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Turner Drake & Partners Ltd.
6182 North Street
Halifax, N.S.
B3K 1P5
Canada

Tel.: (902) 429-1811
Toll Free: (800) 567-3033
Fax.: (902) 429-1891

Suite 221
12 Smythe Street
Saint John, N.B.
E2L 5G5
Canada
Tel.: (506) 634-1811

Suite 11
109 Richmond Street
Charlottetown, P.E.
C1A 1H7
Canada
Tel.: (902) 368-1811

35 York Street
St. John's, N.L.
A1C 5M3
Canada
Tel.: (709) 722-1811

4th Floor
111 Queen Street East
Toronto, ON.
M5C 1S2
Tel.: (416) 504-1811

E-Mail: tdp@turnerdrake.com
Internet: www.turnerdrake.com

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# Monday, 29 August 2016

Purchasing a service is risky. You do not know what you will get until you get it. Products are tangible: you can see, feel, and sometimes taste or hear them to judge their quality. Unfortunately, you cannot do that with a service. Quality can only be determined after the service has been delivered. But there is a better way…

Turner Drake is the first, and currently the only real estate consulting company in Atlantic Canada to be registered to the ISO 9001:2008 quality standard. We are also registered as a firm regulated by the Royal Institution of Chartered Surveyors (RICS) for the 2015-2016 year. We are one of only two real estate firms in Atlantic Canada to be RICS registered.

What is the RICS Regulation?

RICS is leading the initiative for a worldwide standard of professional conduct in the land, property and construction sectors. Registered members are required to adhere to three major regulatory components:

1. RICS Rules of Conduct
2. Continuing Professional Development
3. RICS Ethical Standards

These standards are upheld by a risk-based monitoring system to ensure quality services are provided by registered firms. For more information about the program, visit the RICS website.

How is registration achieved?

To satisfy the RICS standards, we had to establish that we had the following programs in place:

• A complaints handling procedure.
• A training program for all employees (we have a 7-year training program that includes 27 in-house training modules [500 hours], completion of the University of British Columbia’s Diploma in Urban Land Economics (DULE) and Bachelor of Business in Real Estate (BBRE) degree, and mentored “on the job” training.
• Professional Indemnity Insurance to ensure that if a claim is received, a designated insurer will respond (not the insurer in place when the negligent act occurred).

What does this mean for me?

We follow the RICS fundamental principles in every aspect of our business:

1. Ethics: You can feel confident that you are dealing with an ethically sound firm.
2. Protection: Independent Professional Indemnity Insurance.
3. Security: We have a clear and transparent procedure in place to resolve complaints as fairly and efficiently as possible.
4. Client Care: Our staff regularly update their skills and knowledge through training and education to give you the best service possible.

We follow the values of the RICS regulation in each and every assignment we undertake. Purchasing real estate services can be a risky business, but we have substantially reduced that risk.

Monday, 29 August 2016 14:25:30 (Atlantic Daylight Time, UTC-03:00)  #    -

# Wednesday, 24 August 2016

Builders of multiple-unit residential apartment buildings will be all-too familiar with the GST/HST self-supply rules administered by Canada Revenue Agency (CRA) under the Excise Tax Act. Engaging with CRA at any level is a knee-trembling experience that is best avoided if at all possible, so spare a thought for apartment builders, who have no choice but to engage every time they finish a new project. The self-supply rules require that builders volunteer the value of their completed asset, remit the GST/HST due and then wait to be told if they got it right. Welcome to the unnerving world of self-supply.

Based on the number of calls we have been getting of late, CRA is growing increasingly suspicious of the values being declared by builders in this new age of ultra-low discount rates and ultra-high property values. They smell profit and want a bigger piece of it. If you’ve been targeted for scrutiny, it’s time to call for reinforcements.

How it works

For those who are unfamiliar with the process and want to follow along, this is how it works. Generally speaking, “used” residential property is exempt from GST/HST and no liability arises when it is sold in the marketplace. But new residential property is taxable upon completion, and for rental property the liability usually arises when the first unit is occupied, at which time GST/HST becomes payable based on the “Fair Market Value” of the asset. The most common situation, of course, is newly constructed rental apartment buildings, but the self-supply rules apply to other types of residential property, including condominiums if the builder chooses to rent them rather than sell them, an increasingly likely scenario in markets where the demand for condominiums has dried up. So on that happy day when the first unit is rented, the builder is deemed to have sold and repurchased the property at its declared (i.e. self-assessed) “Fair Market Value,” and gets to celebrate the occasion by remitting the required GST/HST.

The purpose of the GST/HST self-supply rules is to ensure the builder does not escape paying tax on value-added components of the project, such as the value of employed labour, financing costs and profit, the value of which would have been taxable had the asset been sold rather than rented upon completion. According to the official CRA publication (GST/HST Memoranda series 19.2.3, paragraph 5), the stated purpose of the self-supply rules is to create a “level playing field” and remove the potential tax advantage a builder would otherwise have in constructing a residential complex for rent.

So what is “Fair Market Value” and what does the Tax Court say?

CRA’s Policy P-165R gives some guidance and basically interprets it as the highest price that can be achieved in an unrestricted market – much the same as the industry-standard definition of Market Value. It also recognises the three traditional methods for determining Market Value, colloquially known as the “three approaches to value,” being the Cost, Income and Direct Comparison approaches. While the CRA Policy statement does say that no particular method should be excluded categorically, the Tax Court of Canada has tended to favour the Cost Approach in its rulings on GST/HST self-assessment cases. The most recent Tax Court ruling to cross our desk (Beaudet v. The Queen, 2014 TCC 52) adopted the Cost Approach method in favour of the other methods to establish the Fair Market Value of a residential apartment complex, but only after giving careful consideration to each of the other methods. So don’t be fooled into thinking the other valuation methods have no relevance: on the contrary, CRA will expect all the relevant valuation approaches to be examined and reconciled. They are deeply suspicious that reliance solely on the Cost Approach method conceals genuine profit, whereas the Income Approach method uncovers it. They might be right, but buildings which sell in the marketplace and generate those ultra-low discount rates are cash flow vehicles, delivering stable revenues backed up by full occupancy and a track record of success. New-builds have neither full occupancy nor a track record and must be valued accordingly for self-supply purposes.

Whether or not the final result matches other market valuations done on the same property for other purposes – typically mortgage financing – does not appear to distract the Court, which remains firmly focused on the specific issue at hand. That was perhaps most clearly expressed in an earlier Tax Court decision (Sira Enterprises v. The Queen 98-2463-GST-G) when it said “[t]he Court’s duty is to determine the fair market value of the properties for the purpose of the GST. The Court is not interested in the fair market value of these properties for the purpose of sale, and indeed there might be many factors which might have to be considered if the court were required to determine the fair market value for the purpose of sale, which may not be relevant for GST purposes.”

So protect yourself and sleep well

Our advice to builders is to be pre-emptive: have an independent assessment of the Fair Market Value done upon – or even in advance of – completion to support the self-assessed value being reported for GST/HST purposes. That puts you in the best possible position to defend a future challenge, and will undoubtedly help you sleep at night.

So if you, or someone close to you, is losing sleep at the prospect of engaging with CRA, give our Counselling Division a call.



Written by Lee Weatherby, Vice President of our Counselling Division. For more information about our counselling services, feel free to contact Lee at (902) 429-1811 or lweatherby@turnerdrake.com

Wednesday, 24 August 2016 14:55:06 (Atlantic Daylight Time, UTC-03:00)  #    -
Counselling
# Tuesday, 23 August 2016

When you think of the ideal office space, what are your must-haves? An environmentally friendly building? Open work spaces? Proximity to your home or city amenities? These are considered some of the most commonly desired traits in office space by HRM tenants. Office space that fit this bill is becoming more available in the downtown core. Does this mean that the recent trend of moving into office space in the suburbs will come to an end?

HRM comprises eight urban and suburban sub-markets: Central Halifax, Central Dartmouth, Downtown Peripheral Halifax, Suburban Halifax, Peripheral Dartmouth, Burnside/City of Lakes, Bedford and Sackville. Notable changes to these submarkets since 2011 include 950,000ft.2 of new office space added to the rental market in Central Halifax, Bedford, Burnside/City of Lakes and Suburban Halifax.

With the current lagging economy, it is not surprising to learn that vacancy has almost doubled in the last five years, especially considering the plethora of new office space brought on stream throughout HRM. Vacancy increased in every submarket, but the changes in vacancy rates indicate a shift in where demand for office space is flowing – to suburban business parks. For example, Burnside/City of Lakes and Suburban Halifax experienced among the lowest increases in vacancy. The chart below reflects how the distribution of total rentable area by sub-market has changed in the last five years.



It’s not all bad news for the CBD, though… vacancy in downtown Halifax saw a below average increase in vacancy. This begs the question: because suburban space was highly available, are tenants moving there because they wanted to, or because of its availability? With more space coming on stream in the downtown core consistent with commonly desirable office traits, does this mean tenants will start to shift back toward the downtown core?

In the last year, vacancy increased in the downtown core, not because of tenants vacating the area, but because there is more inventory available. Urban space is competing against new, modern office developments in suburban business parks (previously the only option for new office space in the city) and the population is concentrating in the urban core. With rental rates stagnating as vacancy rises, this is the prime opportunity for tenants to move into new space… and perhaps that space will be in the downtown area.

Click here to read more, including a map showing the spatial distribution of vacancy rate changes since 2011. This topic was covered in detail in this month’s TDP Trends, a free service provided to decision makers with property portfolios in Atlantic Canada. Each month, it provides information on demographic, psychographic, migratory, income and wealth distribution, investment, technological, space utilisation, and other trends influencing property values now or in the future. TDP Trends are archived on the public area of our website.

Tuesday, 23 August 2016 14:01:14 (Atlantic Daylight Time, UTC-03:00)  #    -
Economic Intelligence Unit | Nova Scotia
# Monday, 15 August 2016

Linear projects such as transmission line rights of way (RoW) are fertile ground for seeds of suspicion, mistrust and hostility. The scale of the project which may involve dozens, if not hundreds of property owners ensures that the acquiring authority is required to deal with a similar number of individuals. The very nature of the scheme, the forcible taking of property from people who individually stand to gain little from its outcome, often fans the flame of opposition… an experience that pits the “little guy” against corporate Canada. This is worsened if the acquiring authority deploys agents who rely on bluff, bluster and bonhomie rather than real estate expertise, and consider it their mandate to minimize the compensation payable.

Few acquiring authorities assess compensation on a property-specific basis before opening negotiations, or follow the leadership of the Nova Scotia Department of Transportation and Infrastructure Renewal and agree to the owner retaining professional advice at the acquiring authority’s expense. Most regard the property owner as a hindrance. They wait until negotiations founder before preparing an accurate estimate of the compensation properly payable under the Expropriation Act presumably on the assumption that, since they have not expropriated the property, anything goes. Even when a formal estimate of loss is prepared by an independent appraiser, it may not address the entire compensation… little wonder then that property owners distrust authority.

As part of our Counselling Division, which has completed the valuation and negotiation of compensation for several large infrastructure projects, I have seen tension between the acquiring authority and landowners unfold. Based on those experiences, here are the Top 5 reasons property owners use to warn the acquiring authority to “Stay off my land!”

5. The Grudge

One of the most difficult obstacles to overcome is a landowner who simply does not trust the acquiring authority. Often this is because they have been forced to part with their land in the past to make way for an already established RoW, and their previous experience was not a good one. Landowners that are approached yet again may view the current acquisition as a way to “settle the score” for an acquisition they feel was handled poorly in the past. A landowner that has a longstanding negative view of the acquiring authority may be difficult to deal with from Day 1.

4. Uninvited Guests

Much like the stress caused by termites, cockroaches or your in-laws, many landowners worry about the uninvited guests that a new RoW across their land may bring: hunters, recreational vehicles or people looking for a quiet place to dump their garbage. These concerns generally involve worries about damage to the land, liability issues and environmental impact.

3. Au Naturel

Appearances can be deceiving, and sometimes scrub land that appears to have little value may offer far more than meets the eye. Land can harbour an abundance of natural resources from which its owners can profit, such as cultivated crops, gravel deposits, minerals and harvestable timber. Often overlooked is the cost to extract these valuable resources and the fact that market values in many areas already incorporate resource values. Remember to be conscious of over-counting and double-counting when it comes to compensation payments.

2. Nothing Will Ever Be the Same

The general impact of the new RoW is something that almost every landowner contemplates. Some consider the impact to be minimal and will be happy to support the project in exchange for fair compensation payment, but others view the impact as harmful and often have many legitimate concerns that should be addressed. Common concerns include changes to view planes, interference with access, increased noise levels, loss of windbreaks, parcel severance and health concerns.

1. The Greatest Subdivision that Never Was

If I had a nickel for every time I was told that a new RoW was impacting a future subdivision … well, I’d have at least a couple bucks! Impact on future development potential is hands down the most common theme that I have encountered. Sometimes legitimate subdivisions or lands ripe for development are disrupted by RoW projects, and in those instances landowners should be compensated accordingly. However, in my experience many of the “subdivisions” that RoWs just can’t seem to avoid are more of a dream than a reality.

Overall, I would say that the concerns expressed by landowners are often a blend of rational and irrational thought. The world is becoming a more sophisticated place, and landowners are better educated and have access to more information than ever before. In the past, liaison with landowners may have simply included a couple of phone calls and a pat on the back from an employee of the acquiring authority. Nowadays the representative of the acquiring authority should have an increasing number of abilities including exceptional interpersonal skills, above-average organizational skills, patience and training in real estate valuation techniques.

The representative of the acquiring authority should give all landowners the benefit of the doubt and listen carefully to all of their concerns without judgement. Listening to the concerns of a landowner and working with them to mitigate as many of these items as possible is a great way to gain a landowner’s trust. However it is important to be aware that some landowners will go to extreme lengths in order to disrupt the project or increase the compensation payable to them. Good record keeping and a genuine understanding of the burdens that a RoW may bring to a landowner are key.

In the end, you’ll rarely win over every landowner involved in a RoW acquisition, but by keeping these five points in mind, hopefully you can minimize the number of times you hear the phrase “STAY OFF MY LAND!”



Written by Matthew Smith, Manager of our Counselling Division. For more information about our counselling services, feel free to contact him at (902) 429-1811 or MSmith@TurnerDrake.com.

Monday, 15 August 2016 12:43:03 (Atlantic Daylight Time, UTC-03:00)  #    -
Counselling
# Monday, 18 July 2016

As a recent addition to the Turner Drake team, one of the first major jobs I worked on was collecting data for our December 2015 Market Survey of leasable office and warehouse space in St. John’s, Newfoundland. Given my experience of Newfoundland was limited to a couple trips to visit my girlfriend’s family, being tasked with getting a handle on an entire city’s office and warehouse market seemed a daunting task. However, it has proven to be one of the best learning experiences during my first year at Turner Drake. As a newcomer to the real estate industry, speaking with building owners and managers gave me insight into the issues they were facing, and a more intimate understanding of the market in Newfoundland than I expected to develop in such a short period of time. After such a positive experience, I was excited to be tasked with collecting data on the St. John’s market again for our June 2016 survey.

The June survey is smaller than the December survey: we only gather data on the office markets, with the exception of HRM, where we surveyed both the office and warehouse markets. Don’t think that this means it was an easy job: at Turner Drake, “smaller” rarely means small.

To ensure our data collection met the rigorous standards of our ISO 9001:2008 quality standard certification, our surveyors undertook a month-long data gathering process. We began by compiling an inventory of every new office or industrial space with a minimum rentable area of 5,000 ft.2 in our five target markets (St. John’s, Moncton, Fredericton, Saint John and Halifax). As the number of cranes on our cities’ skylines attest, this was no mean feat. However, this was just the beginning.

The meat and potatoes of the data gathering process is distributing and following up on more than 550 surveys for our June report (and more than 900 for the December version). We begin by sending every one of our contacts an Inventory Form for each of the buildings they are responsible for. This year, we took a bold step forward and sent the survey forms by… email! If we’re lucky, the respondents complete the form with information on the size of their buildings, the current vacancies, the rental rates they are realizing, and a few other pertinent details. Then they check the little box saying “Please send me a copy of the final report” and we’re done. However, things are rarely that easy, and Turner Drake surveyors won’t rest until the job is done! If we don’t receive a response, we send a follow-up email, and if that isn’t returned, we call, and if our calls aren’t returned, we call again… and again… and again… until we get the data we need.

After all of the data has been gathered, it is entered into our CompuVal™ system. CompuVal™ allows us to track vacancy and rental rates over time for both individual buildings and entire markets, as well as analyze the data to predict future trends. To ensure no errors are made, our surveyors review each other’s work, “cleaning up” typos or other mistakes.

All told, the data gathering process can take several hundred hours to complete. For our June surveys, our four surveyors spent more than 330 hours gathering data. This is the point where we turn things over to our Economic Intelligence Unit, who work their magic by taking the raw data and turning it into a vibrant picture of the local market.

If you’re interested in learning more about our Market Surveys or purchasing a copy, give our Economic Intelligence Unit a call at (902)-429-1811 or visit our website.



Written by Colin Walsh, Consultant in our Lasercad® and Valuation Divisions. To learn more about Colin, visit our Facebook page to see his Featured Consultant article.

Monday, 18 July 2016 12:19:35 (Atlantic Daylight Time, UTC-03:00)  #    -
Economic Intelligence Unit | Newfoundland & Labrador