Erin Ruddy.Erin Ruddy @CdnAptEditorrent trendsAuthors: 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.FACTS AND FINDINGS FROM RENTALS.CA$2,330The opinions expressed are those of the authors of articles and do not necessarily reflect the views of Canadian Apartment Magazine. This information is general and is not a substitute for legal advice. Sworn Statement of Circulation: Available from the publisher upon written request. Although Canadian Apartment Magazine makes every effort to ensure the accuracy of the information published, we cannot be held liable for any errors or omissions, however caused. Printed in the average monthly rent for a one-bedroom in Toronto32%...of rental households in Canada are single-person$ the average rent per square foot in B.C.$20... is what most tenants would add to rent for in-suite laundry42%...of Toronto tenants’ incomes (on average) goes to rentOur Business is to Make Yours Shine! Whiterose is an Industry Leader with a long list of condos in the downtown and surrounding areas Whiterose Janitorial Services Ltd. believes in servicing its customers with professionalism, communication and appreciation. The Key to our success is service, quality and value. We clean beyond the surface! Quality management begins behind the scenes prior to commencing a job all employees are evaluated and or training to the whiterose standard given special attention to health and safety policies. Whiterose Janitorial Services is a full service company and a member of ACMO and CCI. Specializing in cleaning and live in & live out Superintendents for the past 30 years. Spectrum of Cleaning Services: • Facility assessment • House keeping and general cleaning services • Customized cleaning service plan • Customized cleaning schedules • Window cleaning (Exterior high rise) • Garage cleaning • Marble restoration & Polishing • Carpet cleaningVisit our website or call us today for your no-obligation quote! 1-877-253-3648 / 416-850-9676Spectrum of Superintendent Services: • Building audit • Check Hvac • Perform generator tests • Cooling towers • Chillers • Compressors • Sprinkler system • Fire pump • Hot water tanks • Booster pump • On call 24/7 for emergenciesCOMMITTED TO EXCELLENCE SINCE 1986Apartment CANADIANVOLUME 16 / NUMBER 4 / SEPTEMBER/OCTOBER 2019FEATURE 14 C  o-living The key to unlocking higher cap rates by Roman BodnarchukCOLUMNS 8 Transactions Q3 Investment Sales Activity 10 CMHC By the Numbers by Graeme Huycke 24 Ask the Expert Smart Life-Saving Solutions 26 Newsworthy Industry Hot Topics 28 Perspective Ontario’s Annual Rent Increase Guideline by Chris Seepe 30 Maintenance Don’t Flush Your Money Down the Toilet by Lorenzo Digianfelice 34 Insurance It’s a Stormy Situation by Andy SchwartzeCOVER STORYDEPARTMENTS18 Affordable, Sustainable Housing for All Policies and solutions to help end Canada’s affordable housing crisis by Erin Ruddy4 Apartment CANADIANON THE COVER:VOLUME 16 / NUMBER 4 / SEPTEMBER/OCTOBER 2019New construction in Vancouver, B.C.Editor’s Note FORWARD THINKING HOUSING SOLUTIONS FOR A BETTER TOMORROW36 Smart IdeasplusPA R T O F T H EPA R T O F T H EQ3 SALES ACTIVITYCO-LIVING PM#40063056CREDITP A R TO FT H EP A R TO FT H ETRENDSupcoming industry events DEC 4, 2019DEC 5, 2019JUNE 8, 2020THE BUILDINGS SHOW Metro Toronto Convention CentreMAC AWARDS GALA Metro Toronto Convention CentreRENTAL HOUSING CONFERENCE Westin Nova Scotian, HalifaxOver 25 Years’ Experience in Renovating Apartments and CondominiumsCOMMERCIAL • INDUSTRIAL • RESIDENTIAL • INSTITUTIONAL General RenovationsKitchen RenovationsPaintingCleaning of UnitsPlumbing*FlooringBathroom RenovationsElectrical*Fire and Flood RestorationCustom CabinetryDrywall and Crown MoldingFencing* Use a Licenced Plumber and Licenced Electrician (ESA)91 Pippin Road, Concord, ON L4K 4J9 Tel: 905-660-2353 / 905-669-8888 Toll Free: 1-888-660-2353 Fax: 905-660-8390 / 1-888-660-8390 sales@multitech2000.comwww.multitech2000.comMunicipal Licence No. T85-4186258Q3 Investment Sales Activity Competition for available assets remains intense Canada’s third quarter investment sales activity has been brisk, continuing the record pace of 2018. Investors are looking to buy apartment buildings, the asset class with a reliable track record of healthy performance, including during economic downturns. “Competition between investors remains intense, with demand outdistancing the supply of properties for sale,” observes Keith Reading, Director of Research at Morguard, “Rental fundamentals remain healthy across the country, with rents steadily rising and demand outpacing available supply.”Meanwhile, on the new construction side, activity has increased, with units being rented prior to or shortly after completion. A recent report by Urbanation reveals that the pipeline for new rental supply is currently 50 per cent higher than it was two years ago in the Greater Toronto Area—which is good news for renters and the apartment industry in general.RECENT Transactions: AddressCity#of UnitsSale Price (Millions)Sale Price/UnitPurchaserVancouver252$90,000,000.00$357,143.00Starlight Investments1.Montecito Towers2.InterRent REIT PortfolioMontreal544$132,000,000.00$234,458.00InterRent REIT3.Akelius PortfolioToronto628$176,800,000.00$281,529.00Starlight Investments4.41 Dundonald StreetToronto101$35,000,000.00$346,535.00Timbercreek Asset Management5.Oceania CourtVancouver117$32,500,000.00$277,778.00Western Investment Properties6.1825 Russell RoadOttawa104$23,000,000.00$221,154.00Aera Investments7.Manoir DufferinMontreal118$22,666,537.00$180,564.00InterRent REIT8.1575 Summerhill AvenueMontreal66$22,325,000.00$254,839.00Kastello Immobilier JV Gestion immobiliere Cogeim9.3101 Eglinton Avenue E.Toronto68$19,700,000.00$289,706.00Starlight Investments10.149 St. George StreetToronto48$19,200,000.00$400,000.00Hollyburn Properties8 | Canadian Apartment | Part of the REMI Network |TRANSACTIONS >>Multifamily Assets Round out Canadian GRESB DataAccordingly, based on data reported at the asset level, Canadian participants appear to carry more weight within GRESB’s residential property category than their numbers might suggest. For example, the energy intensity performance indicator is calculated only from information supplied from properties with 100 per cent data coverage, and 307 Canadian multifamily assets accounted for 6.2 per cent of those properties. Meanwhile, 16 per cent of all reported building certifications for management and operations were attained through BOMA BEST, a certification only available in Canada. Although Australia/New Zealand has consistently achieved the top regional score throughout GRESB’s 10 year history — this year with an average score of 80.9 — there is no asset-level information about energy intensity or building certifications for multifamily properties in the global region. In total, 41 portfolios collectively holding 2,107 assets valued at USD $242 billion underpin the 2019 score. In comparison, the 26 Canadian participants attained an average score of 76.6, surpassing the global average of 72. It’s more difficult to parse out the number of contributing assets from roughly 38,300 cited for the Americas region, which includes portfolios located in the United States, Canada, Mexico and Brazil. However, Canadian portfolios submitted energy intensity information for 2,247 individual assets versus 713 properties factored into that performance indicator in Australia/New Zealand.More than half of the major Canadian real estate portfolios participating in the GRESB global benchmark for environmental, social and governance (ESG) performance this year hold multifamily assets. Crossreferencing the list with Canadian Apartment’s Who’s Who 2019 survey, 13 of them collectively own and/or manage more than 1,000 rental apartment buildings encompassing about 76,500 units. Three others have a sparser complement that translates into an additional handful of buildings. The GRESB class of 2019 boasts: solely or primarily residential players, including Killam Apartment REIT and Minto Group; diversified portfolios with a significant share of multifamily, including HOOPP, QuadReal Property Group, GWL Realty Advisors, Concert Properties and BentallGreenOak (formerly Bentall Kennedy); and others with smaller stakes relative to their office, retail and/or industrial profiles, such as Triovest Realty Advisors, Fiera Properties, Manulife and Ivanhoé Cambridge. In total, more than 1,000 respondents, representing 100,000 individual assets across 64 countries, were benchmarked in this year’s assessment, bringing a fairly wide mix of portfolios under scrutiny. GRESB awards overarching continental scores, but the numbers and values of assets underpinning those scores vary considerably. “In the Americas, we have some gigantic portfolios,” Neil Pegram, GRESB director for the Americas, observed at the recent 2019 results presentation in Toronto.MOBILE FRIENDLY| | September/October 2019 | 9CMHC REPORT >>By The Numbers Insights from CMHC’s Regional Mortgage and Consumer Credit Trends report Each quarter, CMHC publishes regional reports and data based on Equifax Canada numbers. These reports offer in depth insight into the data on personal debt and credit provided by the Equifax database. From average weekly earnings to debt-to-income ratios, below are some highlights and key learnings from Q1 2019 for the five regions covered by CMHC—Atlantic, Quebec, Ontario, Prairies and British Columbia.ONTARIO REGION “Higher monthly debt obligations for Ontarians were primarily driven by mortgage and HELOC growth coupled with higher interest rates. Nevertheless, delinquency rates remain low, supported by strong labour market conditions.” — Jordan S. Nanowski, CMHC Senior Market Analyst The share of delinquent mortgages has remained low The share of delinquent mortgages in Toronto (0.10%) and Hamilton (0.09%) remained stable and below the provincial average (0.14%) in Q1 2019. Ottawa (0.25%), which has one of the highest delinquency rates amongst Ontario CMAs, saw continued year-over-year improvement, albeit small (a decline of 0.01 percentage points). Strong labour market conditions in Ontario continue to contribute towards lower delinquency rates. The provincial unemployment rate is near the lowest it has been in decades and average weekly earnings continue to exhibit strong growth. As a result, borrowers are more able to make timely mortgage payments. Disposable income has been growing faster than total outstanding debt in Ottawa over the last two years; whereas Toronto and Hamilton saw the two grow at a relatively similar rate. A downward trending debt-to-income ratio in Ottawa 10 | Canadian Apartment | Part of the REMI Network |contributed towards a narrowing of the gap in delinquency rates between Ottawa and Toronto/Hamilton. Mortgage delinquency rates trend down for lower mortgage limits Mortgage delinquency rates remained stable across most mortgage limits compared to Q1 2018. Delinquency rates for mortgages with relatively smaller limits at origination tend to be higher as first-time homebuyers with lower incomes and/ or less stable employment typically hold them. However, delinquency rates for these relatively smaller mortgages at origination continue to trend lower, significantly narrowing the gap between larger mortgages. This narrowing could be the result of a strong labour market having a larger marginal impact on the ability for relatively smaller mortgage holders to make timely mortgage payments.CMHC REPORT >>BRITISH COLUMBIA REGION “Fewer British Columbians applied for new mortgage loans in the first quarter of 2019 due to rising interest rates and tighter mortgage rules. As a result, mortgage balances and monthly obligations became higher on average, and fewer HELOC loans were utilized. Despite a high level of indebtedness, consumers maintained high credit scores while keeping the delinquency rates low and stable.” — Pershing Sun, CMHC Senior Analyst Delinquency rates in Vancouver and Victoria remained low and stable In the first quarter of 2019, 0.13% of outstanding mortgages in Victoria were delinquent, up slightly from 0.12% in the first quarter of 2018. After stabilizing at or under 0.11% for the past six quarters, Vancouver’s delinquency rate also saw a slight increase from 0.11% in Q1 2018 to 0.12% in Q1 2019. The delinquency rate for both Vancouver and Victoria remained below the provincial level of 0.17%. The delinquency rates in Vancouver and Victoria have been experiencing steady decline since 2014 but have remained relatively stable at the level of 0.1% since Q3 2017. This is supported by economic fundamentals including strong employment and population growth, as well as low interest rates and appreciation of home values in all market segments. The recent slow-down in certain segments of the BC resale market, especially Vancouver, combined with rising interest rates, has contributed to a slower growth in the total number of mortgage loans in BC, contributing to the relatively steady trend of the delinquency rate in the two major regions in the province.Mortgage delinquency rates of all loan ranges continued to be low while the share of delinquent mortgages with smaller loan amounts remained elevated in Vancouver The trend in mortgage delinquency rates across all mortgage limits at origination has been flat over the past four quarters in both Vancouver and Victoria after consistent decline since 2014, especially for mortgages with limits higher than $300k, where the rates remained at approximately 0.1%. However, in Vancouver, the delinquency rates of mortgages with limits between $100k and $200k increased from 0.12% in Q1 2018 to 0.14% in Q1 2019, and those with limits between $200k and $300k increased from 0.09% to 0.12%. Comparatively, delinquency rates of mortgage with limits at $100k$200 in Victoria remained relatively higher at 0.19%, coming down from over 0.2% in the past three quarters. Both regions’ small mortgage loans continued to have the largest share of delinquency in Q1 2019. The delinquency rates of mortgage with limit lower than $100k in Vancouver is 0.19%, whereas Victoria’s largest share of delinquent mortgage occurred in those with limit between $100k and $200k.PRAIRIE REGION “The decrease in average weekly earnings of Albertans, the downward pressure on house prices in Saskatchewan, and higher mortgage rates all contributed to increased delinquency rates in Prairie CMAs. However, average credit scores remained excellent despite the increases in delinquency rates and higher average monthly obligations.” — Christian Arkilley, CMHC Senior Analyst Mortgage delinquency rate rising in the Prairie region In Calgary and Edmonton CMAs, the shift in the composition of employment from oil and gas to services producing industries has resulted in shocks to income and contributed to the increase in the delinquency rate. The downward pressure in house prices and higher mortgage rates contributed to higher mortgage delinquency rates in both Regina and Saskatoon CMAs. The delinquency rate is, however, higher in the Regina CMA (0.65%) than any other CMA in the Prairies. Stable economic growth and an improvement in employment led to the lower delinquency rate (0.29%) in the Winnipeg CMA compared to the other CMAs within the Prairie region. In Edmonton and Saskatoon, the decrease in full time employment resulted in income instability and contributed to rising mortgage delinquency rates in these CMAs. The delinquency rate in the Calgary CMA increased to 0.35% from 0.34% the previous year, the lowest increase in the Prairies, as growth in employment helped to stabilize delinquency rate. Mortgage delinquency rates by loan origination are higher for loan amounts of less than $100KIn the Prairie region (except Edmonton), mortgage delinquency rates by loan origination amounts are higher for loan amounts of less than $100,000, with delinquency rates ranging from 0.36% for Winnipeg to 0.79% in Regina. In Calgary, mortgage delinquency rates by loan origination amounts were generally clustered around
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