Home Team Leaders Products News & Research Contact Us Related Sites Site Map Search Client Area
    Newsletters  |  Research  |  Media Centre  |  Surveys  |  TDP Trends  |  Case Studies  |  Careers  |  Quality Ratings  |  Blog  



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

Sign In
Twitter Facebook Linked In




# Thursday, June 24, 2021

Affordable housing has been a hot topic in recent years, and is even more so now as rental vacancy rates are extremely tight and housing prices have experienced record rates of increase in Atlantic Canada.  A recent news article caught my attention, with its reference to a price point – “attainable” – I haven’t heard as much about, and it inspired me to take a look at what the difference is, and how each lines up with Atlantic Canadian markets.  Then, because alliterations sound better in threes, I needed a third A: the obvious choice in this context is to look at availability.

 

First, the definitions, a slipperier thing to pin down than one might imagine.  Canada Mortgage and Housing Corporation (CMHC) defines affordable housing as housing that costs less than 30% of a household’s before-tax (gross) income, absent any requirement for the housing to be provided or made possible through a government program, and without restriction on tenure or type. 

 

With that definition, affordability is very much relative: in theory, a $4.3-million home would be “affordable”, provided your household income is $300,000 – about 1.7% of Atlantic Canadian households.  

 

Relatively affordable: on the market for approximately $4.4-million.  Source: ViewPoint Realty


Seems likely that this is not the intention of the definition, or any measures put in place to encourage the supply of affordable housing.  And in fact, CMHC’s Housing Continuum graphic implies that affordable housing is separate from market housing.  Wikipedia offers a slightly more specific definition:

 

…housing which is deemed affordable to those with a median household income or below as rated by the national government or a local government by a recognized housing affordability index.



Source: CMHC 


If we combine the two, that would indicate that affordable housing is housing which costs no more than 30% of the median household income – and for practical purposes, let’s assume that is in reference to local median incomes, and not, for example the national figure…more on that later.    

 

We conducted a very high-level analysis of the median incomes for the four Atlantic provinces and a selection of cities.  We used average rental rates for 2-bedroom units because this is by far the dominant unit type for rental accommodation.  The calculation is simple (very!): divide 30% of the median household income by 12 to get the monthly income, subtract off the average rental rate and an allocation for utilities of $150 per month (property tax and water are included in the rental rate; electricity/heating may or may not be included, so to play it safe, we assumed that it’s not for most units) and see what’s left over.    Great news: positive balances all-round, averaging $620 per month surplus – hoorah, there’s no affordability issue! 


 

NS

NB

PE

NL

Median income

$67,115

$65,329

$67,375

$73,783

30%

$20,135

$19,599

$20,213

$22,135

Monthly

$1,678

$1,633

$1,684

$1,845

Avg. 2-bed rent

$1,179

$895

$989

$890

Utilities

$150

$150

$150

$150

Balance

$349

$588

$545

$805


 

HRM

Fredericton

Charlottetown

St. John's

Median income

$75,966

$73,489

$69,714

$89,482

30%

$22,790

$22,047

$20,914

$26,845

Monthly

$1,899

$1,837

$1,743

$2,237

Avg. 2-bed rent

$1,254

$986

$1,013

$971

Utilities

$150

$150

$150

$150

Balance

$495

$701

$580

$1,116


 

Cape Breton

Kentville

Summerside

Moncton

Saint John

Median income

$57,209

$61,787

$59,612

$69,287

$68,835

30%

$17,163

$18,536

$17,884

$20,786

$20,651

Monthly

$1,430

$1,545

$1,490

$1,732

$1,721

Avg. 2-bed rent

$807

$810

$889

$949

$825

Utilities

$150

$150

$150

$150

$150

Balance

$473

$585

$451

$633

$746

Data Sources: Environics Analytics via Sitewiseweb; CMHC; Dalhousie University


Here’s the “but”…and it’s not inconsequential by any stretch.  Median household income is, by definition, the middle of the income spectrum.  So, a household earning the median income being able to afford average costs for rental housing tells only half the story.  Our next analysis worked the figures backwards: we took the average rent plus the same allocation for utilities, on an annual basis and figured out how much a household would need to earn in order for housing costs to equal 30% of their gross income – then figured out approximately how many households fell below that income threshold, based on the number of households in various income brackets.  Reports of an issue don’t look overblown at all.   


Data Sources: Environics Analytics via Sitewiseweb; CMHC; Dalhousie University


Prices for owner-occupied housing have increased substantially over the course of the pandemic.  We ran the same sort of analysis as above, for average/median sale prices in 2020 and 2021.  The geographic availability of data is a bit inconsistent, but our aim is a general idea, so overall, the data is fit for purpose.  Mortgage rates impact the cost of housing; we used discounted rates (rather than the posted rates) relevant at the relative times.  To keep things simple, we assumed a 5% down payment, then based on a very unscientific poll around the office cross referenced against an online monthly expenses calculator, we allocated 40% of the mortgage cost to cover property tax, utilities, and insurance costs: rough idea, fit for purpose.


Data Sources: Environics Analytics via Sitewiseweb; CREA; ratehub.ca


We also looked at the year-over-year change in house prices: in 2020, the median income was sufficient to afford a house in all Atlantic provinces, and the selected cities (2020 house price data for Moncton is conspicuous by its absence), but in 2021, the income needed to afford a typical house climbed over the median level for Nova Scotia and PEI, and their capital cities. 


Data Sources: Environics Analytics via Sitewiseweb; CREA; ratehub.ca


Obviously, averages and medians are the central figures: there will be houses priced lower as well as houses priced higher, so the above analysis is not to say that in HRM, for example, you couldn’t find a house priced within your means if your household income is less than $100,000 (though it’s getting trickier, especially with our recent embrace of the “offers over” system of home buying).  But this does provide an indication of affordability, and leads us to the next A on the list: attainability. 

 

Again, the definition is slippery, and in some senses, attainability is defined the same way as affordability, i.e., at no more than 30% of gross household income.  It seems that the key difference is the removal of reference to median income: each income bracket will have its own price range of attainable housing – and associated appropriate housing types, categorized by type, size, and tenure.  Implicit in the idea of attainability is that suitable housing exists in the local market in a variety of forms and price points, sufficient to meet the needs of the population.

 

We used data on household income brackets to model the proportion of households in each province/city by maximum monthly housing budget.  We then used the same $150 allocation for utilities for rental units to determine affordable rental ranges, and the same ratios for expenses-to-mortgage (i.e., 60% of budget is available to service the mortgage, with 40% allocated to property tax, utilities, and insurance) to determine affordable house prices, as were used in the earlier analyses.  All figures are approximate at best and should not be relied upon for life decisions, but they give a sense of what is attainable to each income bracket from a price perspective. 


Data Sources: Environics Analytics via Sitewiseweb


Income Bracket

Monthly Rent

House Price Range

% Atl. Canada HHs

From

To

From

To

Under $20,000    

 

$   350

 

$     73,450

7.4%

$20,000 - $39,999

$   350

$   850

$     73,450

$   146,900

21.5%

$40,000 - $59,999

$   850

$1,350

$   146,900

$   220,350

15.9%

$60,000 - $79,999

$1,350

$1,850

$   220,350

$   293,800

13.3%

$80,000 - $99,999

$1,850

$2,350

$   293,800

$   367,250

10.6%

$100,000 - $124,999

$2,350

$2,850

$   367,250

$   440,700

10.1%

$125,000 - $149,999

$2,850

$3,350

$   440,700

$   514,150

7.0%

$150,000-  $199,999

$3,350

$4,850

$   514,150

$   734,500

8.1%

$200,000 - $299,999

$4,850

$7,350

$   734,500

$1,101,750

4.3%

$300,000 and over

$7,350

and up

$1,101,750

and up

1.7%

Data Sources: Environics Analytics via Sitewiseweb.  Note that the annual income from a minimum wage job, at 40 hours per week and 52 weeks per year varies by province but all four Atlantic Canadian provinces would fall towards the low end of the $20,000-$39,999 income bracket, averaging $26,000 overall.  


And so we come to the final A: availability. It's an important one, because it's effectively the supply side of the supply and demand equation, which is the driving force behind prices. For this portion of the discussion, we're abandoning price points in the interest of balancing level of effort that can be allocated to a blog post.


One of the components of the attainable definition was that a variety of housing formats would be available locally to serve the various budgets - the CMHC housing continuum graphic gives a rough sense of what this might look like, as does this Housing Life Cycle graphic borrowed from the City of Belleville, Ontario.  

 


From an availability perspective, we start with rental tenure.  With the exception of Cape Breton and St. John’s, vacancy rates are low across the selected cities. 


Source: CMHC (annually in October)


At a provincial level, in October 2020, there were just over 3,000 vacant rental units in Atlantic Canada, of a total rental universe just shy of 114,000 units.  Once those 3,000 units are sliced and diced by price, style, and location, availability is probably problematic. 


Source: CMHC (October 2020)


For residential sales listings, we have to rely on data for Nova Scotia only, due to availability, but we suspect that a similar pattern will be in evidence in the Maritime provinces at least.  Prices continue to climb in 2021, but it appears that the supply-side driving force behind that trajectory may no longer be in play: the number of listings for the period 1st January to 16th June in 2021 was greater than any other year in the past five years, versus 2020, which had the fewest listings of the five years. 


Source: NSAR MLS®


But what about affordability of these available houses?  That’s a question that could have many answers – in that it can be answered in a myriad of ways.  We’ve opted for a very simple one, using price points of affordability for the median household income under two interest rate scenarios: the current posted rate and a current available discounted rate, and ignoring down payments because we’re more concerned with monthly costs in this analysis. We’ve also ignored time – and changes to mortgage rates and income levels over its course, for illustrative purposes (horseshoes, hand grenades, and this blog post).


Median Household Income

$67,115

30%

$20,135

Monthly

$1,678

Mortgage amount @ 1.68% (discount rate)

$410,793

Mortgage amount @ 4.79% (posted rate)

$293,120

Mortgage rates from ratehub.ca


Let’s just pause on the one-hundred-and-seventeen-thousand-dollar difference in what is “affordable” under those two rates.  In some areas, you could buy a house for that.  Maybe not for much longer, if interest rates stay low, but there are rumblings from economists that as interest rates rise, the “affordability” of houses will contract and what some fear is a housing bubble, may burst. 

 

The second half of 2021 is yet to be, so here are the Nova Scotia listing counts annually to 16th June.  A few things jump out:  (1) there were more listings in the first half of 2021 than in the same period of any other year in the past five (we already knew that from earlier); (2) other than at the outset of the pandemic, when home was so distinctively the safest place to be and few wanted to let strangers walk through theirs, 2021 had the fewest listings below the posted interest rate affordability threshold; and (3) 2021 had the fewest listings below the discounted interest rate affordability threshold, full stop. 


Source: NSAR MLS®, with affordability thresholds calculated using data from Environics Analytics via Sitewiseweb; and ratehub.ca.  

 

Back to that mention of localized median household incomes.  In the absence of sufficient NOAH (Naturally Occurring Affordable Housing: see TDP VP Neil Lovitt’s excellent blog from earlier this year) in the region, programs that encourage affordable units in new developments are an important part of the solution moving forward. 

 

There’s a knife edge on which balances the costs of development with what is affordable to those who need non-market housing.  It is highlighted by reaction to a recent announcement of a sizable federal loan on a new apartment building that will be approximately one-quarter designated affordable units.  They’ll be priced in relation to the median income for the area, which has generated a fair bit of blow back (to be fair: the perception of how widespread negative reviews of policy are is almost certain to be skewed, since those who really disagree are far more likely to speak out against it, while those who agree or are neutral have less incentive to chime in on the discussion).  The issue they raise is that the local (Halifax) median income referenced is close to $90,000 (as in, one large Costco order close to), so the affordable units could be priced as high as $2,238, though most are actually going to be less than that since the agreement includes provision for a further discount to the 30%‑of‑median‑income standard.  The underlying questions in the flak are really: is median income a reasonable metric on which to base affordability measures?  And what median should be used?  And is there any relationship between the maximum “affordable unit” price tag and unit size?  One-bedroom versus four at $22-grand is a pretty substantial difference.

 

There’s a geographic driver of housing prices, and it costs more to commute less, generally.  Maclean’s magazine published an analysis in 2014 that showed a minute of driving time could save you thousands in housing costs.  Inspired, we devoted a TDP Trends to the topic; with some variation, in general, the farther you get from the downtown core, the less expensive houses are.


Source: Turner Drake & Partners Ltd. (2015)


This is relevant to a discussion of housing that is affordable, attainable, and available because cars are expensive to own and operate.  Pushing affordable housing to the far reaches of the city, where transit options are limited/nil (and don’t forget that commute times via bus are going to be longer), is short-sighted at best, and counter-productive at worst.  But median incomes are likely higher where housing prices are higher, whether that’s localized within a city, or the city median is used in lieu of the provincial one. 

 

Is there a conclusion?  Not in terms of a solution.  But an acknowledgement of the complexity of the issue, and the fact that a broad stroke approach to the metrics may provide little in the way of assisting those who need support to find and keep suitable housing that fits both the budget and the family structure.  That, and the fact that  “affordable housing” as defined, is only of use if it is also attainable and available. 




Turner Drake refines high-level, surface-scratching analyses like the foregoing, into fine-grained, location specific consulting assignments, including market and non-market housing supply and demand analyses throughout Atlantic Canada, and Housing Needs Assessments from coast to coast.  To see how we can provide solutions to your real estate problems, you can reach Alexandra Baird Allen at (902) 429-1811 or abairdallen@turnerdrake.com. 


Thursday, June 24, 2021 11:42:31 AM (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | Economic Intelligence Unit | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake
# Wednesday, May 5, 2021


After listing a property for sale, you receive an offer from a prospective buyer. Then, before you’re able to present the offer to your seller-client, a second and third offer arrive with all of the buyers and their agents impatiently waiting for answers.


While handling multiple offers requires more diplomacy than handling a single offer, from a business standpoint there is really little room for complaint here. You have an attractive listing, which has a good chance of selling quickly, and your marketing efforts are paying off, which should please the seller.


However, there is plenty of room for problems if you don’t handle the intense demand for your listing with diligence and fairness to all – your seller-client and the prospective purchasers.

 


Verbal Offers Are Not Competing Offers

All offers must be presented in writing. If a seller’s agent is presented with a verbal offer, the seller must be told what was offered and the buyer’s agent must be instructed to put the offer in writing in order to be considered.

 


Disclosure to the Buyer

In Nova Scotia, the decision to disclose the existence of competing offers to buyers is entirely up to the seller.

Should the seller receive competing offers, the seller’s agent should:

  • inform the seller immediately;
  • recommend the seller review each offer prior to making a decision;
  • disclose the presence of competing offers to the buyers’ agents if the seller agreed to do so, however the content of the offers must remain confidential;
  • attempt to have all offers presented to the seller in the same time frame. The seller can delay the presentation by providing written consent; and
  • advise the seller of their options, such as:
    • accept one offer, reject all others;
    • counter one offer and set others aside pending the result;
    • reject all offers;
    • accept more than one offer with any offers after the first as back-up offers. Any back-up offers must remove the seller’s obligation from the first contract when moving on to the next through a condition included in the counter offer, such as “seller’s acceptance of this back-up offer is subject to the seller ceasing to be obligated in any way by [date] under the previously accepted purchase contract. This condition is for the sole benefit of the seller.”

 

Representing Buyers

The buyer’s agent has a duty to disclose competing offers and any terms that are known to them, but ultimately buyers might not be made aware of competing offer situations; that decision rests with the seller. If the seller does disclose that the buyer is in a competing offer situation, the buyer’s agent should:

  • immediately inform the buyer;
  • advise the buyer of the seller’s options;
  • ask to personally attend the offer presentations; and
  • advise the buyer of their options, such as:
    • increase the offer prior to presentation;
    • leave the offer as it is;
    • withdraw the offer; or
    • reconsider the fixtures, chattels, terms and conditions of the offer prior to presentation and have these changes reflected in writing.

 

Tips for Buyers

Once the buyer is made aware that they are in a competing offer situation, they may want to increase the offer price and/or reconsider a term or condition in effort to compel the seller. Financing and inspections are both examples of conditions that buyers could remove in effort to improve their offer. Doing so however, increases the level of risk for the buyer.

 

Price:

What can the buyer realistically offer on the property? Is the property appropriately valued? Buyers should understand the long-term risks of increasing their offer price and what impact it could have on their financials. Further, buyers should understand that increasing their purchase price above the asking price does not guarantee that their offer will be successful.

 

Property Inspection:

Buyers may be tempted to remove the inspection condition in an effort to present a more appealing offer to the seller, but there could be major risks involved in doing so. Property defects and major repairs are an expensive reality in many older buildings and foregoing the inspection will prevent the buyer from having a clear understanding of the current state of the property. Buyers are recommended to use extreme caution when deciding to remove an inspection clause for this purpose.

 

Financing Pre-approval:

If you don’t know exactly what you can afford, you may be looking out of your price range and wasting your time. You may also be looking below what you would have qualified for and not getting the right investment property for you.

If you start off by getting a pre-approval on the other hand, you can sort by price, identify the right neighbourhoods, and find your desired property much faster.

 

Offer & Acceptance:

There is no contract until all parties agree to its written terms, sign their names to express that agreement and communicate acceptance to the offering party. Until then, you have nothing more than a stack of offers – not a stack of contracts – any one of which could appeal to your seller-client. Do not advise a buyer or a buyer’s agent that the seller has accepted the buyer’s offer until the seller has signed the offer. A seller who orally expressed a willingness to accept an offer has not yet accepted the offer and has no legal obligation to do so. Thus, no contract has been formed.

 

The Back-up Offer:

When one offer is accepted, your client may be willing to negotiate another as a “back-up”. Of course, this would require agreement by the second buyer and would require special language indicating that the back-up contract has no legal standing unless and until the primary contract is terminated.

 

Only One Winner:

Unfortunately, in the case of multiple offers for one property, there will be those that lose. Someone will walk away disappointed for not having been able to buy their ideal property, but if everything is handled in an equitable manner, the seller should NOT be the losing party, but should walk away with a deal that is in their best interest.



James Dunnett is a Consultant in our Brokerage Division and has extensive experience in handling complex leasing and sales transactions. If you need help managing your leasing requirements, or are interested in purchasing or selling a commercial property, James will be happy to assist you through every step of the transaction. Contact him at (902) 429-1811 or jdunnett@turnerdrake.com.

Wednesday, May 5, 2021 12:10:44 PM (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | Brokerage | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake
# Thursday, April 22, 2021

The Covid-19 pandemic has had a tremendous impact on the commercial real estate industry.  Central Business Districts throughout Atlantic Canada (and beyond) have experienced the greatest impact as the market shifts away from traditional brick-and-mortar office space.  Many large employers anchoring multi-story office buildings have transitioned to a remote workforce to satisfy public health guidelines, while also providing their staff with more flexible working arrangements.  Vibrant, bustling downtowns are now a shell of what they once were – your morning pitstop is now closing its doors and is shadowed by dark buildings and empty parking garages, while office towers are being considered for possible sale, renovation, or conversion to multi-residential purposes. 

With a reduction in office occupancy, downtown districts have experienced a significant decrease in traffic.  During December 2020 our in-house regional market survey found that the majority of urban centers throughout the Maritime provinces have experienced increasing vacancy rates.  Halifax was the only market to see a slight decrease in the rate (of 1.39 percentage points). Downtown St. John’s on the other hand recorded the largest vacancy rate at a whopping 37.46%, substantially higher than that of the greater St. John’s area as a whole, and up 10.93 percentage points (PP) from the prior year. Moncton office vacancy rates increased 8.56(PP) from the prior year while Saint John and Fredericton followed with growth rates of 4.07(PP) and 3.83(PP) respectively.   

On a macro level, Statistics Canada report that the number of firms with 10% or more of their workforce working remotely doubled between February and May 2020. This trend may not be over any time soon, as one in five companies reportedly expect 10% or more of their staff to continue working from home post-pandemic. Canada did experience a decrease in remote working after the first wave of COVID-19, however since October 2020 remote working has increased and in December was sitting at 28.6% according to Statistics Canada.

Although the pandemic has brought a lot of doom and gloom, it has also created new opportunities and broadened perspectives. Our Lasercad® team have had the pleasure of helping our clients pivot and re-focus; assisting them in mapping out socially distanced office layouts in order to “future-proof” spaces, while also promoting continued in-person workflow amongst staff. We have provided landlords and building owners with accurate measurements and floor layouts to aid in managing and renovating their properties.

The long-term effects of the pandemic on local commercial real estate remain to be seen, however preparing yourself and your property for various outcomes is a great start. Having an electronic CAD inventory of your space allows the flexibility to run a variety of scenarios and can be a helpful tool while working with tenants, contractors and buyers. If you would like to hear more about our recent projects please don’t hesitate to reach out. Our Lasercad® team would be happy to discuss your concerns and requirements as you try to navigate these uncertain times. 

Mark Smith is a consultant in our Valuation Division and is heavily involved in many of our Lasercad® projects. For more information about our range of Lasercad® services, feel free to contact Mark at (902) 429-1811 or msmith2@turnerdrake.com.

Thursday, April 22, 2021 11:05:21 AM (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | Lasercad | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake
# Thursday, April 1, 2021

Expropriation is the forceable taking of property by an acquiring authority for a public project, such as a road, transmission line, pipeline etc. In the vast majority of cases, only a small portion of a property is taken, and sometimes only a partial interest is required.  Pipelines, for example, only require a sub-surface easement interest, allowing the owner to continue using the surface for anything that doesn’t interfere with the operation and maintenance of the pipeline itself.  Transmission lines are happy to share, requiring only an easement interest for the towers and the overhead lines.  Regardless of whether the interest is full (fee simple) or partial (easement), the acquiring authority pays compensation for the value of the interest taken, the boundaries of which are defined by a survey plan and a legal description, properly recorded at the Land Registry.

In some instances, however, an acquiring authority may exert control beyond the boundaries of what it has legally acquired.  In Nova Scotia, new highways are usually designated as controlled access highways under the Public Highways Act, imposing potential new restrictions on building setbacks.  A permit from the Minister is required for the construction of buildings and structures within 60 metres (197 ft.) of the limit of a designated controlled access highway or within 100 metres (328 ft.) of its centre line.  That is probably far more restrictive than the local By-Laws require, potentially sterilizing a fair chunk of land alongside the new highway unless Ministerial approval is granted.  In rural areas it probably doesn’t matter, but in urban areas it might, especially if there is a potential for development.  The Public Highways Act does allow compensation for so-called injurious affection resulting from a controlled access highway designation … but not for new highways.  So, any compensation in respect of new setbacks alongside new highways must presumably be claimed via the Expropriation Act, even though the restrictions are authorised under a different act.

Pipeline easements come with similar strings attached.  Oil and gas pipelines are regulated under the National Energy Board Act (which strictly speaking grants orders for rights of entry rather than expropriations).  The Act imposes an automatic 30 metre (98 ft.) Prescribed Area – or safety zone – on either side of the pipeline, within which so-called ground disturbances and construction activities are restricted. Some activities are totally prohibited and others require the pipeline company’s permission.  So, whilst the pipeline company only acquires the easement within which its pipeline sits, it casts a 30 metre shadow on either side.  Compensation for restrictions within the 30 metre safety zone is often challenged but has been awarded and upheld by the Federal Court in valid circumstances.  Again, in rural areas it might have little impact, but in urban areas it most likely will, especially if it interferes with development plans.


Lee Weatherby is the Vice President of our Counselling Division. If you'd like more information about our counselling services, including advice on expropriation matters, feel free to contact Lee at (902) 429-1811 or lweatherby@turnerdrake.com

Thursday, April 1, 2021 10:37:40 AM (Atlantic Standard Time, UTC-04:00)  #    -
Atlantic Canada | Counselling | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake
# Wednesday, March 3, 2021


From the tip of the Tuskets to the briny Bras d’Or, Nova Scotia hosts a buffet of islands along the coast and in our many inland lakes.  They provide visitors with a glimpse of wild beauty and an air of mystery; offering fantasies of self-isolation in a rustic cabin, or (in rarer cases) a self-sustaining luxury compound in the sea.

There is no denying the unique appeal of an island property: every trip is a journey and the setting is ripe for peaceful contemplation and an escape (geographically) from it all.  But not all islands are created equal, and one person’s paradise is another’s bare rock suited more to the gloomy vibes of a horror film à la The Lighthouse (filmed, incidentally, in the almost-an-island Cape Forchu near Yarmouth, NS).

On occasion we are tasked with placing a monetary value on islands in Atlantic Canada, and though it feels crude to reduce these special places to dollar signs, our valuation crew is beholden to the oath of Market Values and Highest and Best Use.  So, what factors into such an assignment? Before I jump into my canoe or take to the sky for the inspection, here are some considerations rolling around my head:

Location

The classic axiom of real estate applies most strikingly to island properties.  An island located many kilometres out to sea will attract a much smaller pool of potential purchasers than an island within a leisurely boat ride of the mainland.  For every additional hour spent travelling to an island, the cost of fuel, and risk of weather increases the difficulty in visitation and greatly increases the cost to move construction materials.  For this reason, inland islands (on mainland lakes, or the Bras d’Or Lake) are generally more accessible and desirable than their oceanic counterparts. 

Amenities

What better accessory for your yacht than a private island? Islands located near marina facilities, yacht clubs, and other services are immediately attractive to folks who enjoy Nova Scotia’s sailing culture.  This trend is best revealed in the market for islands between Lunenburg and Chester on Nova Scotia’s South Shore.  Here you will find the most expensive islands in the province, adorned with multi-million-dollar estates including the recently purchased “Kaulbach Island”.  With a price tag of $4,000,000 this property includes multiple high-end buildings, deep anchorage, and a farm to keep you stockpiled in the event of any cataclysm (yacht not included).

Waterfrontage

Sandy beach or granite cliff?  Both offer beauty but it is the former which is sought most by island purchasers.   Valuing an island property often involves two key unitised elements: the “Basic Land Value” captures the uplands which tend to vary in quality based on vegetative cover, topography, etc. and are expressed as a value per acre; and the “Waterfront Benefit” which varies based on coastline material (sand, stone, boulders, etc.), accessibility, topography, and aesthetic appeal; and is expressed as a dollar amount per linear foot of water frontage.  Breaking down value into both the Basic Land Value and the Waterfront Benefit is one of the ways we can leverage past sales of islands (which are inherently unique) to provide an estimate for islands yet to be sold.

Ecological Interest

As with many assignments involving wild places, the cold calculus of valuation has a redeeming quality when it can be leveraged to protect the land for future generations.  In Nova Scotia, organisations such as the Nova Scotia Nature Trust, Nature Conservancy of Canada, Ducks Unlimited, and the Provincial government have created a market for islands which explicitly recognises their ecological significance.  Islands which might otherwise be used to dry fishing gear can be justified with a Highest and Best Use “for conservation use” when there is demonstrable demand for islands hosting birds, mammals, and plant life unique to these coastal oases. 

It’s a small step, but by establishing conservation as a legitimate Highest and Best Use (backed by market data) we are opening a door to recognising the intangible values and relationships we have with land.  It is this humble appraiser’s hope that one day the valuation process will broaden even further, allowing for the legitimate weighing of non-market values and against the rigid confines of what is merely “financially feasible” or “legally permissible”.  Perhaps we can one day pit the spiritual value of land against its extractive value.

James Stephens is a consultant in our Valuation Division and is heavily involved in the valuation of lands for the provincial governments, private land owners, and land trusts including the Nova Scotia Nature Trust, Nature Conservancy of Canada, Annapolis Valley Farmland Trust, and the Island Nature Trust. For more information about our range of Valuation® services, valuations for land donations, feel free to contact James at (902) 429-1811 or jstephens@turnerdrake.com

Wednesday, March 3, 2021 10:32:49 AM (Atlantic Standard Time, UTC-04:00)  #    -
Atlantic Canada | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake  | Valuation
# Tuesday, February 23, 2021

Well, last year certainly was one for the history books. Of all the issues amplified by the pandemic in 2020, housing and its affordability has been among the most universal, and the most important. Tight vacancy and escalating rents, construction cost and process challenges, plummeting interest rates and a dearth of listings, CERB and eviction bans, renovictions and rent control, escalating homelessness and guerilla shelters. The jury is still far out on 2021, of course, but the challenges and conversations around housing show no signs of a speedy resolution.

I’ve been trying and failing for some time to write about housing; what’s been happening in our region, and how those trends have been affected by the ongoing pandemic. Part of my challenge has been simply keeping up to date – these days you can’t go more than a week or so without getting hit with some new and relevant information. Another part of my challenge has been the complexity of the issue. Housing is the bottom line that many personal, economic, and policy issues fall down to; it is difficult to understand one major facet of the issue without an appreciation for the others.

Originally my goal for this piece was to do a punchy listicle with a couple interesting data points. In my naivete, I established a working title of “3 Charts to Explain Housing”. However, I’ve found it impossible to weave together anything worth saying using so few threads. So, with apologies to our ever-patient marketing staff and any of you who were wishing for a light read, I give you: Seven Facets of Our Housing Situation Explained (with eight charts).  

POPULATION GROWTH

While the COVID-exodus to Atlantic Canada from elsewhere in the country has received much media attention over the past few months, it is really a sideshow. Despite the interesting anecdotes about sight-unseen sales in (formerly) sleepy markets, or Realtors® conducting showings via Zoom, overall interprovincial migration is not significantly different in 2020. We have longer term and more fundamental growth drivers affecting our region. Many of these have been a significant source of housing demand over recent years, but in some cases, have waned under pandemic conditions:

Oil Patch Kaput

During the tar sands heyday from late 2004 to late 2015 out-migration from Nova Scotia to Alberta averaged about 1,250 people every quarter. That’s one Antigonish per year. For eleven years straight. These days, with oil trading at half its price, the exodus has collapsed by a similar proportion while in-migration from Alberta has remained comparatively steady. The result: in the 62 quarters from Q1 2000 to Q2 2015, net migration from Alberta to Nova Scotia was positive only 3 times. In the 21 quarters since (no data yet for Q4 2020), it’s only been negative once. A penny saved is a penny earned.

Real Estate Refugees

Yes, there is certainly a notable inflow of population and home-buying capital from other Canadian regions that have experienced stronger price appreciation, and worse pandemic performance. The work-from-home narrative dominates the conversation on this, but it is not the whole story. This is a combined house price arbitrage play with the beginnings of a structural trend, principally from Ontario and British Columbia, driven by population aging as households execute longer-standing plans to retire Down East. It has been going on for several years, with 2017 being a breakout after Toronto and Vancouver posted eyewatering year-over-year house price increases. The after-spring bump in 2020 from ON and BC is only about 10% higher than the same period last year.

Increasing Immigration

The immigration story was really kicked off in 2016 with the much-publicized landings of Syrian Refugees however other streams for entry really took things from there. Nova Scotia went from welcoming about 610 international immigrants per year (2005-2015 average), to more than 1,390 per year since. Numbers have waned in 2020, obviously, but the Federal Government was early to state that immigration, and increased immigration at that, is a core element of its post-pandemic economic recovery plans. We therefore expect this trend to pick right back up as vaccination is rolled out globally.

Student Bodies

Efforts to recruit international students (and their sizable tuition fees) have been front and centre for post-secondary institutions for some time. However, the Trump presidency apparently supercharged things as a significant number of prospective students have diverted to other western countries who didn’t follow the same nationalistic and isolationist path. This is such an interesting twist of fate that it deserved its own chart:

Again, the pandemic has had an understandable dampening effect as travel has become restricted and classes moved online, but this is a temporary blip. With sanity restored to the White House, however, it will be interesting to see how quickly, and to what extent, this trend recovers in Canada.  

Added together, we get a picture of population growth which has been driving strong housing demand for a period well before a coronavirus turned the world upside down.


In fact, the pandemic has decelerated the net impact of these demand drivers, evidenced in CMHC’s 2020 Rental Market Survey which found apartment vacancy in Halifax rising significantly from its previous record low… though it remains too low.

 

SUPPLY RESPONSE

All of this new population needs shelter, demand requires supply. Adequate housing supply, in and of itself, does not solve all housing challenges. However, making sure we are expanding our housing inventory in pace with our population growth is a fundamental piece of the puzzle solving some issues, and making many others a lot easier to deal with. Supply and demand interact like tectonic forces in housing markets, any of the other actions we might take are done in their context. Let’s take a look at the Halifax area, which is generally where most of the province’s population growth is landing. How have we been doing? 

(Note: Household growth is derived by applying occupancy rates to population growth estimates from Statscan. Occupancy rates are interpolated/extrapolated from census figures, and are approximately 2.3 people/household for recent years. This approach likely underestimates the number of households added as the demographics of new arrivers lean towards smaller households than the general population.)

Not good.

Typically, it would be excessive to examine this data over a 30-year period, but here it is necessary to show just how unprecedented the current growth disparity between people and shelter is in Halifax. For the entire time series Halifax only rarely approached – and never exceeded – an even level of housing construction for each household added to the city. Each time that it did, the industry responded with stronger building rates. This is important as demand is also increasing from shrinking household sizes within the existing population in addition to this incremental demand from growth. In 2016 Halifax blew past that previous ceiling, adding more households than houses for the first time in at least three decades, and more importantly, sustained these historic levels of under-building for 5 years and counting! The first rule of getting out of a hole is to stop digging.

 

CREDIT

As debt becomes cheaper to carry and more easily accessed, it inflates the value of assets. Falling yields on risk-free vehicles like government bonds drive investors to seek higher returns, and the same low rates that motivate this behavior mean the system is flushed with credit on which to acquire these assets. For decades, interest rates have been in secular decline, and this was accelerated significantly in 2009 when the Great Financial Crisis ushered in the era of emergency near-zero rates which have seemingly evolved into permanently low rates. Or perhaps the emergency is now permanent, it is sometimes hard to say.

Real estate is an illiquid asset, which means transactions in the market are heavily influenced by the marginal buyer; those who are willing and able to outbid all others for the property, and thereby set the bar for valuation. We observe the impacts of this monetary policy context clearly in the commercial real estate sector as cap rates have compressed, amplifying the market value of properties independent of changes in the income they generate. A similar effect is felt in the residential sector, where increasing mortgage credit acts as an accelerant in any market with a whiff of demand, launching prices higher, even as the incomes that support them lag.

The chart below shows the results of a simple model that applies typical mortgage parameters to annual house price, income, and interest rate data to plot the changing relationships between income, purchase price, and mortgage carrying cost. In the data since 2000, incomes have increased by about 70%, new house prices by 200%, and average interest rates have dropped by 50%. 


The resulting price to income ratio skyrockets by nearly 190 percentage points as a result. However, the countervailing force of loosening credit means the actual carrying cost of that price, which is what households actually pay (because we don’t buy homes, we buy mortgages), is only up 5 percentage points over the same period and generally fluctuates up and down within a tight 15 point range.

This is the critical mistake made by those who talk about housing prices as being “detached” from incomes. House prices are attached to incomes, firmly, by the sinews of credit. As it has eased, that connection has lengthened, but the relationship is just as firm. In fact, it is more accurate to describe this relationship in the inverse; it is largely because interest rates have fallen that prices have gone up! If interest rates were to reverse their long-standing trend, we would see how quickly this detachment narrative disappears.  

 

DISAPPEARING NOAH

Naturally Occurring Affordable Housing, in housing policy parlance, is a somewhat new and misleading term that basically refers to unsubsidized housing that exists within the private market at a relatively affordable price. Think classic shoebox 3-story walkup apartment buildings (though it can come in any form). Without non-market interventions such as capital grants or operating subsidies, this housing is affordable mostly because it is less desirable relative to other options in the market, and this is principally a function of when it was built.  Buildings go down in relative value over time, or depreciate in valuation parlance, because they go out of style, they get rundown and tired, they lack design features and amenities that more recent buildings have, they are more likely to suffer pest nuisances… if competition is the mechanism by which markets work, these buildings are losing the competition.

This part of the housing inventory is critical for those employed in entry-level positions or lower-income industries. However, as NOAH is still firmly within the housing market, it is subject to market forces. In times of growing demand, the lower end of the market is generally where renovations and recapitalizations become feasible first. In and of itself, this is a good thing. We want our building stock to receive reinvestment and cycle back up through the market instead of declining into uninhabitability. However, that idyllic impression of market function is running into some cold realities.

The first is a quirk of our development history. The chart below shows the distribution of apartment inventory in Nova Scotia by building age (we have removed the comparatively minor contribution of buildings built pre-1950 for the sake of our x-axis). With regular maintenance and the occasional replacement of major building systems like roofs and HVAC, that typical midcentury shoebox building may be expected to last 50 or so years before a complete revamp is required to extend its lifespan.


At any given time there is a continuous stream of building stock aging down and being recycled back up through the market, but a disproportionately large section of the apartment inventory is now coming due. Units constructed during the boom of the 70s are turning over, and there are far fewer units next in queue replace them at the bottom. Particularly cruel examples notwithstanding, this dynamic is largely responsible for the increasing prevalence of “renoviction” stories that we’ve seen in the media over the past couple years. Our total supply of NOAH is dwindling.

 

INCOME INEQUALITY

The second reality affecting the ability of NOAH to adequately serve lower income households is the fact that those households are falling further behind. The majority of households in rental housing are in the bottom 40% of the income distribution. The chart below shows how incomes (adjusted for inflation) have changed over time.


This of course does not reflect the added issue of declining income mobility, highlighted in recent research from Statistics Canada. Still, even this incomplete picture is concerning: over four decades real family incomes in this lower 40% have, at best, increased by less than $4,000 or about 0.26% per year. Unfortunately, the operating expenses of the buildings they occupy (property taxes, utilities, construction materials, insurance premiums, contractor and trade labour, etc.) are growing at a much higher rate. Compounded over decades this means rent in stable, older buildings – even if run on a break-even financial model – will increasingly outpace the ability of many renter households to afford them.

This is mostly a renter’s issue, but it affects those in owner-occupied housing as well. Though interest rates have maintained affordability in the carrying costs of mortgages, other costs associated with home ownership, such as down payments, have become increasing barriers to entry. Ultimately, the spectrum of the population that the housing market serves is getting narrower, and a big part of that issue (especially the “crisis” part) is due to stagnant household finances and stagnant social supports as inequality in our society grows.

                                

SUPPLY OF NON-MARKET HOUSING

The third reality is the availability of housing options for those who are finding themselves outside of the limits of the market. Canada as a whole has not engaged much in the production of social housing, especially since the late 80s and early 90s as the federal government unwound their previous decades of involvement. Yet, even by these low standards Nova Scotia has the dubious distinction of being the second worst province in terms of adding to its stock of non-market housing since 1990:  


A brief pause here to look over the rim of my glasses at New Brunswick which has apparently built all of thirteen (!) units in the last three decades. This data is from CMHC’s inaugural Social and Affordable Housing Survey, so hopefully in future updates more units will be identified.  

Barely more than 7% of Nova Scotia’s non-market inventory has been built since the 90s, and I would wager the proportion for more recent decades is closer 0%. Over this same timeframe, all housing completions tracked by CMHC totaled nearly 98,000 units, meaning only 0.93% (910 units) of what we’ve built has gone towards increasing our non-market inventory.

Now, this is at least somewhat understandable. Up until recently Nova Scotia has been able to coast along without too much trouble thanks to stagnant population growth and the ability of NOAH to take considerable pressure off the waitlists for non-market options. Well, those days are over. If there was one thing the Province could do without having to wait for their Affordable Housing Commission to tell them, actually increasing the inventory of social housing would be it!

 

IMPORTED DEMAND

Finally, we get to the Boogeymen. For those who subscribe to the “detachment” perspective described earlier, the thought process is straight forward enough; if local fundamentals are not viewed as an explanation for housing costs, logic dictates that something else must be afoot. There is a fairly large goodie bag of these something-elses, but they are always fundamentally about pathways for external demand to enter and distort local market conditions: money laundering crime lords, capital from unstable regions flying to the local real estate of safer countries, foreign and local speculators turning houses into tax-advantaged capital gains, Wall St. and Bay St. financializing local housing in order to transfer wealth from residents to shareholders, wealthy tourists displacing locals via AirBNB conversions.

Like any good story, there is always an element of truth at the core. And like any good Boogeyman, a lack of information prevents us from ruling them out entirely. The issue with these explanations is not whether they are completely fabricated; most are true to some degree and documented to have occurred somewhere at some time. The issue really is whether they are happening locally, and if so, are they to a degree that would have a material effect. In our view, there are enough conventional and locally-based explanations for our housing conditions in this region. Occam’s Razor and all that…

Having said that, we fully agree with at least one of the proposed mechanisms by which outside demand has been imported into our local markets: the proliferation of short-term rentals. The number of housing units in our communities now dedicated exclusively to providing short-term accommodations on a commercial basis has exploded since the global advent of AirBNB and its imitators just a few years ago. While there are some interesting and ultimately beneficial facets to this trend, what demands the most attention currently is the resulting reduction in housing supply available for traditional forms of tenancy. 

In response, we have invested in access to world-leading data services covering this new sector of the real estate market. Currently we have market data coverage for all of Nova Scotia at the individual listing level, updated monthly. We have a few interesting extra-curriculars in the works for this resource, but alas, these are busy days and client needs come first (seems like a certain provincial government should be beating down our door on this one, but I digress). In the meantime, here is why Short-Term Rentals have our attention:   


This chart shows the growth of housing units (CMHC tracked housing completions) against growth in what we estimate to be commercially operated STR units (i.e. entire-home AirBNB listings that spend the majority of the year available on the platform rather than housing a long term resident). Starting with only a couple hundred in 2016, commercial STRs have grown rapidly, peaking at nearly 1,700 units in 2019. This negates about 18% of the 9,300 housing units completed in the municipality over the same timeframe. In a time when we need all the supply we can get, this is an unnecessary headwind. At the same time, these overall numbers are not earth-shattering; it’s hard to imagine that conditions would be that much different if the industry had been able to pump out 11,000 units instead of 9,300 over those three years.  

However, those are the overall numbers. The short-term rental market is not dispersed evenly throughout the housing market, it is having vastly different impacts within Halifax. Some locations have no loss of housing availability, others are under significant pressure. To illustrate, though STR units peaked at 18% of completions for HRM overall, if we narrow our analysis to just the Peninsula, that figure jumps to about 30%. You can imagine how that may escalate further looking at some of the high-demand neighbourhoods.

More on that in the future.



Whew, you made it to the end, but when it comes to housing issues there are no shortcuts! This is an immensely important challenge and we’re trying to do our part. We are proud to support the work of Nova Scotia’s Affordable Housing Commission through our involvement in their Data and Financial Modelling Working Group. Of course, Turner Drake is also engaged in numerous consulting assignments, including non-market housing feasibility studies, and Housing Needs Assessments from coast to coast. To see how your community can benefit from the unique expertise of our Planning and Economic Intelligence team, call Vice President Neil Lovitt at (902) 429-1811 or nlovitt@turnerdrake.com.

Tuesday, February 23, 2021 9:18:15 AM (Atlantic Standard Time, UTC-04:00)  #    -
Atlantic Canada | New Brunswick | Newfoundland & Labrador | Nova Scotia | Planning | Prince Edward Island | Turner Drake
# Tuesday, December 22, 2020

Among the fun things to look forward to at this time of year is PNC’s annual (37 years now!) Christmas Price Index, in which they calculate the prices of the twelve gifts from the classic song, “The Twelve Days of Christmas”.  The highest increase year-over-year was for the two turtledoves, up 50% to $450, which contrast to a few of the other avian gifts: swans, calling birds, and a partridge will cost you the same this year as last…as will minimum wage milk maids.  This year’s index accounts for cancellations of many live performances: the unavailability of dancing ladies, leaping lords, pipers, and drummers means that the total cost of these gifts is down over last year.  How far down, though, is a matter of measurement.  If you were to buy just one of each of the gifts – one goose, one ring, one French hen, etc. – you’d pay 58.5% less than last year, for a grand total of $16,168.14 (USD).  But you can also measure by the full cost of all the gifts –   both the turtle doves, all the geese, none of the performers – to arrive at grand total for 2020 of $105,561.80, down just 38% since 2019.  Or, and I’m assuming this is based on the one-of-each option, PNC also provides a “core” index, which excludes the Swans-a-Swimming, the price of which is apparently the most volatile.  The core index for 2020 costs $3,043.14, down 88.2% from 2019. 

So, the same index has three different year-over-year price changes.  That provides a perfect segue into a discussion of the critical thought, and careful consideration required before relying on Price Indices for decision making, planning, and policy purposes…there are many available from which to choose, including the overall, oft quoted, Consumer Price Index (CPI).  This is not to say that price indices are not a valuable tool – just that care needs to be exercised in choosing and using them.

Twice a year, we undertake a comprehensive market survey of rental office and warehouse space; the summary results include average net rental rates, realty taxes and operating expenses, and gross rental rates.  As part of our analysis, we look at the relationship between the All-Items CPI and the total for realty taxes and operating costs (RTCAM), over a five-year period.  The CPI is a measure of the cost of a certain “basket of goods”, and as such generally measures the rate of inflation – which is expected to be reflected in the costs to operate a building.  The fact that the cost to operate a building includes a different basket of goods than that required to run a household – more cleaning and heating, fewer sneakers, school supplies, and food items – makes it unsurprising that, while these two measures usually move generally in concert, there can be significant variation.  This year, where costs have shifted up and down across various sectors, particularly highlights the challenge of relying on the CPI as a surrogate for other baskets of good: the five-year ratio between CPI and RTCAM, describing how the RTCAM moved for each 1 percentage point change in the CPI, varied from a 1.14 percentage point decrease in office RTCAM in Saint John NB, to a 1.01 percentage point increase in Fredericton, with Moncton, St. John’s NL, and Halifax falling at varying points along that range.  December’s survey includes both office and warehouse space in Halifax, and there is a differential between the ratio of CPI to RTCAM for the two sectors, with office RTCAM coming in at 0.59 to 1 percentage point change in CPI, and warehouses coming in at a ratio of 1.2 to 1. 

PNC says about their index:

The PNC Christmas Price Index® is an annual tradition which shows the current cost for one set of each of the gifts given in the song "The Twelve Days of Christmas."

It is similar to the U.S. Consumer Price Index, which measures the changing prices of goods and services like housing, food, clothing, transportation and more that reflect the spending habits of the average American.

The goods and services in the PNC Christmas Price Index® are far more whimsical, of course. And most years, the price changes closely mirror those in the U.S. Consumer Price Index. This year, the approach to PNC’s CPI takes into account the sociopolitical environment brought on by the pandemic by using the Index to provide an analysis of current market conditions, while including the impacts of COVID-19 as highlighted by the data. 

It’s a fun way to measure consumer spending and trends in the economy. So, even if Pipers Piping or Geese-a-Laying didn’t make your gift list this year, you can still learn a lot by checking out why their prices have increased or decreased over the years.

It’s definitely worth checking out.  And if you’re interested, we publish the summary results of our market surveys on our website and through email distribution.  Watch for them in the New Year – or contact us to subscribe.  Wishing you and yours all the best for the holidays, from all of us at Turner Drake & Partners Ltd.  

Alex Baird Allen is the Manager of Turner Drake's Economic Intelligence Unit. If you'd like more information on market research or our semi-annual Market Survey, you can reach Alex at 902-429-1811 Ext.323 (HRM), 1-800-567-3033 (toll free), or email ABairdAllen@turnerdrake.com 

Tuesday, December 22, 2020 11:30:32 AM (Atlantic Standard Time, UTC-04:00)  #    -
Atlantic Canada | Economic Intelligence Unit | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake
# Thursday, November 5, 2020

Photo Credit: istockphoto

The Asking Price is a critical element when listing a commercial property. If it is too low you may under sell your property. If it is too high it will scare away prospective purchasers and the listing will go stale: it may then be necessary to withdraw the property from the market and re-introduce it at a later date, or alternatively reduce the price substantially to reignite interest. But while property sells at Market Value, owners often measure its worth in terms of Intrinsic Value. This can give rise to a difficult conversation between real estate broker and property owner.

 

Market Value is generally defined as "the most probable price which a property should bring in a competitive and open market as of the specified date under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus”. More specifically, market value is based upon a property’s Highest and Best Use. The Highest and Best Use of a property is the probable and legal use of land, or an improved property, that is physically possible (what can be physically built on the site?), legally permissible (what uses are permitted under the current zoning?), financially feasible (will the purchaser achieve an acceptable return within a reasonable investment horizon?) and maximally productive (what use generates the highest return?). Simply put Market Value is the highest price attainable assuming the property is expertly marketed to the widest pool of prospective, knowledgeable purchasers.

 

Intrinsic value is the owner’s perception of the inherent value of their property to them. This value can be based on the actual amount of money they have invested in the asset, any sweat equity by the owner, emotional attachment, or just their perception of current market conditions. Sometimes the property owner may be constrained by the debt burdening the property, or the net cash they need to realise on sale after paying capital gains tax and transaction costs.

 

How do you bridge the divide between Market and Intrinsic Values? It starts with the acceptance by both parties, broker and property owner, that they have a common goal… to sell the property on the most advantageous terms to the owner. Before we undertake to market a property for sale, we sit down with the owner (vendor) to go over the marketing plan for their property, the pricing strategy, and the listing agreement, to ensure the vendor understands the selling process and each party’s obligations under the contractual arrangement. Since an appropriate asking price is critical, we research the property, its zoning and planning considerations, and sale prices of comparable properties, to develop an asking price based on the Market Value. Because Intrinsic Value frequently differs from Market Value the vendor may have price expectations that cannot be realised on sale and it may be better to withhold the property from the market until prices increase…. realising of course that there is always the risk that prices may fall too, as is the case currently in some market sectors. However if the owner is serious about selling, it is imperative that the asking price be reflective of Market Value plus a negotiating buffer (every purchaser likes to feel like they have negotiated a good deal for themselves). Otherwise, the overpriced property will sit on the market and become stigmatised: potential purchasers will wonder why it has been on the market for longer than is typical, if there is something wrong with the property, or will want to try to use the long marketing exposure as negotiating leverage. On the other hand if a property is reasonably priced and is properly exposed to the market, a vendor will have much better chance of consummating a sale at a price, and within a time frame, that optimises their sales transaction.

 

Reduce Stress: Live Longer


Selling your property, even commercial real estate, is rarely anybody’s idea of fun… so we have compiled a list of the difficult questions you meant to ask your real estate broker but were too embarrassed, simply forgot… or did not know you should ask. Questions such as “I don’t want my staff to know I am selling: what can I do to keep it quiet?” or “I am already talking to a prospective purchaser: do I still have to pay you a commission if I sell to them?” and even “Why do I need a real estate broker anyway?”. Better still we have provided our answers in the way we do best… frank, forthright and brutally honest! Call or email me, I will happily send them to you.



As Senior Manager of our Brokerage Division, Ashley Urquhart assists both landlords and tenants meet their space requirements, and vendors and purchasers optimise their property portfolios. For more real estate brokerage advice, you can reach her at aurquhart@turnerdrake.com or (902) 429-1811.

Thursday, November 5, 2020 11:25:55 AM (Atlantic Standard Time, UTC-04:00)  #    -
Atlantic Canada | Brokerage | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake
# Monday, October 5, 2020

Residential fires are soaring, causing millions of dollars in damages, and claiming the lives of many. While this headline may sound shocking, this has become a catastrophic reality for many apartment owners across Canada and worldwide. It’s quite clear how the ongoing pandemic has changed our daily lives in a socio-physical sense - most notably the way in which we interact with others, and how we navigate the shopping malls and hallways in our apartment or condo buildings. What many have not considered however, is the increased risk of fire-related emergencies resulting from higher daytime occupancy levels in multi-unit residential buildings.

National Fire Prevention Week runs from October 4th to 10th. This might not be something you typically note in your calendar, however, if you are an apartment owner or manager, you should! If you have yet to equip your building and tenants with clear evacuation plans, or reviewed your latest fire-insurance policy, these items should be top of mind.



Given the ongoing COVID-19 pandemic, and the attempt to abide by physical distancing protocols, employers worldwide have been forced to encourage remote, work-from-home policies.  According to StatsCan, 32.6% of companies reported 10% or more of their workforce were teleworking in the month of May, compared with just 16.6% in February.  Furthermore, 22.5% of companies expect 10% or more of their staff to continue working from home post-pandemic.

It’s a typical noon hour on the fourth floor of your apartment building, and you’re finishing up a conference call while lunch simmers on the stove. The kids are racing around the apartment while the laundry machine chugs through the spin cycle. There’s a knock on the door - another amazon delivery… Sound familiar?! Working from home has allowed significant flexibility in a world of fast-paced multitaskers however; it also raises concerns surrounding at-home fire emergencies.

Building owners, managers and insurance companies are quickly growing concerned as the slightest distraction can have severe (and sometimes fatal) consequences.  A recent article by Greg Meckbach of the Canadian Underwriter noted that the number of fatal at-home fires in Ontario has risen by 65% compared to this time last year. Local sources including the Halifax Fire Investigation Summary also highlight this issue, shedding light on the growing frequency of fires in predominately multi-residential apartment buildings across the Halifax Regional Municipality.

It is crucial that building owners ensure the safety of their residents by establishing a formal fire emergency and evacuation plan.  To the surprise of many, this is also a requirement set forth by most municipalities and within the National Fire Code of Canada (see our March blog post for specific details/requirements).




Sadly, the majority of buildings do not have adequate fire plans or procedures in-place. These protocols are an added level of insurance that are typically overlooked until it’s too late. Now more than ever, apartment owners and managers should be establishing or reviewing existing fire protocols for their buildings. We also suggest reviewing your current fire insurance policy to ensure you are equipped with adequate coverage. On the face of it, these suggestions may seem like an added expense however; they could be invaluable in the event a fire arrives at your doorstep.  

In my dual roles of Manager of Turner Drake’s Lasercad® Division and consultant in our Valuation division, I have experience in both the preparation of Fire Escape floorplans, and the completion of Fire Insurance reports.  I have worked with a number of building owners and managers to implement Fire Safety Plans in apartment buildings throughout Atlantic Canada. If you have any questions regarding our Fire Safety Plans or how to go about reviewing your current Fire Insurance coverage for your property, feel free to contact me at 902-429-1811 or mjones@turnerdrake.com


Monday, October 5, 2020 8:10:22 AM (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | Lasercad | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake
# Thursday, August 27, 2020

It goes without saying that the COVID-19 pandemic has directly and abruptly affected both short-term cash flow and long-term economic prospects for real estate owners in the Atlantic region. Commercial and investment property has been particularly hard-hit, with hospitality and retail property profoundly (and in many cases, irreversibly) impacted. 

Not surprisingly, my colleagues and I field multiple inquires a week respecting the potential for property tax relief.  Unfortunately, we find ourselves delivering the unwelcome news that there’s very little immediate aid available; in some cases, not for years to come. A little background will help to explain why this is so.

Property taxes are the product of a property’s assessed value (a point in time estimate of market value which is calculated as of a legislated date: in assessment parlance, the “base date”), and the applicable tax rate.  In most Atlantic Canadian jurisdictions, assessment and taxation are separate functions.  Assessed values are calculated by assessing authorities (the Property Valuation Services Corporation in NS; Service New Brunswick in NB; the Department of Finance in PEI; the Municipal Assessment Agency and the City of St. John’s in NL); mil rates are set (and taxes collected) by the municipalities.

In providing relief, Atlantic Canada’s assessing authorities and its municipalities are stymied by legislative authority that varies from jurisdiction to jurisdiction.  The ability for the pandemic to be reflected in assessed values (which, in all four provinces, are to market value) depends to large degree on the base date:

On the taxation side, we have prepared a reference guide detailing the myriad of programs available in various Atlantic Canadian cities, towns and municipalities[1]It is available on our websites at https://www.turnerdrake.net and https://www.turnerdrake.com/products/propertytax.asp. The vast majority have been limited to extension of tax deadlines and reductions in interest rates applied to arrears.

There is little that can be done with respect to the tax rate applied to your property[1]; your tax management strategy should therefore focus on your assessed value.  What will be the impact of the pandemic on values?  In my opinion, few property types will escape unscathed, and for many, recovery will be protracted. While I don’t have a crystal ball, we do have a rear view: experience in the aftermath of historic cataclysmic events- e.g. the recessions of the early 1990s and 2007-2009; 911; and SARS, for example- will all provide guidance in establishing the penalties on the value of ICI real estate.

Property taxes can be an enigma under conventional circumstances. COVID-19 has created a property tax quagmire. My colleagues and I would be happy to provide advice on a property-specific basis.



[1] The exception are Nova Scotia’s roofed accommodations, restaurants, and campgrounds.  Under a pre-existing provision in the Assessment Act, any property closed, or anticipating being closed, for four months of the municipal taxation year may apply for a Seasonal Tourist Business Designation.  Eligible properties will see their tax rate reduced by 25%.  Applications must be filed by September 1st.

Giselle Kakamousias is the Vice-President of Turner Drake’s Property Tax Division.  Her experience negotiating and appealing property assessments is extensive: it is a wise property owner who follows her advice.  If you’d like more of it, she can be reached at (902) 429-1811 ext. 333 or gkakamousias@turnerdrake.com.

Thursday, August 27, 2020 9:43:17 AM (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Property Tax | Turner Drake
# Monday, July 20, 2020

Have you ever gazed over a decrepit old building, or vacant parcel of land, thinking to yourself “This would be the perfect place for…”


Taking this vision and transforming it into reality is the premise behind an as-if-complete valuation. This form of valuation provides a current or prospective (future) value opinion of a development prior to it being constructed. In addition to undeveloped properties, real estate owners and developers can also utilise this form of valuation to determine the contributory value of renovations to an existing property.  



Owners and developers typically require this form of valuation as an input for mortgage financing and proceed in one of two ways: The property can be valued as though it were complete as of the effective date of the report or alternatively; it can be valued as at an assumed date of completion. Regardless the path, the values presented rely heavily on the standard described in the report, and the proposed timeframe of the development.


Working together with architects, engineers, lenders, designers and planners is an integral part of orchestrating the materials required for this form of valuation. Building plans and renderings paint the backdrop while finish schedules, cost estimates and operating projections provide focus to the finer economic details required for these projects. 


Financing details are based on the lender’s relationship with the developer together with their experience completing similar developments, financial position, cost of the project and overall loan-to-value ratio. Once the as-if-complete value of the property is determined the bank will typically schedule formal draws for the various milestones of the development. For example; the first milestone may cover the cost of excavation and site work, foundations, framing and roofing. This is where experience, organisation and timing are key to the financial and fiscal success of the project.


Often developers run into issues during initial milestones, where projected budgets are exceeded and the initial draw does not cover the costs allocated to such milestones. This can occur as a result of unforeseen circumstances, an unexperienced contractor or builder, fluctuating material costs etc.  If the developer does not have access to an outside source of funds to complete this work and proceed to the next milestone, lenders will sometimes issue a “swing-line” or short-term, interest-only line of credit to see them through to the completion of the milestone at hand. Progressing through the first and second milestones of a project are often the most difficult as they can be the most capital intensive. Paying close attention to cash flows and budget are paramount to ensuring the financing terms are met and the project is completed as scheduled.


While construction pushes forward and developers achieve various milestones, it is typically the responsibility of the valuation consultant to confirm the work completed falls in-line with the details described in the report. Various meetings and site visits are completed throughout the project, and progress reports filed to the lender as per the scheduled incremental milestones leading up to, and including, the completion of the project.


New developments and renovations are susceptible to a number of different variables that could easily alter a project cost or timeline. Such variables can heighten the risk of a project; therefore, including proper contingencies and mapping out the development in fine detail will aid in minimising risk and provide additional comfort to lenders considering your project. 


The ongoing pandemic has had a tremendous effect on the world and although primarily negative in nature, many clients have taken this additional time to dream big and “put the wheels in motion.” Formerly neglected ideas are re-surfacing and with the help of this form of valuation we are playing a key role in bringing these ideas to fruition. 



Patrick Mitchell is a consultant in our Valuation Division and has extensive experience in the valuation of projects that are in early stages of development, or have yet to break ground. Patrick’s passion for design and architecture has strengthened his relationships with local architects, builders and developers. For more information about our range of Valuation® services, or more details concerning as-if-complete valuations, feel free to contact Patrick at (902) 429-1811 or pmitchell@turnerdrake.com

Monday, July 20, 2020 10:13:25 AM (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake  | Valuation
# Tuesday, June 30, 2020

In truth, very few people get the chance to suffer the trauma of an expropriation.  You have to be in the wrong place at the right time. But if and when your opportunity does come, your best hope is to emerge financially “whole”, albeit a little battle scarred, confident that the lawmakers have your back through their expropriation legislation.

Expropriation legislation has its roots in the Dickensian days of the English railway boom of the 19th century, a time of rapid industrialization that needed legislative “devices” to hurry things along. Reforms followed until eventually the individual was adequately protected against the state. In Canada, legislative reform came along in much more modern times, but by the 1970’s most provinces had a pretty decent code of expropriation compensation in place.  And Nova Scotia was among the best of the best.  Its 1973 Expropriation Act fully embraced the commendable philosophy that because expropriated owners were being deprived of their property against their will, they should not be treated as typical litigants. Instead they were entitled to be satisfied – at the authority’s expense – that they were indeed being treated fairly. The playing field was level: all was good.

Alas, things have changed since then. Numerous subtle and not-so-subtle changes have been introduced over the past 25 years that have tilted the playing field.  And always in the same direction. Perhaps the biggest changes, in the Nova Scotia Expropriation Act at least, have been with regard to the expropriating authority’s legal obligation to reimburse a claimant’s fees. The original safety net was contained, in plain and simple language, in section 35 of the original Nova Scotia Expropriation Act.  It entitled an expropriated land owner to be reimbursed for “the cost of one appraisal and the legal and other costs reasonably incurred…in asserting a claim for compensation”. Checks and balances protected the public purse from frivolous abuse, but the basic intent was that, win, lose or draw, an owner – rich or poor - was entitled to be heard at the authority’s expense. 

The first change came in 1996. Section 35 was abruptly repealed and in its place stood a re-enacted section 52. Things became considerably more dicey for the property owner with respect to the reimbursement of costs, which were now only assured if the owner proceeded to a hearing and won outright.  The owner was now in much the same position, for cost purposes, as a typical litigant who chooses to engage in combat.  Of course, there is nothing preventing an amicable settlement without resorting to a hearing – and the vast majority of expropriations are settled that way – but the safety net of section 35 was removed.

2019 saw more changes when the Nova Scotia government introduced a Tariff of Costs to control the amount of appraisal, legal and other experts’ costs that an expropriating authority must legally reimburse. Henceforth the amounts that combative property owners can recover are prescribed by law.  With respect to appraisal fees, the allowable amounts depend on the complexity of the case (measured against a rather loosely defined benchmark called “ordinary difficulty”).  In some cases the Tariff will be sufficient. In other cases it will fall short.  The same with the reimbursement of legal fees.  Claimants may very well have to reach into their own pockets to pursue their case from now on, as would a typical litigant. If you think that sounds a tad unfair, you are right.  After all, no one chooses to be expropriated. And from my experience it is always more time consuming, and therefore more costly, to represent a claimant than it is to represent an expropriating authority. For property owners, this is a once-in-a-lifetime event.  The rules have to be explained; facts sorted from fiction; expectations managed. Expropriating authorities, on the other hand, can draw on their in-house resources and often have a wealth of experience.  The conversations are different.

And it’s not just the issue of cost reimbursement that has been tilted. Another amendment in 1996 denied compensation for loss of access along provincial highways when alternative access is being provided by new service or access roads. An odd, and as far as we know unique, twist to the Nova Scotia compensation code. More recently, a 2019 amendment introduced a new definition of Disturbance to the Nova Scotia Expropriation Act, a particular head of claim that arises when a claimant has to relocate.  The old words had withstood the test of time, undefined but “undisturbed” for a generation. In Nova Scotia it is now very narrowly – and again, as far as we know, uniquely - defined and will inevitably defeat claims that have previously been upheld.  Indeed that’s the whole point.

Changes to the Expropriation Act in Nova Scotia have usually been introduced as knee jerk reactions following adverse decisions by the courts, introduced as helpful “clarifications” to help them get it right next time. Challenging an expropriation and pursuing a claim through the courts has never been for the faint-hearted.  But these days you might need a war chest with no guarantee that you will emerge financially “whole”. 

Lee Weatherby is the Vice President of our Counselling Division. If you'd like more information about our counselling services, feel free to contact Lee at (902) 429-1811 or lweatherby@turnerdrake.com

Tuesday, June 30, 2020 10:05:02 AM (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | Counselling | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake
# Thursday, May 28, 2020

COVID-19, despite months of rumblings that it might be on its way, arrived rather abruptly on our doorstep.  Collectively, we shifted from theoretical preparations “in case” and “if” the virus impacted us directly, to many people working from home, a transition that happened within days in some cases.  Ready or not, here it came. 

Now, just (“just”!) a couple of months later, the next transition is upon us, as the economy reopens and we figure out, industry by industry and company by company, what the new normal will look like.  It’s a question on the minds of many, and one my department has spent a fair bit of energy contemplating from our makeshift at-home workstations (check out this CBC article for a peek at mine…kids and various home schooling accoutrements banished for the deception of professional appearances).  The short answer is that it is too soon to tell, though there are rumours and rumblings that work-from-home will continue for some people and/or companies (demand for that may come from either end of the equation).

The longer answer is that major recessions usually result in a sea change in how office space is utilised.  After the 1990 recession, which coincided to a certain degree with the advent of cell phones and the internet, there was a rise in “telecommuting”, some people working from home, and “hot desking” where different people used the same desk at different times of the day.  Cubicles rose in prominence over individual offices (as evidenced by every 90s movie that takes place in an office).  Post-2008 recession, the movement was to open concept offices, with bullpen style areas where everyone has a laptop and a cell phone and shares common space and/or works from home part of the time.  Each of these shifts, from individual offices to cubicles to bullpens, equates to fewer square feet of office space per employee…which in turn equates to lower costs for companies, for whom office space is often the single largest expense after HR. 

The logical next step in the continuum is an increase in employees working from home, with an overall reduction in the amount of office space leased.  This could be driven by employees who find they like shedding their commute and are productive at home (and expect to be more so when schools and daycares reopen).  It could also be mandated by employers who find that cutting workplace expenses - from rents to coffee supplies - can come without significant detriment to their business model. 

There are some companies for whom this is a viable option, but for others, it is not practical.  Will confidential meetings between lawyers and clients take place in lawyers’ basement playrooms, or out in public at coffee shops?  Unlikely.  Further, many industries rely on the sharing of ideas to innovate and problem solve.  The benefit of casual conversations and impromptu collaborative meetings is worth the expense of working together in one location.  So there will remain demand for professional office space from certain sectors for a variety of sound reasons.   

Worth noting, too, is the consideration that the pre-COVID bullpen office set up has significant drawbacks until (unless) a vaccine becomes available: shared space is not practical from a public health perspective, and may redirect those who can’t realistically work from home long term, to shift back to individual offices that ameliorate physical distancing.  That is: more square feet of space per employee.    

And then the final elephant in the room is the total elimination of demand for office space from companies which do not survive the economic fallout of the pandemic.  It is too soon to measure how extensive this will be, but there certainly will be casualties of a recession that may well be deep and prolonged. 

So, coming full circle to the short answer: even with lots of companies opting to return to offices, a decline in overall demand for office space is certainly expected, probably over the next couple of years.  Because leases are typically signed on 3-5 year terms (or longer), a “shadow” vacancy of leased-but-vacant space could surface first (i.e. space for sublease), though if the original lessees can’t pay, the space is effectively just vacant regardless of any contractual debt on it (distinguished from, for example, a healthy company who chooses to move to a new office building when they still have a year left on their lease).  With increasing vacancy, landlords will opt first for rental incentives to entice tenants to their space, and there will be downward pressure on net rental rates.  Our June Market Survey is underway now…stay tuned in the coming months for the early indicators of impacts on the market.  


Alex Baird Allen is the Manager of Turner Drake's Economic Intelligence Unit. If you'd like more information on market research or our semi-annual Market Survey, you can reach Alex at 902-429-1811 Ext.323 (HRM), 1-800-567-3033 (toll free), or email ABairdAllen@turnerdrake.com 
Thursday, May 28, 2020 10:55:05 AM (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | Economic Intelligence Unit | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake
# Wednesday, April 22, 2020

No one wants to own a “dirty” property; it is important to both Buyer and Seller that they understand how a sale can be impacted by the discovery of contamination. From the Seller’s standpoint, they may need to remediate the property prior to selling. Remediation is costly and time consuming – it can take a year or longer to test the soil and groundwater, adequately address the contamination, and ensure that the site is fully remediated. The Seller will incur carrying costs, such as property taxes, during the remediation.

There will be other problems too, in addition to the time delay. The Buyer’s lender will rarely finance a dirty property and will almost always require a Phase 1 environmental assessment to confirm that it is not contaminated. In most cases it will be the Buyer who commissions the Phase 1 report. This consists of historical research of site… do past uses point to possible contamination from chemicals or hydrocarbons?...  was the property previously used to house a gas station?... were manufacturing or service uses such as dry cleaning, sand blasting (lead paint), etc. conducted on the property?... The term “mad as a hatter” originates in the fact that hat manufacturing utilised mercury as part of the process, with unfortunate consequences for the participants. The Phase 1 audit will also investigate existing and surrounding property uses that may have contaminated the site; for example a bus depot whose leaking underground storage tanks have resulted in contamination of the ground water and its concomitant migration into surrounding “downstream” properties. It will also consider the building materials used on site…. are the plaster, or ceiling tiles, likely to contain asbestos; the fluorescent lights, PCBs; the paint, lead; what other horrors lurk in the building structure? If anything suspicious comes out of this research, the Phase 1 report will recommend a more invasive Phase 2 investigation requiring drilling or removal of building material for laboratory investigation.

A Phase 1 report can cost anywhere between $1,200 and $3,000 for most small to medium sized properties. Since a Phase 2 environmental assessment comprises soil and ground water testing, more intrusive testing and the use of heavy equipment, this study can easily cost over $20,000. Should the Phase 2 study identify contaminants, the level of contamination and the intended use of the property by the Buyer, will determine the degree of remediation required. If contaminants exceed the maximum allowable level, the Department of Environment has to be notified and they will issue an order to remediate the property within a specified timeline.

Remediation can be time consuming. Once the contaminated soil has been removed from the property, an environmental consultant will set up “test events” whereby the soil will be re-tested to confirm that the remediated property falls within the specified guidelines. These test events usually occur once every three months over a year long time period. However, if the groundwater below the property is not static, the test events may register that it is “clean” during one test and then show contamination at the next test event, as the groundwater migrates back and forth.  

The intended use of property also determines the overall impact of the contamination and the level of required remediation. For example, a former gas station site  to be sold for apartment development requires a higher level of remediation than a site to be utilised for industrial purposes…. properties intended for residential use are held to a higher environmental standard than properties to be occupied for commercial uses. 

Since the Seller is in the chain of title they may be held liable for contamination after the property has been sold… even though they may not be the source of the contamination! This is why mortgagees, such as banks, will rarely foreclose contaminated property… and why governments would be wise to avoid expropriating pulp mills (Government of Newfoundland take note!). It is therefore to the Seller’s advantage to establish the present extent of contamination (if any) to safeguard themselves for the future. If a property is sold and is subsequently discovered to be contaminated, the Seller will need to establish that it was “clean” when they sold it, otherwise they could be held liable for the contamination even if they did not cause it.

A Buyer is similarly advised: If they purchase a property without undertaking the proper environmental assessment to confirm that the property is “clean”, they are at risk; they could be held liable for the contamination, even though they did not cause it, and be ordered to remediate the site at significant cost. Unless the Buyer is a risk seeker they should invest in hiring an environmental consultant as part of their overall property purchase due diligence.

The moral of this story? Don’t be penny wise and pound foolish! It matters not whether you are a Buyer or Seller: a few thousand dollars spent on an environmental audit can save you hundreds of thousands in potential remediation costs. 

Ashley Urquhart is the Senior Manager of our Brokerage Division.  She has a vast network of contacts and would be happy to assist you with all your leasing needs. If you would like more information, please feel free to contact Ashley at (902) 429-1811 or aurquhart@turnerdrake.com.

Wednesday, April 22, 2020 9:58:12 AM (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | Brokerage | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake
# Tuesday, April 7, 2020

As summer edges near, warm days pull our minds and hearts outdoors - reminding us of the natural areas that make Nova Scotia a beautiful place to live.  From the maple-dappled shores of the St. Marys River to the sweeping rocky coastlines of Yarmouth’s Tusket Islands Nova Scotia has an abundance of natural beauty spanning countless ecosystems.  These natural spaces from a web of protected and semi-protected landscapes across the province ranging from provincial nature reserves to prime agricultural lands protected in perpetuity from development beyond a plough’s furrow.

Canada’s legal concept of ‘owning’ land, though heavily based in a euro-centric view culturally, does provide tools to assist in the protection of our natural environment.  Most of the time when someone purchases a property what they are actually paying for is a registered legal interest in the property which allows them to use it unencumbered by others (the “Fee Simple” Interest). However, there are many ways to split up this interest and each comes with a value reflecting what the interest holder can and cannot do on the property.  For example, by placing a restrictive covenant on lands, or placing ownership with a land trust, it is possible to prevent the spoilage of natural places.

Valuing a partial interest in land is a critical step in protecting wild areas through the use of Land Trusts, which are not-for-profit organisations dedicated to the protection and stewardship of special places including rare species habitat, areas of historic cultural significance, and precious agricultural land.  Sometimes these Land Trusts acquire property outright through donation or purchase, and other times an interest is granted to the Land Trust as a Conservation Easement which details what is – and is not – permissible activity on the land.  In this way, these Land Trusts have steadily grown a network of protected places over the course of many decades.

For many landowners, the decision to donate land is driven by a love of nature or a desire for a lasting legacy.  As an added incentive there can be tax breaks associated with these ecological gifts – the value of which must be determined by a professional appraiser.  In this way Turner Drake has played a quiet (but important) role in the protection of an abundance of properties which ultimately contribute to Nova Scotia’s roster of important wild places.  We are fortunate that through this process, we have walked across places few Nova Scotians have seen or heard of, but which nonetheless provide safe haven for many plants and animals.

The season for outdoor exploration is here and given current restrictions in urban-based gatherings Nova Scotians have a unique opportunity to explore their surroundings and connect with their natural environment in a meaningful way.

James Stephens is a consultant in our Valuation Division and is heavily involved in the valuation of lands for the provincial governments, private land owners, and land trusts including the Nova Scotia Nature Trust, Nature Conservancy of Canada, Annapolis Valley Farmland Trust, and the Island Nature Trust. For more information about our range of Valuation® services, valuations for land donations, feel free to contact James at (902) 429-1811 or jstephens@turnerdrake.com

Tuesday, April 7, 2020 10:31:04 AM (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake  | Valuation
# Monday, March 30, 2020


In light of ongoing coronavirus pandemic, we are writing to update you on how these recent events are affecting our work. Overall, you should know that Turner Drake & Partners Ltd. is adapting to the situation and we remain open and available to assist you with your real estate needs.

The effort to slow the progression of COVID-19 is of critical importance, and we are proud to do our part. Turner Drake is following the most current recommendations and direction from the appropriate government authorities, and has taken steps to ensure the safety of our personnel and clients. This means we are conducting our operations in new ways, including implementing flexible and remote working options for staff, enacting stricter office cleaning and hygiene protocols, and practicing social distancing when staff are present in the office. It also means we are modifying our procedures for how we serve our clients, including minimizing in-person meetings, making greater use of teleconference and screen sharing systems for interactions, and working with you to implement proper sanitation and distancing practices when our work takes us to your site. The Client Area of our website allows you order new jobs, monitor the progress of existing assignments, and transfer large files through the Drop Box option (don’t worry—our Client Area has a password recovery tool if you have misplaced yours). If you do not yet have access to our Client Area, you can also order new jobs through the “Contact Us” portion of our website www.turnerdrake.com. If you would like to meet in person, please contact us in advance so we can make arrangements.

Turner Drake’s mission is to help solve your real estate problems, and we will continue to live up to that while also rising to this public health challenge which demands action from us all. Our consultants are proactively contacting clients where these new practices will impact ongoing assignments, and we welcome any questions you may have currently, or in the future as this situation evolves. Thank you for your understanding and cooperation, and we promise to extend the same as all of us adjust to this unprecedented and rapidly changing situation.

Best wishes and good health.

Monday, March 30, 2020 12:14:06 PM (Atlantic Standard Time, UTC-04:00)  #    -
Atlantic Canada | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake
# Thursday, March 12, 2020

Just how important is proper fire safety planning?  In addition to potential loss of life and property damage, lack of proper Fire Safety Plans can land you with a hefty fine…or even potential jail time!

Section 2.8 of the National Fire Code of Canada states that any building required by the National Building Code to have a fire alarm must also have an approved Fire Safety Plan. Halifax Regional Municipality By-law F100 also states that, “Every person who contravenes or fails to comply with these regulations or fails to carry out an order made under these regulations, is guilty of an offence and is liable on summary conviction, to a fine of not more than $5000, or in default of payment of the fine, to imprisonment for a term not exceeding six months”.

Concerned? Turner Drake’s Lasercad® Division can prepare two types of Fire Plans to help manage your properties’ fire safety concerns: Fire Emergency Plans and Fire Exit Plans.

Pictured below are examples of both types of plans prepared for a local client. Fire Emergency Plans provide a detailed layout of each floor in a building, showing the location of all demising walls, doors, windows, plumbing fixtures, etc. In addition to providing a detailed layout of the space, Fire Emergency Plans indicate the precise location of all implements relevant to fire safety. The lower ground floor of a Halifax Heritage Building pictured below illustrates the exact location of all fire safety devices on the floor, such as Fire Extinguishers, Smoke Detectors, Exit Signs, Pull Stations, etc.

Fire Exit Plans are prepared to show the general layout of a floor’s common area accessible to the general public, and indicate key features necessary to ensure a safe evacuation in the event of a fire. Pictured below is a Fire Exit plan prepared for the ground floor of the same building.  The plan clearly indicates the location of the Fire Exit Plan, marked “You Are Here”.  Additionally, it shows readers the location of all Pull Stations in the event these must be activated to trigger the building’s fire alarm. Most importantly, Fire Exit Plans guide readers to safety via proper evacuation routes while also highlighting all emergency exits, and applicable Muster Points for the assembly of building occupants at a safe distance from the building.

If your building exceeds 3 storeys and does not currently have Fire Emergency or Fire Exit Plans please give us a call. Our Lasercad® team would be happy to discuss how we can help improve your building’s Fire Safety while also answering any questions you may have regarding local safety requirements.



Andrew Savoy is a consultant in our Valuation Division and is heavily involved in many of our Lasercad® projects. For more information about our range of Lasercad® services, including Fire Safety Plans, feel free to contact Andrew at (902) 429-1811 or asavoy@turnerdrake.com
Thursday, March 12, 2020 10:33:01 AM (Atlantic Standard Time, UTC-04:00)  #    -
Atlantic Canada | Lasercad | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake
# Monday, March 2, 2020

As a child I imagined what it would be like to score a goal for the home team in a sold out stadium.  The deafening sound of tens of thousands of fans celebrating my efforts was amazing.  I still have a passion for sport, but by day, my passion is property tax so I read with interest some recent reports on how a handful of pro sports franchises significantly reduced their property tax bills.  The Montreal Canadians, San Francisco 49ers and Carolina Panthers had their property tax bills slashed by 40%, 50% and 56% respectively.  Chances are your business doesn’t occupy a stadium, but there are tax lessons to be learned for any businesses that owns or occupies a Special Purpose Property.      

Special Purpose Properties are properties that are designed in a way that makes them good for a single use.  Some uses (like hotels) appeal to a broad array of investors, but others appeal to a very limited market making them difficult to value.  Stadiums obviously fall in this category but so do churches, schools, power plants, hospitals, and most purpose built manufacturing facilities.

The most common method for estimating the tax assessment of a limited market, special purpose property is the cost approach.  You start by estimating how much it would cost to construct the improvements, deduct allowances for all forms of depreciation and then you add the land value.  Simple enough.  So how is it possible that Bank of America Stadium (the home of the Carolina Panthers) can have estimates of its value ranging from $87m to $472m? 

It’s because valuation experts will differ in how they account for “all forms of depreciation”.  Physical depreciation is readily understood, however properties can also suffer from functional and/or external depreciation. Although a stadium, pulp mill, food processing plant, church or hospital may have been meticulously maintained, it may be subject to significant amounts of functional and external depreciation if its configuration is sub-optimal, if it is poorly located, or if the economic prospects for which it was built have deteriorated in some way- all of which are grounds for a reduction in its assessed value.

The Bell Centre in Montreal opened in 1996.  It cost roughly $240m to construct (roughly $485m today).  The land is currently assessed at just over $50m and the total assessment now stands at $167m.  This implies a total depreciation from all causes of approximately 75%. Only a small amount (+/-1/3rd) of this relates to physical depreciation as stadiums can have very long physical lives.  Anfield, Old Trafford, Fenway Park, and Wrigley Field are all more than 100 years old so the key to accurately estimating the total depreciation in a stadium (or any other special purpose property) is in identifying and quantifying functional and external depreciation. Unfortunately there aren’t any tables an assessor can use to estimate these forms of depreciation.  It requires an understanding of why the property was configured the way it is, how it would be configured were it to be re-built from scratch, and an understanding of the location and economic factors that apply to the use it was designed for.

During my career, consulting on behalf of taxpayers I’ve often heard the argument from assessing authorities “the owner is using it for the purpose in which it was built” and/or “the business is very successful” which leads to the question “how can there be significant functional and/or external depreciation.” In the Panthers case it’s true the stadium was being used for the purpose in which it was built.  It’s true that the business is viable (David Tepper acquired the Panthers including the stadium for $2.2b in 2018) but those are the wrong questions.  The right question is “would the business be worth more if it had the right stadium in the right location?”

The right stadium might have more seats, more private boxes, more places to sell advertising and might cost less to operate.  It might also be built in a location to make commuting easier so more fans buy tickets and spend more on concessions while they are at the game.  The same concepts hold true for any special purpose property.  A church located distant from its parishioners, a school with declining enrolment, a power plant compelled to use high priced coal, and a poorly configured manufacturing plant located too distant from its markets or its raw materials can all suffer from functional and/or economic depreciation.    

2020 property assessment notices are rolling out across Canada (New Brunswick is up next!).  If you own or occupy a special purpose property, make sure you ask the right questions when you decide if it’s time to request a review this year.  

  

Andre Pouliot is Vice President of our New Brunswick operations and Senior Manager of our Property Tax Division. For more information about our property tax services, feel free to contact Andre at (902) 429-1811 or apouliot@turnerdrake.com

Monday, March 2, 2020 10:38:48 AM (Atlantic Standard Time, UTC-04:00)  #    -
Atlantic Canada | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Property Tax | Turner Drake
# Friday, January 17, 2020

CMHC has just released its annual rental market survey data, and the results are concerning for the Halifax Regional Municipality. After 2018’s record low vacancy, we’ve been eagerly waiting to see whether supply or demand would win the race this past year as both construction and population growth continue their fevered pace. Unfortunately for renters, it looks like demand has again won. With new supply undershooting by 280 units over the year, the overall vacancy rate has now plummeted from 1.6% to a new record low of 1.0% in 2019.

While the challenge of finding an apartment is stressful enough, unfortunately for renters the bad news doesn’t stop there. Vacancy rates are a leading indicator for rental rates, and this year’s results show the first hard evidence that tight market conditions are translating into price increases within the existing rental stock. Once the competition for limited available units heats up, price increases kick in as the market begins rationing too little supply among too much demand. While the statistics of overall average or median rents have been on the rise for a number of years, this has largely been driven by the addition of new, more expensive buildings to the rental pool. Yearly increases in existing buildings were muted, proceeding at around 2% per year even in record-setting 2018. However, thanks to the knock-on effects of that year’s diminutive vacancy rate, same-building rents in 2019 show an increase of 3.8%. This is nearly double the historical average, and the largest single-year increase on record. The 2019 vacancy rate of 1.0% therefore does not bode well for renters in this year to come. Things are going to get worse before they have a chance to get better!

On that note, what is it going to take for things to get better? Despite record-levels of construction in the purpose-built rental sector, the market supply is not growing fast enough to meet demand (hence the reduction in vacancy). Based on average figures for the last 3 years, the period where population growth has driven vacancy below its typical range, the calculations are humbling. HRM would need to increase the supply growth rate by about 13%, delivering an extra 230 units per year, just to stabilise the vacancy rate and keep up with the growth in demand. Of course, holding vacancy at 1% won’t help with prices. In order to return the market to a reasonable 3% vacancy rate, there would have to be a further increase of 23%, another 410 units per year, and this would have to be sustained for the next 3 years in order to get back to balanced market territory.

Multiunit starts were up in 2019, but only by 15%. This is an industry already at record activity levels and it strains to push the pace further. Additionally, provincial level data is suggesting HRM’s population growth may still be accelerating. As a result, odds are that a sufficient increase in the growth of rental supply is not about to materialise in the short term to provide relief.

So what solace can we offer? Well, it’s not much to take to the bank, but we may be seeing the start of demand-side trends that could help blow off some pressure. Much of the population growth pressure is driven by new people arriving in the city from elsewhere in the province, county, and world. Having a few years under their belt now, not-quite-so-recent migrants and non-permanent residents could start to flow out of the rental sector. Having found their feet, these groups may look to transition into the homeownership market as they seek to become more established (or, in the case of international students, simply move away as their studies conclude). Of course, there are also domestic trends to consider as well, and while rental demand growth from downsizing boomers is unlikely to relent, an increasing number of millennials are aging into their prime home buying years.

Often lost in the rental housing conversation is the fact that despite the frenzy of apartment construction, HRM has actually not built very much housing in the last few years overall. Unlike other Canadian cities where a surge of rental construction has come only after owner-occupied markets launched out of financial reach, HRM’s rental supply is the first preference for many. This means rental housing has been voraciously consumed at the same time that homebuilders have struggled to find demand for their available lots. As a result, the explosion of apartment construction has been largely offset by a drop in subdivision development.

Perhaps things are turning around, however. This past year may have heralded disappointment for renters, but it provided encouragement for owners; price action in the resale market showed strength that we haven’t seen since the early 2010s, and with it came an uptick in new construction activity as well. Is this evidence that some of HRM’s recent population growth is starting to flow from the rental sector into ownership?

This would certainly be good news for the homebuilding industry, which has been a shadow of itself for several years. It would also be good news for those still in the rental market, as a revived owner-occupied market would ease pressure on rentals by siphoning off some of the housing demand. Further, reactivating the idle resources in the homebuilding sector is an easier means of increasing the growth rate in total housing supply than hoping for the multiunit sector to conjure up a significant escalation in their maxed out production levels. 



Turner Drake is engaged in Housing Needs Analyses from coast to coast. To see how your community can benefit from the unique expertise of our Planning and Economic Intelligence team, call Vice President Neil Lovitt at (902) 429-1811 or nlovitt@turnerdrake.com.

Friday, January 17, 2020 3:16:50 PM (Atlantic Standard Time, UTC-04:00)  #    -
Atlantic Canada | New Brunswick | Newfoundland & Labrador | Nova Scotia | Planning | Prince Edward Island | Turner Drake
# Wednesday, October 23, 2019

I recently read an article by the CBC entitled “From sacred to secular: Canada set to lose 9,000 churches, warns national heritage group.”  The article discusses shrinking congregations as member’s age, move away or switch to new spiritual practices.  The article notes that in Eastern New Brunswick alone the Roman Catholic Archdiocese for example predicts that 20 of its 53 parishes will likely close if the congregations can’t find a way to generate more money.  With less money coming in and higher maintenance and operating costs churches face a challenging future.  

This article resonated with me on a professional level and personally as a member of a local church.  In the past few years our firm has been contacted by a number of churches, in particular church committees made up of congregation members.  These committees are assigned the unenvious task of exploring what to do with their beloved church as it faces the challenges of a shrinking congregation.

The common questions asked by committee members to aid in their decision making include:

  • Scenario #1: What is the value of the church as it currently operates?
  • Scenario #2: What is the value of the underlying land as a redevelopment?
  • Scenario #3: What if the church were sold for an adaptive re-use, what would it be worth?

Essentially the committees want to determine the Highest and Best Use of their property, with values determined for each scenario so they can be make an informed decision, and ultimately present it to their congregation. 

Churches serve a number of roles for their community.  Outside of Sunday church services and funerals they are used as polling stations, a place of refuge after disasters, a place for private and not-for-profit groups to meet, a venue for concerts, fundraiser dinners and suppers and a place for performing arts to operate out of.  While church layout and design elements vary between denominations the fundamental church layout is fairly consistent.  Typically it includes a large entrance lobby, a sanctuary, parlour, large multi-use hall together with a kitchen and a number of smaller rooms used for meetings and general storage.  They tend to have several large, wide-open areas with high ceilings together with a large number of smaller classrooms.  As a result of their special purpose design they are challenging to value.

Scenario #1 - determining the Market Value of a church as it currently operates may not be as hard as it sounds.  There are numerous examples of church properties that have sold to other congregations for continued use as a church. 

Scenario #2 – determining the value of the underlying land for redevelopment is more challenging.  Often times the property has an institutional zone assigned to it, reflecting its current use.  However, this doesn’t necessarily limit the property to its current use.  It can often be re-zoned and redeveloped for a more intensive use.  Exploring this scenario involves discussions with the local planning authority, and in the end professional judgement is needed.  In addition to re-zoning, heritage designation issues, service and utility easements on the parcel and demolition costs for the existing building must be explored and considered under this scenario.     

Scenario #3 considers the value of the church for an adaptive re-use.  This can certainly be the most challenging scenario to consider when determining value.  The question here is “does the existing building actually provide additional, measurable value?”  Older buildings often have a lot of character and heritage value.  However, the cost for repairs and maintenance for these older buildings can be substantial.  They typically have masonry exterior walls with decorative features that require a lot of maintenance.  Their walls are often load bearing, meaning they cannot be easily reconfigured for another type of use without substantial structural work.  In addition they typically sit on expensive land, located in more central downtown locations with increasing pressure on land values.  All of these things can point to demolition of the existing church to make way for a new development.  However, that’s not always the case.

Recently I completed an assignment for a registered heritage property in Halifax.  The Centre Plan envisioned a low-density residential use for the property.  However, Package A contained significant implications for the property as it contains policy applicable to registered heritage properties.  This general policy allows for consideration of new development via discretionary approval processes (a “Development Agreement”) rather than zoning.  The overarching goal of the municipality is to encourage the rehabilitation and retention of heritage buildings. In order to do this, they will support a significant amount of new development intensity on sites containing a heritage building, using this as a tool to create sufficient value that the required conservation measures can be accommodated within an economically feasible project. This opens the possibility for significant building height and floor area ratios, as well as consideration of other cost-savings, such as lower parking requirements.

In that instance, the cost involved with demolishing the existing building coupled with only low-density anticipated for the site meant that demolition of the building was not the best option.  Alternatively, retaining the existing structure, or a substantial portion of it under policy contained within Package A of the Centre Plan opened up the possibility for significant building height and floor area ratios, as well as consideration of other cost-savings, such as lower parking requirements.  This second option meant a higher value for the property.  In that instance the best option was retaining the existing building for an adaptive re-use as part of a larger development.

The take-away here is that valuing churches or special purpose properties is not a straightforward exercise.  With shrinking congregations and higher operating costs these types of assignments are becoming increasingly more common.  They can be complicated and require a team approach to valuing the property with assistance from planners with a solid understanding of the Centre Plan.

 

For more information on the valuation services we provide visit our Valuation and Advisory Services site https://www.turnerdrake.org.



Nigel Turner, Vice President of our Valuation Division, can be reached at nigelturner@turnerdrake.com

Wednesday, October 23, 2019 11:57:24 AM (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake  | Valuation
# Friday, October 4, 2019

On Wednesday September 4th, I had the pleasure of presenting before the Standing Committee on Law Amendments regarding the assessment and taxation of heavy industry in New Brunswick.  I was pleased to see such a high level of interest from Committee members in understanding how property tax assessments (which are based on market value) are calculated. 

Fair assessments start with accurate estimates of a property’s value.  In a market value assessment system, there are no “breaks” or “deals” for property owners.   Assessment professionals take their cues from the market and adjust their models so all assessments approximate market value.

Understanding the assessment system means understanding market value and the factors that influence it.  Most of us have a reasonable understanding of the factors that influence the value of our homes.  We understand that a strong housing market drives higher values for all houses.  We understand that a property with features that purchasers desire (e.g. great kitchen; open concept design; a finished basement) will have a higher value than one that lacks these features or is in a state of disrepair.   We understand “location, location, location”, and the benefit of being close to amenities like parks and schools, and the disadvantage of being located next to negative influences like landfills or flood zones.  

Although the market for heavy industrial properties is global as opposed to local, the factors that influence their value are not dissimilar.  When markets are strong (i.e. there is a balance between the number of buyers and sellers), values can be stable.  When markets are weak (there are more sellers than buyers), values will fall.  Individual facilities can become less appealing to buyers as they get older, or if the building design and layout will not accommodate the most efficient technology or process.  Location also applies.  Instead of proximity to parks and schools, ask if the facility is located close to its raw material, or close to where it sells its final product?  Does the location offer a competitive advantage or disadvantage in terms of the cost of inputs to production?

The 2013/2014 re-assessment of pulp and paper mills in New Brunswick generated questions from the Committee and provides an excellent case study for the factors that impact the market value of heavy industrial properties generally.  If you understand the factors that impact housing values, consider the following scenario. Imagine an older neighborhood with houses built up over a period of 100 years.  The market is poor, and there are significantly more sellers than buyers.  When you look up and down the streets, approximately 1/3rd of the houses are vacant and boarded up while they wait to be demolished.  Demand is weak generally, but the houses in this neighborhood are especially less appealing than newer houses because they are older and are lacking in amenities that purchasers require.  The purchasers themselves have concluded that it would be much less expensive to build a new house than to modernize the older structures. In fact, the houses are so functionally obsolete, there are builders constructing houses across town with all of the amenities purchasers demand for less than half the cost of reconstructing replicas of the homes in the older neighborhood.  

This was the state of the market for pulp and paper mills at the time of the reassessment.  Maritimers will recall closure of mills in Bathurst, Dalhousie, Miramichi, Brooklyn, and Port Hawkesbury; all but one were subsequently demolished.  Assessors and Appeal Boards in assessment jurisdictions across the country were tasked with coming up with an estimate of the market value of these assets. Many experts provided testimony, and Appeal Boards in contested hearings in Ontario ordered assessment reductions ranging from 60% to 75%.  It shouldn’t be surprising that experts tasked with determining the values of mills in our region came to similar conclusions. 

To be clear, the assessment process is about ensuring that assessments reflect market value, not about providing a “break” or a “deal” on property taxes.   

 

André Pouliot is a Senior Manager in the Property Tax Division at Turner Drake & Partners Ltd.  André holds professional designations in Valuation with the Appraisal Institute of Canada, Royal Institution of Chartered Surveyors and has more than 20 years of experience in the assessment and valuation of heavy industrial, commercial, and investment properties. 

 

Friday, October 4, 2019 9:18:44 AM (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Property Tax | Turner Drake
# Wednesday, September 18, 2019

Photo Credit: iStock Photo AntonioGuillem

It comes like a bolt out of the blue; the municipality wants to purchase your property so that they can widen the highway. Often times they intend to seize just part of your property: that front yard you so carefully nurtured to provide a fragile barrier between your home and the busy street is destined to become another traffic lane. Many owners have received this type of letter, more will receive similar letters in the future (if not from the municipality then the province, federal government or any organisation with expropriation powers such as a water authority, power utility, Crown Corporation). Sometimes the purpose of the exercise may not be clear, other than the fact that your property, or part of it, is required for the public good. During our early days in business in the 1970s some provinces, such as Nova Scotia, did not always inform owners that they had taken title to their property… the unfortunate owner only discovered such was the case when they enquired why they were no longer getting a property tax bill! Often times, municipalities such as the City of Halifax, did not advise the owner that they required the property, or part of it, content to leave it to the appraisal firm to break the news when they arrived on site to conduct their inspection. (We fired the City of Halifax as a client after arriving on site to find the property owner had not been informed about the expropriation; his wife was dying of cancer in the bedroom). Legally this is still the case in many provinces in Atlantic Canada; the acquiring authority does not have to inform you that you no longer own your property for several months after they have filed the expropriation document (Nova Scotia 90 days, Prince Edward Island 60 days). Thankfully in practice, that at least has changed, but the unfortunate reality is that property owners rarely have legal grounds to prevent the authority from purchasing their property. In other countries, property owners have to be notified that their property is to be expropriated and have the right to object that the acquisition is not really required for the road widening, or other scheme that is its raison d’etre, or that the scheme itself is not required to serve the public good. But this avenue is rarely available in Canada, or indeed in North America. (In this Region, proposed expropriations under the Federal and New Brunswick Expropriation Acts are the exception that prove the rule. Each require the acquiring authority to notify the property owner before they expropriate and provide a public enquiry to hear objections. However the Federal Act is really window dressing, the public hearing a mechanism to “vent”; the New Brunswick Act however does require the Expropriation Advisory Officer to issue a decision as to the necessity for the expropriation and whether the scheme is consistent with the public interest. If your property is located in Nova Scotia, Newfoundland or Prince Edward Island you have no say in the matter at all!. Even if subsequent events disprove the “valid public use” test, owners have no right to recover their property (the ill-fated Mirabel Airport in Quebec is an example… the original owners, or their descendants, were eventually offered 300 hectares of the 38,800 hectares originally expropriated, but only after a long, bitter and very public fight). So what do you do when you receive “the letter”, particularly if it does not mention “expropriation” and is instead a civilised attempt to negotiate compensation before the municipality seizes your property by force?

 

We live in an age when most of us have lost faith in our institutions, the civil service, politicians and the private sector. That trust has been eroded over the past two decades by greed, politicians who no longer adhere to acceptable forms of behaviour, the shrill cacophony of social media seamlessly blending fact with fiction, and an emancipated Fourth Estate no longer able to defend the “little guy”. The adage “you can’t fight city hall” too often engenders a feeling of helplessness, particularly if the acquisition involves your family home, the sanctuary you hold inviolate; or your business, a livelihood born of blood, sweat and tears. Cheer up, not all is bad, the press and electronic media may no longer have the heft they once did, but you do have the protection of an excellent and independent judicial system. Why is that important? The letter you received from the acquiring authority may not have mentioned “expropriation”, and the words “judicial system” may raise the spectre of long and expensive litigation in which you, the little guy, are pitted against an acquiring authority with much deeper pockets. But bear with us. Even if your property has not yet been expropriated the negotiations will be framed by the Expropriation Act because the acquiring authority has to rely on it if they cannot reach a settlement with you by negotiation. Now, it has to be said, the Expropriation Acts do not represent the legal community’s finest hour. The Nova Scotia and New Brunswick Expropriation Acts, each appear to have been written in a hurry by somebody suffering from a hangover. The Newfoundland and Prince Edward Island Expropriation Acts have a distinct feudal flavour, drafted in the days when peasants lived in huts of mud and wattle, addressed their betters with a touch of forelock, eyes downcast and a mumbled “zur” (or that, at least, appears to have been the assumption of the persons drafting them). In fact the PEI Act doesn’t even attempt to lay out the framework for compensation, happily delegating it to the court system, undoubtedly in the pious hope that the judge would have a clue what it was all about, because the person drafting the legislation sure as hell didn’t! Only the Federal Expropriation Act can claim lucidity, and even it overlooks the fact that businesses occasionally occupy real estate and are adversely impacted if it is whipped away from under their feet. But, and this is the good news, none of this really matters very much because there are some good Expropriation Acts elsewhere and a body of case law and appraisal practice that have established well proven methodologies for identifying and calculating compensation. The courts have embraced the principle that, since expropriation is the exercise of police power by the state (or its surrogate), the benefit of the doubt lies with the unfortunate property owner and they have not been shy in ensuring that the latter does not suffer financial loss as a result.

 

Expropriation

 

So what is “Expropriation” and why should you care? Expropriation is the seizure of your property, or a part of it, by the government, or a body authorised by them, for public use or benefit. The bad news, as we have already mentioned, is that you cannot object to it unless you live in New Brunswick or the property is being acquired under the Federal Expropriation Act… the good news is that you are entitled to be fairly compensated for your loss. The initial approach from the acquiring authority advising you that they want to purchase part or all of your property will rarely mention the word “expropriation”. Whilst this may be an attempt to spare your feelings by appearing to be non-threatening you should be cautious. We no longer have a strong media but, as mentioned, we do have an excellent court system… and they are on your side. While you will probably never need to go to court you should avail yourself of the protection afforded by our judicial system. Your rights to fair and proper compensation are codified in the relevant Expropriation Act (sort of) but you will not be so protected unless (1) your property has been officially expropriated or (2) the acquiring authority has agreed in writing to proceed as though you had been expropriated i.e. that they will afford you all of the compensation you would have been entitled to under the Expropriation Act had your property been expropriated. So this is Step One, make sure that the acquiring authority is prepared to offer you all of the rights and privileges afforded by the Expropriation Act and get that commitment in writing. If they will not provide it, refuse to negotiate until they expropriate your property.

 

Compensation

 

It is a fundamental principle of Expropriation that the acquiring authority is required, as far as monetarily possible, to put you in the same position after the acquisition as you were before it. Most court decisions have interpreted that principle as giving you the benefit of the doubt, short of plundering the public purse. The federal and some provincial Expropriation Acts acknowledge that the negotiations are unevenly balanced in that the property owner faces an acquiring authority with much deeper pockets and resources. Some Expropriation Acts attempt to level that playing field by requiring that the acquiring authority be transparent in their calculations of compensation, and some give the property owner access to their own professional advice if they desire it, at the acquiring authority’s cost. The Federal Act unambiguously provides that the property owner is entitled to professional advice at the Fed’s cost, the Atlantic provinces are more parsimonious, sometimes offering it if the property owner wins in court (Nova Scotia, New Brunswick, Newfoundland), or not considering it worthy of mention (Prince Edward Island). Nova Scotia limits the amount they will pay in legal costs and appraisal fees, something they are now allowed to do in their Act, so the unfortunate property owner has to pick up the rest of the cost, or find a cheap lawyer or appraiser. A word of caution: the devil is in the details and some acquiring authorities do not play by the rules established by the relevant Expropriation Act, case law or appraisal practice. It is essential to have an understanding of your rights under the Act, the type of compensation and how it is calculated. Each province in Atlantic Canada has its own Expropriation Act and each municipality, or other body with expropriation powers, is governed by that Act. The federal government also has its own Expropriation Act. Broadly speaking the Acts are similar, in practice if not content, and the methodology for calculating compensation is identical even when it is not specified in the legislation.

 

Negotiations

 

The acquiring authority may employ their own staff to negotiate, or will contract it out to a firm such as ourselves (we also negotiate on behalf of property owners). Our article “Land Agency… a respectable profession” elsewhere in this Blog details our approach when we are representing the acquiring authority: you should expect nothing less. The act of expropriation, or its anticipation, obligates the acquiring authority to fairly compensate you for your loss and that means they must engage in “principled negotiation” rather than attempt to settle the compensation claim for the lowest amount. If you find that you are not comfortable negotiating, insist that the acquiring authority pay for your professional representation. Whether the Act specifically allows for it or not, it has been our experience that acquiring authorities want to reach agreement without the adverse publicity of a formal expropriation, much less the agony and expense of a court action. They recognise that some property owners need professional assistance and that this may facilitate an agreement. If the acquiring authority is attempting to negotiate compensation before they formally expropriate, particularly if your property comprises woodland or agricultural land, the acquiring authority may attempt to negotiate without commissioning an appraisal, using instead their knowledge of property values. There is nothing wrong with them so doing provided they are open and transparent about their compensation calculations and are able to validate them by reference to other property sales. However you can require that the acquiring authority provide you with a formal appraisal (they have to anyway if they formally expropriate) and you should insist on this if your property has buildings on it, is in an urban area, or if only part of your property is being acquired and the remainder is likely to be adversely impacted. Many Expropriation Acts (Federal, Nova Scotia, New Brunswick) require that the formal offer after expropriation has to be accompanied by an appraisal. The formal appraisal should meet, at a minimum, the Canadian Uniform Standards of Professional Appraisal Practice (CUSPAP) www.aicanada.ca/about-aic/cuspap/ . Frankly CUSPAP is not the most rigorous standard in the world, it is not specifically directed at expropriation, and most appraisers (like most lawyers) are not sufficiently familiar or skilled in recognising and computing the various Heads of Claim. Do not accept any appraisal tendered by the acquiring authority at face value. Research the author of the appraisal report on the internet and check his/her reputation with a trusted professional advisor to verify that they are experienced in expropriation work. At a minimum they should be an Accredited Appraiser of the Appraisal Institute of Canada or a Member of the Royal Institution of Chartered Surveyors (Valuation) but neither qualification guarantees that they are experienced and knowledgeable in expropriation. Do not assume that the acquiring authority has already done the research and has chosen their appraiser on the basis of merit; the Federal Government and some provinces do so, but other provinces and many municipalities, Halifax Regional Municipality for example, simply select an accredited appraiser on the basis of cheapest cost. Some acquiring authorities will instruct the appraiser to limit the types of compensation (Heads of Claim) they consider in the appraisal and although the omissions may be listed in the appraisal report their significance can easily be overlooked. The Province of New Brunswick Department of Transportation and Infrastructure, for example, instruct their appraisers to ignore Injurious Affection and Special Economic Advantage, items which often constitute the bulk of the loss suffered by the property owner.

 

Heads of Claim – A Hitch Hiker’s Guide

 

A governing spirit of expropriation, or the negotiations which preclude it, should be that the property owner (and tenant if the property is rented) will not suffer financial loss as the result of losing all, or part, of their property. You will not be compensated for emotional loss arising, for example, from the upheaval in your life. If you are a property owner the types of loss and accompanying compensation will fall under some, or all, of the following Heads of Claim:

 

(1) Market Value of the interest acquired in the property.

(a) “Market Value” is defined differently in the various Expropriation Acts but essentially is the amount of money you would get for your interest in the property if it was sold on the open market. For example, if you occupy and own the freehold (fee simple) interest in a residence which is acquired in its entirety by the municipality, your compensation will equal the sale price you would have achieved had you sold the property of your own free will through a real estate agent. This can cause a problem if the Market Value of your property is lower than that of other properties in the neighbourhood since the cash you receive will not be adequate to purchase a similar home. In that instance you are entitled to additional compensation under the “Home for a Home” head of claim (see below). Unfortunately you will not be compensated for any “special” value your property may have to the acquiring authority over and above its Market Value.

(b) If the municipality only takes part of your property (typically part of your front yard in the case of a road widening), you are entitled to the Market Value of that portion of your property. Obviously calculating Market Value is somewhat problematic since bits of front yards are not typically sold on the open market. Its value will therefore be based on the sale prices of comparable vacant lots expressed on a square foot or other unit basis. You are also entitled to the value of any improvements such as lawns, flower beds, bushes, etc. … but not the emotional value you may have invested in nurturing them. If fences and steps have to be demolished the acquiring authority has to replace them. Sometimes the loss of a front yard is so extreme it renders the home unsuitable for continued owner occupation; it may be uninhabitable or suitable only as transient accommodation such as short term rental. In that event the owner should be able to substantiate the acquiring authority purchasing the entire property. The “Home for a Home” provision may then be relevant.

 

(2) Home for a Home

(a) If the property is occupied by the owner, as opposed to being rented, as a family home, you will be entitled to additional compensation if the Market Value of the property is inadequate to purchase a similar home in the neighbourhood. In this event your compensation will be based on the Market Value of similar homes for sale in the neighbourhood. What happens if there are none for sale? Whilst the compensation does not require that you remain in the neighbourhood it does get a little tricky if you do not have that choice. In the unhappy event that substitutes are not available you would be entitled to be compensated for the Market Value of the next best alternative.

(b) If the property is rented, a cottage, or anything other than an owner occupied family home, your compensation is restricted to Market Value even if you cannot purchase a similar property with it. The acquisition will also trigger tax liabilities which you did not contemplate until you intended to sell the property. It is our view that the impact of paying those taxes now, rather than deferring them for the future, is a valid compensable item.

 

(3) Disturbance

(a) When a property owner is forced to move out of their home there will be moving expenses, as well as items such as drapes for the new home. The acquiring authority is required to compensate the owner for these items. If it is not practical to estimate these costs some Expropriation Acts (Federal and Nova Scotia) provide an allowance instead of up to 15% of the Market Value. The New Brunswick Expropriation Act allows, in addition to moving expenses, 5% of the market value of the residential portion expropriated, to compensate for the cost and inconvenience of finding another residence. The other Acts do not place any value on the unfortunate property owner’s time.

(b) If the property contains a business the occupant will suffer a variety of losses. If the business has to relocate it will incur a number of costs: new stationery, informing customers, staff overtime packing and unpacking, new signage, etc. as well as the cost of the move itself. Whether the business moves or not, profits will usually be adversely impacted by the road widening scheme and/or the relocation. Trade once lost to competitors may takes years to recapture, may even be lost forever. Whilst all of the foregoing is compensable some Acts provide that compensation for loss of goodwill, where the business has relocated, can be deferred for the earlier of a year (Nova Scotia) or nine months (New Brunswick) after the relocation, or for three years (Nova Scotia) or two years (New Brunswick) after the expropriation. It is not clear when the business can expect to be paid if it does not relocate, but given that it has to prove its loss one imagines that this would be twelve months (Nova Scotia), or nine months (New Brunswick) after the road widening scheme is complete. Thus a business can struggle to survive during and after the road widening but cannot claim for its loss until later. Whilst the acquiring authority can agree with the business owner to waive the deferment it is our experience that such is not normally the practice. Business loss (goodwill) is not specifically mentioned in the Federal, Newfoundland or Prince Edward Island Acts but is a compensable item.

 

(4) Injurious Affection

(a) Where only a portion of the property is acquired, a common situation with road widening schemes, the balance of the land may be reduced in value because (1) the remaining property is less useful since it is smaller, a more awkward shape, or is severed from the main parcel and/or (2) the construction or use of the road on the land acquired adversely impacts the value of the remaining property. For example, it may no longer be possible to park a vehicle on the land remaining because it is now too small or of the wrong configuration. A residential property without parking is less valuable than a house with a driveway. The construction of the widened highway may render access to the property more difficult if traffic increases. The increased noise and loss of privacy in the home which results from it being closer to the highway will reduce its value. Or take a farm cut in two by a new highway. The farmland on the other side of the new road, particularly if it is limited access highway, will be considerably less valuable because it is no longer as accessible from the farm buildings. Farm fields impacted by the new highway may no longer be of optimum size and shape; drainage may be adversely affected too. In our experience Injurious Affection usually represents the vast majority of the loss sustained by the property owner, especially in residential properties impacted by road widening. The accepted method of calculating Injurious Affection is the “Before and After” method. This methodology is codified in the Federal and Nova Scotia Expropriation Acts. The property is valued as it existed prior to the acquisition and commencement of the road widening (Before Value); and then valued again on the assumption that the road scheme is complete (After Value). The difference between the Before and After values, minus the Market Value of the land acquired, is the Injurious Affection. The New Brunswick Expropriation Act provides that a claim for Injurious Affection has to be made within one year after the damage was sustained, otherwise it is barred.

(b) For housekeeping purposes some Expropriation Acts include Disturbance under Injurious Affection. This has no impact, other than to confuse matters, unless the acquiring authority has directed their appraiser to ignore Injurious Affection (a common practice with the New Brunswick Department of Transportation and Infrastructure).

 

(5) Special Economic Advantage

(a) If the property is owner occupied i.e. not rented, the owner may be able to claim for any special economic advantage arising out of, or incidental to, their occupation of the property to the extent that they have not been compensated under the other Heads of Claim. For example, if you or a member of your family is disabled, and the home has been adapted to meet their requirements with ramps, grab bars, wider doorways and hallways, stair lifts etc. you will be able to claim for the cost of these improvements.

(b) The same conditions apply with commercial property that has been adapted to suite the unique requirements of the business. It applies as well to property that has additional value because of its location, such as a woodlot proximate to the owner’s mill.

(c) Special Economic Advantage is specifically mentioned in the Federal, Nova Scotia and New Brunswick Act.

 

(6) Special Purpose Properties

(a) Some properties do not normally sell on the open market; churches, schools, hospitals, religious and charitable institutions are examples. If the property being acquired falls into this category and the owner has to relocate, they can base their compensation claim on the reasonable cost of creating a similar property (technically known as “the cost of equivalent reinstatement”). Even though the buildings on the property they are vacating may be old, the claim for compensation can be based on the cost of building a new, otherwise identical structure, plus the cost of acquiring a replacement site…. though some Acts (Federal, New Brunswick) attempt to claw back some of the compensation if the owner has improved their position.

(b) The Federal Act, cognisant no doubt that we are meant to be a secular society and less fearful for their immortal soul than the Provinces, do not restrict the qualifying properties to religious institutions and instead embrace all properties that do not normally sell on the open market.

 

(7) Professional Fees

(a) The Federal Act provides that the acquiring authority pay the legal, appraisal and other costs reasonably incurred in ascertaining a claim for compensation. The onus is on the property owner to ensure that the costs are reasonably incurred, not that they are reasonable.

(b) The Nova Scotia Act provides that the owner is entitled to be paid the reasonable costs necessarily incurred in ascertaining a claim for compensation but this is only triggered by an application to the Nova Scotia Utility and Review Board after negotiations have failed. However in practice they are compensable up to the date the acquiring authority makes their Offer to Settle (just before the start of the Board hearing) and are not conditional on the property owner winning their case. Reimbursement of costs incurred after the Offer to Settle are conditional on the outcome of the hearing. The province has recently placed a limit on the fees it will reimburse for legal and appraisal advice. The property owner will now have to fund the difference, or find a cheap lawyer and appraiser.

(c) The New Brunswick Act makes no provision for the reimbursement of professional fees unless the matter proceeds to Court. Reimbursement may be dependent on the compensation award.

(d) The Newfoundland Act provides that professional fees are only paid for proceedings before the Board and they are conditional on the outcome of the hearing.

(e) The Prince Edward Island Act has yet to acknowledge the necessity for professional advice or its role in protecting property owners.

 

(8) Betterment

(a) Where only part of the property is being acquired, the remaining property may increase in value as a result of the scheme for which the property was purchased. For example, land may be purchased for a highway intersection, with the result that the land remaining after the acquisition increases in value because it has development potential for a service station, hotel, shopping centre or other commercial use. This increase in value, known as “Betterment”, has to be offset against the compensation. Depending on the Expropriation Act, Betterment may be offset against the (1) total compensation [Newfoundland and Prince Edward Island] or (2) the land remaining after the expropriation [Federal, Nova Scotia, New Brunswick].

 

(9) Factors Not To Be Taken Into Account

(a) Anticipated use by the scheme for which the property was expropriated.

(b) A value established by reference to a transaction which occurred after publication of the intention to expropriate, or the actual expropriation if there was no published intention to expropriate.

(c) Any increase or decrease in value resulting from anticipation of the expropriation.

(d) Any increase in value resulting from the property being utilised for an illegal use.

 

(10) Heads of Claim Have To Be Consistent

(a) The Market Value of the land acquired has to be based on its existing use value if the costs of relocating are to be allowed. For example, a property owner cannot claim for removal costs if he/she is basing the value of their property on the assumption that it could be redeveloped.

 

(11)  Payment of Compensation

(a)  Federal, Nova Scotia, New Brunswick, Acts - A “without prejudice” offer has to be made by the acquiring authority within 90 days of registration of the Notice of Expropriation. If the parties do not agree the compensation the Federal Act provides for payment of 100% of the offer of compensation; the Nova Scotia Act for 75% of the compensation (excluding business disturbance) and the New Brunswick Act 100% of the “Market Value” (other Heads of Claim such as Injurious Affection are excluded). This payment is “without prejudice” and the property owner is free to pursue his/her claim for additional compensation.

(b) Newfoundland – the property owner has to file a claim for compensation within the time limit specified in the Notice of Expropriation and where the parties do not agree on the amount the matter is sent to the Board to be “fixed”. Compensation is paid out within six months of the Board’s decision.

(c) Prince Edward Island – the property owner has to file a claim for compensation within six months of registration of the Notice of Expropriation “or in the case of land injuriously affected within six months of the injury”. Payment is only made after the parties agree on the amount.


Mike Turner is Chairman of Turner Drake & Partners Ltd. A fifty year veteran of expropriation on two continents he is still shocked at the cavalier attitude some acquiring authorities adopt when dealing with property owners. If you'd like more information about our expropriation services, feel free to contact Mike at (902) 429-1811 Ext. 312 or mturner@turnerdrake.com


Wednesday, September 18, 2019 1:47:53 PM (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | Counselling | Expropriation | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island
# Wednesday, July 24, 2019

What is building efficiency? and why is it becoming increasingly important for landlords, purchasers and tenants alike?

Building efficiency stems from a variety of factors, some of which are tied to the building envelope or overall operating systems (HVAC, lighting, etc.), while others are tied to design and layout.  Our Lasercad® team focuses on the latter and partners with building owners and managers to help analyse and optimise their building efficiency using the BOMA Standard Methods of Measurement.

Using a typical office building as an example, the ratio of a building’s Occupant Area to its Rentable Area will yield a gross-up or efficiency factor, where higher factors equal lower efficiency.  In other words—the larger the percentage of common area to tenant occupied area, the larger the gross-up, and thus less efficient the building.

Since common areas are proportionately allocated (“grossed up”) back to each tenant, they are a primary contributor to determining building efficiency.  Large common areas in a multi-tenant office or industrial building increase a tenant’s overall rent as a result of higher gross-up factors.  It’s a double whammy because tenants are also subjected to higher Common Area Maintenance (CAM) charges which are needed to service those common areas.  The results manifest themselves in a variety of ways—higher vacancy rates, lower net rents, reduced marketability.  The list goes on.  An inefficient building is less attractive to potential tenants as well as to buyers.

Optimising building efficiency is becoming more crucial as development restrictions evolve and building owners, managers and shareholders look to maximise their returns.  Whether it’s new construction, or the renovation of an existing building, the BOMA Standard Methods of Measurement have become an increasingly important input of the initial design phase, and more and more developers are seeking guidance and expertise from our knowledgeable staff.    

Below is an overview of two buildings we recently measured with common areas highlighted in blue.  123 Jones Drive has an excessive amount of common area, including a large lobby, washrooms and extensive hallways.  By contrast, 125 Jones Drive has approximately twice the footprint, yet has far less space taken up by common areas.  Our BOMA analysis revealed the impact of the vastly different layouts: 123 Jones Drive has a gross-up of approximately 30%, meaning their rent is based on 30% more space than they physically occupy (i.e. Floor Allocation Ratio: 1.30).  By contrast, 125 Jones Drive has a gross-up of only 9% (i.e. Floor Allocation Ratio: 1.09) therefore staking claim as the more efficient building.

If you’re interested in optimising your building’s efficiency using BOMA standards, please don’t hesitate to contact one of our analysts to discuss a few of our key strategies. Whether you’re in the preliminary design stages of new construction, or renovating an older building, optimising your space to yield the most efficient solution is our primary focus.

Patrick Mitchell is the Senior Manager of our Lasercad® Division and also highly involved in our Valuation Division.  For further information on how to maximise your property’s value through space certification please don’t hesitate to reach out. Patrick can be reached at pmitchell@turnerdrake.comor by phone at 902-429-1811. 

Wednesday, July 24, 2019 1:52:36 PM (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | Lasercad | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake
# Monday, July 8, 2019


“How much? Get out!” (followed by the noise of a slamming door). Another day in the life of the hapless land agent, doing his level best to get the most for the least. At least that’s the common perception, but here at Turner Drake we approach things a little differently.  Our team of Land Agents follow the concept of “principled negotiation”, not positional bargaining.  And it works.  We are routinely retained to provide Land Agency services under contract to governments and corporations, who are increasingly out-sourcing this type of work to the private sector.  The projects we work on are large and small, involving anywhere from half a dozen to several hundred different property owners, and our mandate is simple: negotiate fair deals for the purchase of land interests to support infrastructure projects. Without upsetting anyone.

Roads and transmission lines are especially popular these days.  Seems we just can’t live without them. These are corridor acquisitions: mile after mile of trees and fields with the occasional home or business. All neighbours.  All savvy negotiators. And all deeply suspicious of strangers who turn up on the doorstep bearing gifts.  So our approach must respect that and we have developed a simple formula built around three principles:

Consistency

We can’t divulge offers and settlements to neighbours.  It’s a privacy thing.  But we expect that neighbours will talk as soon as we leave.  In fact we encourage it.  They can compare figures if they like, essentially testing our integrity to see if anyone got a better or worse deal than the others. And therein lies the challenge with corridor acquisitions.  Those at the end of the line must be treated the same as those at the beginning; those who settle quickly must be treated the same as those who hold out for more; those who shout must be treated the same as those who whisper. Sure, there are perfectly valid reasons for paying different amounts, but it can’t be arbitrary.  It must be explainable.  It must be credible.  And it must be fair.

Transparency

We go to great lengths to make sure landowners understand what is happening and what is going to happen. Large infrastructure projects will already have gone through a very public process by the time we get involved and many landowners will have attended open houses …. and perhaps already made their views known. But the regulatory framework for compensation and landowner’s rights under the law are usually a mystery.  We explain them.  Fully.  Our team of Land Agents are trained negotiators with the support of an entire team of in-house professionals to draw on.  So we don’t present take-it-or-leave-it offers. We explain how they are calculated, usually by reference to a base-line appraisal or a third party site-specific appraisal. All of which is revealed to the landowners so they too can see how the calculations are made.

Respect

It goes without saying but we’ll say it anyway. Every landowner has a story to tell and it is our job to listen.  Respectfully and with an open mind. Of course we don’t believe everything we hear, but invariably we will learn something from everyone just sitting around their kitchen table. Eating the free cookies. Most people just want their voice to be heard, and anyone who is being asked to give up their land against their wishes deserves to be heard. We call it respect. It builds trust and it leads to mutually agreeable results.  And that’s all we’re looking to achieve. Without drama.  Without the slamming of doors.


Lee Weatherby is the Vice President of our Counselling Division. If you'd like more information about our counselling services, feel free to contact Lee at (902) 429-1811 or lweatherby@turnerdrake.com
Monday, July 8, 2019 3:45:55 PM (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | Counselling | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake
# Tuesday, June 11, 2019

Who’s Going to Live In All Those Houses? – A common refrain when there’s a lot of residential development, whether houses, apartments, or condos.  Demographic trends can help to answer the question after the fact, but more importantly, attention to demographic patterns ahead of developing can ensure that housing supply meets demand.  After all, once it’s built, housing supply is here for the long haul.  At the recent NSPDA and LPPANS conference, Turner Drake led a workshop examining how individual decisions feed into patterns in housing supply and demand.  Here’s a brief recap (granted, a Nova Scotia‑oriented recap, but many of the principles apply across Atlantic Canada).
 
The Life Cycle of Housing
A typical person will move around a bit in their lives, starting out in their parents’ house (or houses: if we can infer Canadian behaviours from American stats, the average person owns 4.5 to 5.5 houses in their lifetime), moving to a rental apartment before buying their own home(s).  Later in life, they may downsize back to an apartment (possibly a more luxurious one this time) or condo, and finally make their way to a seniors’ residence. 
 
In-demand housing stock is heavily dependent on the dominant age groups in any given area.  The primary drivers of rental apartment demand are 20-29 year-olds, and the 65-and-older cohort, though the latter is increasingly shifting to a 75-year-plus bracket, and the former arguably extends to above age 35.      


Source: Statistics Canada 2016 Census


The inverse is demand for owned housing, and the primary buyers are ages 25 through 45.  The 25-29/34 year-old age bracket falls into each of the renter and buyer categories: this is the first-time homebuyer age range, where we see the steepest increase in home-ownership rates.  The inference is that by age 45, buyers have bought their first home, possibly sold it and upsized to a larger family home, and here they stay for a prolonged period of time.


Age distribution in Nova Scotia (Source: Statistics Canada Population Estimates)



The graph above shows shrinkage in the brackets that include ages 20 through 45, but growth in the 65+ brackets.  Growth in the 55-64 year old bracket means that the latter will continue to expand as Baby Boomers age.  A 2018 Royal LePage survey of home buying intentions found that 42% of Atlantic Canadian Baby Boomers plan to downsize in retirement, with 23% intending to sell their homes and move to their secondary properties, i.e. to the cottage.  Thirty-two percent would consider buying a cottage in which to live in retirement.  The answer is probably no, but all this moving to the cottage raises the question of whether the province will see population ruralisation over the next few censuses, or whether the urbanisation of younger generations will continue in numbers sufficient to offset it?  The map below shows population change at the Dissemination Area level in Nova Scotia between the last two censuses: the concentration of purple (growth) in urban areas, in contrast with the pink and red (shrinkage) of the rural areas, indicates urbanisation.

Population change 2011-2016, Statistics Canada 2016 Census


Just 29% of Atlantic Canadian Baby Boomers would consider purchasing a condo, the lowest rate in the county.  Recall that the stat comes from a survey of home buying intentions…and recent trends have been for downsizers to opt for rental apartments over condominium apartments.  There is certainly incoming supply of apartment units: CMHC statistics on housing starts over the past few decades show a distinct shift from single-family construction to apartments:


…at least in Halifax:



…though the rest of Nova Scotia is a different story:



The breakdown of the same housing start data shows a distinct rental intention:



…which again is driven almost entirely by the Halifax pattern:



...while the rest of the province still shows a clear preference for offering options for home ownership, with very little constructed for either the rental or the condominium market:



On the demand side, the province appears largely influenced by the statistics for Halifax, with vacancy mirroring the same ups and downs over the past three decades, though vacancy is a bit tighter in the city (overall 2% in NS and 1.6% in Halifax in October 2018).  Demand is strong: vacancy rates have been falling since 2014, even as the inventory of rental units has been steadily increasing.



In the years ahead, expect continued growth in demand for higher density residential forms, especially of the rental variety.  This trend is driven by the Halifax market, and offers an appealing lifestyle (low maintenance, low commitment), combined with the option to live off the equity unlocked from the sale of the family home.  It is not far-fetched to extrapolate that demand for multi-unit rental apartments may also exist in smaller municipalities in the province, but that rural housing economics (lower housing prices but similar construction costs) have thus far constrained the supply side of the equation.   

 



Turner Drake & Partners’ Economic Intelligence Unit follows closely trends in real estate and the factors that can impact its value, from demographic patterns and preferences, to climate change.  Custom reports translate data into conclusions.  For more information on how we can assist you, please call or email Alexandra Baird Allen: 902-429-1811 x323 or abairdallen@turnerdrake.com.


Tuesday, June 11, 2019 12:25:44 PM (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | Economic Intelligence Unit | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake
# Monday, April 15, 2019

Turner Drake started in 1976 with the mission to “provide solutions to real estate problems”. Initially we focused on valuation practice, but as real estate and its challenges have become more diverse, so too have we. Over the decades we’ve added complementary practice areas, expanding our perspective and deepening the expertise we could bring to the aid of our clients. Not long ago we once again ventured into new territory, adding a Planning Division. Rooted in the economic perspective that all our divisions share, our planning practice is unlike any other in Atlantic Canada.

Often we are called in to lend a hand on other Turner Drake assignments; bolstering property tax appeals, identifying implications for property valuation, or accurately reviewing development potential for brokerage clients. But we work most closely with our Economic Intelligence Unit, where our combination of GIS resources and expertise in the analysis of demographic, economic, and real estate market data have led us to some truly interesting planning assignments.  Working with a variety of both private and public sector clients, we’ve been involved in some of the largest planning and development projects in the Region. And some of the smallest. We’ve even picked up a few awards along the way. The challenges and outcomes are varied, but one thing is always common; an approach grounded in real estate economics.

Now, having just crossed the five-year milestone, we celebrate another; our first staff expansion. We put out the call shortly before the New Year: thanks to the many that applied, we are humbled by your interest in what we are trying to bring to the planning profession. So who is the new recruit ready to help us continue our success?    

Say Hello to the Newbie – Andrew Scanlan Dickie

Hello world, I’m Andrew – Turner Drake’s self-declared Newbie – here to share the story that is me; a story of adventure, intrigue, and spreadsheets. Yes, I’m that guy – the one who likes numbers just a little too much. I’m no mathematician, just a fanboy hoping to put my interests to use. I suppose that’s how I ended up here, but that will come.

My last names may throw you off, but I’m a born and bred Montrealer (I can feel the maritime Bruins and Leafs fans cringing). I decided to stay local for my first university degree, receiving a Bachelor of Commerce from McGill. I was young, inspired, and ready to take on the world. What does the mean? You got it – I went back to school, but this time away from home (sorry mom).

In Spring 2017, I graduated from Dalhousie University with a Masters of Planning degree. My short two years in Nova Scotia were nothing short of amazing; I met my soon to be wife, made amazing friends, and embraced the culture and lifestyle. But like many before me, I left to seek opportunities elsewhere.

Over the last two years I worked for a small-town municipal government in Ontario, wearing the many hats allotted to me and expanding my knowledge of planning policy. Don’t get me wrong, I loved it – but two things kept nagging at me: (1) Ontario’s got nothing on the Maritimes (there’s just something about the air here) and (2) my professional life was number deficient (ahem, nerd).

At the time, my partner and I were nestled in the suburbs. We had adopted a dog and enlisted the help of a real estate agent – we were getting pretty darn serious about putting down roots. So, one might say it was an 11th hour moment when the Planning Division opportunity for Turner Drake came up. I would say it was more an aligning of the stars; a chance to return to the place my partner and I hoped to call home and the lifestyle that comes with it, and an opportunity for me to develop both my business and planning expertise.

So here I am, ready to take on the world yet again and use my skills to contribute to the well-oiled machine that is Turner Drake. I’m chomping at the bit, so if you or your organisation are wondering how our expertise in development economics and real estate market analysis can enhance your planning process, just give us a call! Hint, hint, nudge, nudge – mandatory municipal planning strategies as part of the Nova Scotia Municipal Government Act are becoming a thing, so feel free to reach out about how that may affect you or how to explore that process. Alternatively, if you’re in Ontario and require some help navigating Ontario’s Planning Act, let me know!

To see how your project can benefit from our unique planning expertise, call Senior Manager Neil Lovitt at (902) 429-1811 or nlovitt@turnerdrake.com. We’ve got more horsepower than ever.

Monday, April 15, 2019 9:47:05 AM (Atlantic Daylight Time, UTC-03:00)  #    -
Atlantic Canada | New Brunswick | Newfoundland & Labrador | Nova Scotia | Planning | Prince Edward Island | Turner Drake
# Friday, March 29, 2019

You are a tenant looking for commercial space to lease. You start your search by checking the local Kijiji ads and maybe check with a few colleagues when you realise that perhaps you are in over your head. One ad is asking for $14/ft.² net plus operating and taxes, while another is asking $3,500 per month gross. How do you compare these two rents?  

Or perhaps you are a new landlord, eager to fill up your new investment property and start making a return. You are not sure what to charge for rent, but you want to ensure that all of your operating expenses are recovered at the end of each operating year and you are not out of pocket for any expenses.

First, let’s summarise the rental terminology:

Net Rent: Often called “Base Rent”.  This is what you pay for the right to occupy a given space

Additional Rent: Often called “Common Area Maintenance (CAM) and Realty Taxes” or “Service Rent”:  This is the cost of operating a given space or property.  It includes such things as electricity, heat, garbage removal, snow clearing, etc.  It is typically paid for by the landlord and then recharged to the tenant on a per square foot basis.

Gross Rent: This is the sum of all rent paid (Net and Additional Rent).

In order to compare a net and gross lease, the rents must be converted to the same basis (ie: both must be compared on a per square foot basis, or both on a monthly rental basis).  For example: let’s say that a particular unit is 1,500 ft.2 and it is being offered at a Net Rent of $14/ft.² and CAM and Taxes of $11/ft.².  Converting this to a monthly rent is as follows:

 

($14/ft.² + $11/ft.²) X 1,500 ft.² = $37,500 annual or $3,125 per month.

 

Alternatively, if you are provided with a rental rate of $3,500 per month gross for a 1,500 ft.² space, converting this to a per square foot rent is as follows:

 

$3,500 per month X 12 = $42,000 per annum / 1,500 ft.² = $28.00/ft.²

 

Now that you know how to calculate and compare net and gross rental rates…which one is better?  A net lease or a gross lease?...well it depends which side of the lease you are standing on.  The main difference between a net and gross lease, comes down to who shoulders the risk of increasing operating costs.  Under a gross lease, a tenant has committed to a set amount of rent for the lease term.  If the operating costs increase during the term of that lease term, the landlord “eats” those costs, thereby cutting into his/her effective rent.  Under a net lease however, the Additional Rent charged for operating costs fluctuates throughout the term of the lease.  Since landlords are recharging the tenants for common area costs, any increases are simply passed on to the tenant.  Tenants may prefer a gross lease since it represents a steady and guaranteed rent, and no risk of increasing common area costs during the length of the lease.  Landlords on the other hand tend to prefer a net lease where there is a steady and guaranteed base rent, and any risk of increased expenses is simply passed along to the tenant.

Ashley Urquhart is the Senior Manager of our Brokerage Division.  She has a vast network of contacts and would be happy to assist you with all your leasing needs.  Feel free to contact Ashley at (902) 429-1811 or aurquhart@turnerdrake.com.

Friday, March 29, 2019 11:05:01 AM (Atlantic Standard Time, UTC-04:00)  #    -
Atlantic Canada | Brokerage | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake
# Wednesday, January 23, 2019

Now is the time of year where many companies are cleaning house. Auditing departments are analysing and assessing inventory, and looking for ways to minimise losses – kicking off the New Year in stride!  Unfortunately, during this process many building owners and managers overlook the main driver of their revenue – the very square footage upon which leases are based.

It has become increasingly common for building owners and managers to rely on historical figures when selling or purchasing a property.  Many put their trust in building and unit sizes that have been carried forward for years, or even decades.  Considering building revenues and overall property values are directly correlated to building size, wouldn’t you want all of your ducks in a row before purchasing or selling a property?  In other words, when making an investment decision, why rely on areas that have not been certified?  

Space certification is more than just an independent, third party confirmation of the size of an existing space.  It can also be a crucial vehicle for unlocking additional property value.

Recently one of our clients was in the process of negotiating the purchase of a large multi-tenant industrial building.  The owner provided our client with the overall building area together with segregated unit areas.  The owner had openly stated the areas had not been measured in at least ten years and so prior to making his final investment decision, he engaged our Lasercad® team to verify the areas with a space certification of the building.  Once the tenant spaces were measured and the rentable areas calculated in accordance with the appropriate standard method of measurement, we came to an astounding conclusion.  Our space certification rendered a total rentable area which was more than 10% higher than the owner-provided areas!  The building area had been understated for the past 10 years (or more).  From an investment standpoint our client was floored.  Based on the current market rates for the area, the owner had been losing out on approximately $35,000 per year of additional revenue.  The potential revenues which could be realised from the previously understated building size played a major role in determining the overall value of this multi-tenant industrial building.

Although some building owners and managers may overlook the source of their building and unit sizes, many others have been pro-active in implementing space certification as a standard procedure - especially when making investment decisions.  Regardless of whether you are buying, selling, or leasing, it is essential to know where the underlying areas originate from.  The square footage of your building is typically the core revenue driver and often times, these areas are understated.  Now is the time to get a grip on your inventory and ensure you’re maximising its value.  

Patrick Mitchell is the Senior Manager of our Lasercad® Division and also highly involved in our Valuation Division.  For further information on how to maximise your property’s value through space certification please don’t hesitate to reach out. Patrick can be reached at pmitchell@turnerdrake.comor by phone at 902-429-1811.  

Wednesday, January 23, 2019 2:29:15 PM (Atlantic Standard Time, UTC-04:00)  #    -
Atlantic Canada | Lasercad | Valuation
# Thursday, December 13, 2018


Specific Claims are launched by a First Nation band against the Government of Canada for historic grievances, typically over issues like unfulfilled treaty obligations, loss of reserve lands and mishandled First Nation funds. The most common cases that cross our desk involve the sale of reserve lands by the government of the day without the Band’s consent, either because it was never surrendered by them or because it was invalidly surrendered.

The events are always historic and quite often pre-date Confederation – a time when settlers were actively seeking to establish themselves in the new world and the government of the day was eagerly trying to accommodate them through grants and leases of land.  And sometimes that happened to be unsurrendered reserve land.

Those readers with a penchant for all things historical will find interesting reading on the origins of these claims by researching King George III’s “Proclamation of 1763”, issued in those turbulent times of squabbling between the French and the British. It imposed a fiduciary duty of care on the Crown which endures to this day, and is enshrined in the Constitution Act of 1982.  Heady stuff.

Our involvement in these files begins when the historical research has been done and the claim has been accepted by the government for negotiation. The stage is then set for negotiations to begin over the amount of compensation that the FN should receive from the Government of Canada.

The structure within which these negotiations take place is laid out in federal government guidelines. The first, released in 1982, set out the policy on specific claims and established guidelines for the assessment of claims and negotiations. These were tweaked under successive governments but the fundamentals remain the same.  They can currently be found in the document entitled “Specific Claims Policy and Process Guide”, available online and currently (still) under review.

We have been actively engaged on claim files in the Maritime provinces since the company began over 40 years ago – impressive, but a mere blink of the eye within the context of the time periods actually covered by these types of claims. Our involvement occurs in one of two ways.

1.       As an independent Consultant, hired under a joint terms of reference to calculate the ingredients of the claim, which then forms the platform for negotiations between the parties.

2.       As a Technical Expert on behalf of the First Nation, advising their negotiation and legal team on the technical aspects of the claim, ensuring that the process follows the guidelines and that the FN receives the compensation it is due.

We have represented (or continue to represent in currently active claims) over half a dozen First Nations throughout NS and NB, usually in the role of Technical Expert.

The structure of a claim is set out in the guideline and usually there are two components, calculated separately but intrinsically linked through the historical record.

(1) Current Unimproved Market Value - Where a claimant band can establish that certain of its reserve lands were never lawfully surrendered, or otherwise taken under legal authority, the band shall be compensated either by the return of the lands or by the current unimproved value of the lands. A relatively straight forward process…..

(2) Historical Loss of Use - Compensation will include an amount based on the loss of use of the lands in question, where it can be established that the claimants did in fact suffer such a loss. This can include losses from timber, agriculture, minerals and aggregates, fishing rights, land rental losses and a myriad of other components.  A far from simple process, often involving experts from different fields … and forests. The claim clock begins when the lands where first taken – usually 100 years or more in the past.

The process is not a quick one. Reconstructing historical events – and placing a value on them - takes time and diligence.  This is no splash-and-dash appraisal job.  And rightly so because there is much at stake here. Claims typically run into the millions of dollars and the calculations behind them must withstand robust scrutiny by both sides.  The cost of righting past wrongs does not come cheaply – or quickly.


Lee Weatherby is the Vice President of our Counselling Division. If you'd like more information about our counselling services, feel free to contact Lee at (902) 429-1811 or lweatherby@turnerdrake.com
Thursday, December 13, 2018 10:43:20 AM (Atlantic Standard Time, UTC-04:00)  #    -
Atlantic Canada | Counselling | New Brunswick | Newfoundland & Labrador | Nova Scotia | Prince Edward Island | Turner Drake
# Friday, November 16, 2018


Happy GIS Week! 

 

We were working recently on an assignment in the Annapolis Valley, the land of orchards and sloping vineyards…and that got us thinking about the impact of elevation on land area.  Ultimately, the question is one of land value: inherent in the value of agricultural land is potential crop yield.  More land area equals more growing potential equals more value.  Where slopes are acceptable or even advantageous, they may serve double duty in that sloped land is larger than it seems.

 

Our Valuation Division’s MO is to maximise your property value…this is an Economic Intelligence Unit blog post, and this is GIS Week, so we’re going to geek out on how to ensure you’re counting all your land, using a GIS, a little high school math, and a fair bit of Pythagoras[i]

 

Pythagoras’ Theorem defines the relationship between the sides of a right triangle with the equation a² + b² = c².  Side “c” is the hypotenuse, and is always the longest of the three sides. 





For illustrative purposes, we created a convenient, perfectly rectangular, parcel.  It measures 500 x 1,150 m, for a total area of 575,000 m² (57.5 hectares).





That is: 

But the land comprising this parcel is sloped.  The contour lines added to the image below demonstrate the degree of the slope; on average, there is an elevation differential between the highest and lowest elevations of 140 m.  




Thus, the 500 m parcel dimension is effectively 519.2 m:



and the effective land area is 597,080 m² (59.7 ha.), a difference of 22,080 m² – over 2 hectares of extra space for crops! 

 

This is a highly simplified example of the impact of slope on land area.  There are many other factors to take into account, such as the tipping point between beneficial slopes and unusable inclines.  But in a world where “land: they’re not making any more of it,” holds true, the most informed decisions are the best ones.  Where a precise figure is required, you’ll need to call in a professional land surveyor.  But when an area scaled from a map is fit for purpose, using a GIS and a little high school math can yield a more useful number than you’d get from a regular map. 

 

P.S. a related fun fact was shared at Wednesday night’s Geomatics on the Town event (part of the 2018 Geomatics Atlantic Conference): tree planters space their seedlings at a certain distance from each other.  For one tree planter, this was the equivalent of 3 steps on flat ground, but on sloped terrain, it was 12 steps in order to leave sufficient room between trees! 



[i] Mainly for defining the relationship between the sides of a right triangle, but a little bit for first floating the idea that the Earth is a sphere...it comes into play in measuring distance.  There are two methods of measurement in a GIS, Cartesian and Spherical.  The Cartesian method calculates distance and areas based on data as projected onto a flat surface (like scaling from a paper map), while the Spherical method accounts for the curved surface of the Earth (like scaling on a globe).  The distances in this example were measured in MapInfo using the Spherical method.   




Alex Baird Allen is the Manager of Turner Drake's Economic Intelligence Unit, and has a high level of expertise and interest in GIS. If you'd like to reach Alex, call 902-429-1811 Ext.323 (HRM), 1-800-567-3033 (toll free), or email ABairdAllen@turnerdrake.com 
Friday, November 16, 2018 12:36:31 PM (Atlantic Standard Time, UTC-04:00)