H4 | REALESTATE O THEGLOBEANDMAIL| FRIDAY,MARCH13,2020
P
ark Property Management
is one of those Toronto
landlords that no one’s ever
heard of, but whose holdings ev-
eryone has seen or passed at
some point. The 45-year-old com-
pany, controlled by a German
family, owns 72 slab-style apart-
ment buildings, comprising 8,500
units, across Greater Toronto and
Southwestern Ontario. The firm
also has six projects in the devel-
opment pipeline, which together
will add 1,600 purpose-built
apartments to the region’s
squeezed housing stock.
In 2013, Park embarked on a
two-year rehab of one of its prop-
erties, at 53 Thorncliffe Park Dr., a
279-unit building with more than
800 residents built around 1968.
The “deep retrofit” was all about
improving the energy efficiency
of the aging structure, says Mar-
garet Herd, senior vice-president
for residential property manage-
ment, who explains that resi-
dents were increasingly reporting
drafts in their apartments.
The $5-million project in-
volved repointing the bricks, in-
stalling high “R-value” windows,
adding insulation and recladding
the entire structure to stop fur-
ther energy loss. “We did achieve
significant savings,” says Ms.
Herd, who estimates that the
building’s energy costs have
dropped by 20 per cent. The ret-
rofit might also have improved
tenant retention, with 2019 turn-
over rates at just 4 per cent to 5
per cent. She acknowledges the
city’s extremely low vacancy
rates dissuade renters from mov-
ing, but cites a tenant survey
showing a high degree of satisfac-
tion with the project.
Park’s holdings represent a
fraction of Toronto’s vast collec-
tion of 1960s and 70s-vintage
apartment towers – about 1,000
buildings in all, with a combined
190,000 units that are home to
400,000 people. While some are
controlled by Toronto Communi-
ty Housing (TCHC) and various
non-profits, private firms and in-
vestors own more than 80 per
cent of this stock, which is in-
creasingly showing its age.
“You need to think about the
next 60 years,” former New York
chief planner Purnima Kapur
said last month at an Urban
Lands Institute Toronto symposi-
um on how to preserve an invalu-
able supply of mostly affordable
housing in a city with a 1-per-cent
vacancy rate.
While many of these buildings
need better insulation and more
efficient boilers, the devastating
2018 fire at 650 Parliament St., a
TCHC building, revealed the ex-
tent of the risk their owners face.
The Ontario Fire Marshal last fall
determined the blaze was caused
by a “catastrophic” failure of
electrical systems that triggered
explosions. The building’s 1,500
tenants had to find alternative
accommodation, while the cost
of the repairs and relocation ex-
penses could exceed $60-million,
according to estimates cited by
The Toronto Star.
Such disasters sorely test the
city’s resilience. “What happens
if we lose 10 or 20 [of these build-
ings]?” said ERA Architects part-
ner Graeme Stewart, a driving
force behind the city’s 10-year-
old “tower renewal” partnership.
In recent years, various fund-
ing programs have helped under-
write retrofits of public or non-
profit apartments, and the city
will invest $1.3-billion in National
Housing Strategy funds in refur-
bishing the TCHC stock. But Mr.
Stewart said the privately owned
buildings remain elusive because
investments in so-called “deep
retrofits,” which can cost $10-mil-
lion to $15-million and involve
extensive rehabilitation of win-
dows, walls and HVAC systems,
may take decades to recoup.
The ULI Toronto event fea-
tured a focused debate on finding
ways to prompt more private
owners to undertake such pro-
jects, but do so in a way that
doesn’t drive up rents. A team of
U.S.-based ULI experts, in archi-
tecture, sustainable energy, plan-
ning and finance, spent several
days in Toronto last month, vis-
iting buildings and interviewing
stakeholders in order to bring
new eyes to an old problem.
The team has proposed that
the City of Toronto support a
fast-tracked pilot project that
would invest in the most de-
manding and expensive retrofits
across 10 privately owned build-
ings. Panel member Billy Gray-
son, executive director for the
ULI’s Centre for Sustainability
and Economic Performance, said
the group hopes to kick off thepilot project, tentatively dubbed
RentalGrowTO, in May. Several of
the city’s most senior officials
were in the audience, including
deputy mayor and housing czar
Ana Bailao, city manager Chris
Murray and chief planner Gregg
Lintern.Landlord groups applauded
the pitch. “We could easily find 10
pilot sites,” said Daryl Chong,
who heads the Greater Toronto
Apartment Association, after lis-
tening to the ULI presentation. “I
think the sentiment in the room
was, ‘This sounds like a good
idea.’ ” But, he added, “I’m not
sure how far the city is going to
go.”
The bigger question is what
policies various governments
should put in place to provide
sufficient carrots and sticks to en-
courage private firms to keep up
their assets. Mr. Chong points out
that the Germangovernment has
tackled the problem with a retro-
fit financing program that in-cludes low-interest repayable
loans, performance-based invest-
ment subsidies and access to ex-
pert consultants – an important
detail because these retrofits are
technically complex projects.
Ms. Herd, of Park Property,
added that landlords would have
additional incentive to carry out
such improvements if some por-
tion of the expenditure could be
designated as an operating ex-
pense instead of being capital-
ized. “If we could write it off as an
expense, then you could reinvest
the money faster.”
But tax breaks and other
grants or low-interest loans to
private firms all represent fore-
gone revenue for governments
that face complex competing de-
mands, including the funding of
costly social programs, such as
health care and education.
Apparently anticipating resist-
ance from policy makers, the ULI
expert team proposed a more ho-
listic way forboth governments
and property managers to think
about the expenditures on major
building system retrofits, as well
as the cost ofgovernmentincen-
tives meant to encourage owners
to undertake such projects.
The estimated $150,000-a-unit
cost of a deep retrofit, the group
showed in a chart that offered a
new approach to calculating re-
turn on investment, can be bal-
anced against savings on energy,
maintenance, insurance and the
cost of non-insurable accidents.
But for governments, there are
social savings, in the form of
avoided emergency calls, health
outcomes associated with im-
proved quality of life for tenants
and the financial savings to the
city in ensuring a supply of resil-
ient and affordable apartments.
This approach to calculating
costs and benefits can slash the
payback period from more than
70 years to about five. Said Mr.
Grayson, “It’s a better way to look
at ROI.”Special to The Globe and MailThisapartmentbuildinginTorontoat53ThorncliffeParkDr.,a279-unitbuildingwithmorethan800residentsthatwasbuiltaround1968,underwentatwo-yearrehabin2013after
residentsincreasinglyreporteddraftsintheirunits.FRED LUM/THE GLOBE AND MAIL
Thepushtopreserveaginghousingsupply
Toronto’svastcollection
ofvintageapartment
towersareindireneed
of‘deepretrofit’
JOHNLORINCTORONTO
196605 ,0001 0,00015 ,00020,00025 ,00019681970 1972 197401 ,000,0002,000,0003,000,0004 ,000,0005 ,000,0006,000,0007 ,000,000201020122014 20162018Population(GTA) Units completedMismatchbetJeenpopulationandhousinggFoJthSOURCE: URBANLANDINSTITUTE1965 - 19742009 - 2018In recent years, various
funding programs have
helped underwrite
retrofits of public or
non-profit apartments,
and the city will invest
$1.3-billion in National
Housing Strategy funds
in refurbishing the TCHC
stock. But Mr. Stewart
said the privately owned
buildings remain elusive
because investments in
so-called ‘deep retrofits,’
which can cost
$10-million to
$15-million and involve
extensive rehabilitation
of windows, walls and
HVACsystems, may
take decades to recoup.With fast-turnover condo pro-
jects attracting the bulk of
development investment in
recent decades, the ULI Toronto
advisory panel sought to offer
up ideas for kick-starting the
construction of new purpose-
built rental stock. TheCity of
Toronto, for instance, recently
added a new zoning desig-
nation that allows apartment
owners to build new projects
on open space at the base of
their towers.
The ULI expert panel, howev-
er, recommended that theCity
and the province also bring in
tougher and more far-reaching
inclusionary zoning rules that
set aside 10 per cent to 30 per
cent of units in new high rises,
including condos, as affordable
rental.
The previous provincial Liberal
government pledged inclusion-
ary zoning laws in 2016, but
the final legislation, which
received royal assent in 2018,
represented a highly watered-
down version that also gave
municipalities the right to
designate which areas would be
required to add inclusionary
zoning riders on development
applications. The law also
allows developers to set aside
no more than 5 per cent to 10
per cent of all units as affor-
dable, depending on the area’s
density.
PurnimaKapur, the former
New York chief planner, told the
ULI session that inclusionary
zoning laws need to be more
robust, city-wide and mandato-
ry. “A lot of North American
inclusionary zoning started as
voluntary bonusing,” she said.
But in cities such as Washington
and San Francisco, jurisdictions
have tightened the rules.
In some places, the affordabil-
ity requirements are time limit-
ed–30to99years–whereas
other cities make them perma-
nent. Under New York’s 2016
inclusionary zoning rules, for
instance, developers must set
aside 20 per cent to 30 per cent
of units as affordable if they are
in a new building, or 25 per
cent to 35 per cent if they are
situated elsewhere.
Tenants, in turn, qualify if
they have incomes that range
from under 50 per cent to 100
per cent of the average. In New
York, some inclusionary zoning
units are also available to resi-
dents earning slightly above-
average income.
“Permanence is the ideal
outcome but you should be
looking at 50- to 60-years at a
minimum,” she said. “That goes
in a blink.”
JOHN LORINC, SPECIAL TO
THE GLOBE AND MAILINCLUSIONARYZONING