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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
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.
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
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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. 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; 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.
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.
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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

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”. .jpg)
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

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

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.

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. .png)
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
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. |

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

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. .jpg) 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
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.
[1][2].jpg)
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.

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

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. .jpg)
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.
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
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. [1].jpg)
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.

“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. .jpg)
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
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: 

…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.
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 [1][2].jpg)
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.

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.

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. .jpg)
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

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

Why Hire a Commercial Broker? How a Commercial Broker Adds Value in Real
Estate Transactions
There are ample online and
offline resources available at your fingertips to help you purchase or sell a
commercial property on your own – so why hire a broker? If you have the time,
negotiating skills, real estate market information, and understand your target
market and how to reach them, you don’t!
However, unless you can say
yes to all of the above, here is how a commercial Broker adds value to your
transaction:
1. Your time is valuable. Letting a Broker do the heavy lifting and
deal with “tire kickers” allows you to focus on your business.
2. Brokers have the contacts
and resources to market your listing or find you a suitable property, ensuring
all opportunities are uncovered.
3. Brokers understand your
target market and how to reach them.
4. Brokers do not have an
emotional attachment to the property or transaction.
5. Brokers are often members
of local real estate associations, which can provide you with access/exposure
to the MLS system in addition to their own websites, social media platforms,
and databases.
6. Brokers have the inside
track on market data, sales transactions, planning considerations and players
in the market who are looking to purchase or sell commercial properties. They can
help you determine a reasonable price and can help maximise market exposure.
7. Brokers know how to
properly measure a building and collect the property information required, such
as any material latent defects that must be disclosed in a transaction, which
can avoid future lawsuits.
8. Brokers prepare Purchase
& Sale Agreements, Counter Offers, etc. on your behalf, saving you from hiring
a lawyer to assist with these items.
So, once you’ve decided to
hire a commercial broker, how do you choose which broker/brokerage to represent
you? The short answer is to simply hire the broker with whom you feel most
comfortable. There are many excellent commercial brokers locally, so meet with
a few, ask them questions, and choose the broker you feel will best represent
you, and who understands your wants and needs. Each commercial broker has their
own strengths; it is up to you to determine which one is the best fit for your
organisation.
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 1 (800) 567-3033.
October 7th
through 13th is Fire Prevention Week in Canada. With firefighters in Nova Scotia responding
to over 1,400 fire related incidents in 2016/2017, it is important to ensure
that you have the resources in place to help tenants safely clear a property in
the event of a fire.

The theme of this year’s Fire Prevention Week is “Look. Listen. Learn. Be aware. Fire can happen anywhere.” The “learn” component of this year’s them refers to the need for everyone to learn two ways out of every room. We can help. 
Our LaserCAD® team is able to assist with “learning” by creating fire escape diagrams for your building. We can add additional crucial details to your fire escape diagrams by including the locations of fire extinguishers, pull stations, hose cabinets, and emergency lighting, as well as clearly indicating escape routes. These maps allow tenants to quickly identify an escape route and the location of fire safety equipment in the event of an emergency. We can also customise the diagrams as needed, showing separate escape routes for each individual tenant space and noting any other relevant details, such as muster locations. You may not be able to predict when a fire will occur, but you CAN plan for it. For further information feel free to reach out to any one of our Lasercad® space measurement experts at (902)-429-1811 or toll free at 1-800-567-3033.
.jpg)
It is a common misconception that a piece
of real estate has a single value. This
is simply not true. Determining which
value is appropriate likely has the biggest impact on property value.
The Royal Institution of Chartered Surveyors’
Global Valuation Standards, specify six types of real estate value (Market, Rental,
Equitable, Investment, Synergistic, and Liquidation). The Appraisal Institute
(of America) has identified ten distinct, and valid, property valuation bases in
common use in North America. Legislation, case law, and the purpose of the real
estate assignment, result in many variations of these property valuation bases.
Any conversation about valuing your property has to start therefore with
an understanding of the purpose of the valuation assignment or you can end up
with a conclusion which is worthless at best, or seriously misleading at worst.
Let’s discuss the
two most common types of value.
Market Value (Highest and Best Use) is typically quoted and understood by many (including
appraisers) to be the only type of value.
It is the highest price you would get for your property on a specific
date, if it was offered for sale, properly marketed, and exposed for a
sufficient period of time to alert and allow all potential purchasers to submit
offers. It assumes that both seller and
buyer are knowledgeable of property values, that neither are under pressure to
sell or buy, are typically motivated, and are each acting in their best
interest. It assumes a cash purchase, or typical mortgage financing, in
Canadian dollars. It also anticipates that the purchaser will be able to put
the property to its “Highest and Best” use, which may for example, include
redevelopment, if this will create a higher value than the existing use of the
property.
But beware, Market
Value is not the
price you could expect to get if the purchaser (1) was an adjoining owner, (2) was
undertaking a land assembly, (3) was a relative or business associate, (4) knew
something that the vendor should have known but did not, (5) did not know
something known to the vendor of which the purchaser should have been aware,
(6) wanted a “vendor take back” mortgage, (7) intended to lease back the
property to the vendor, (8) enjoyed a negotiating advantage because, for
example, the vendor was in dire financial straits, … and so on.
I was recently contacted by an
existing client looking to secure financing for their property located on the
Halifax Peninsula. Their property was
improved with an older, single storey commercial building. The underlying land was worth considerably
more than the building and property under its current use. After discussing the purpose of the
assignment with the client and their bank, it became clear that the bank was
interested in more than just the Market
Value (Highest and Best Use) of the property in this instance. The bank’s goal was to determine if the
income generated by the property, under its current use, was sufficient to keep the lights on and pay the existing mortgage. However, the bank also wanted to know what
they could expect to sell the property for if they ended up taking possession
of it and selling it on the open market. Effectively, the bank had two different
goals which gave rise to two different values.
We completed a thorough analysis of
the property and provided the owner, and their bank with two values (1) Market Value (Highest and Best Use), which in this
case was for redevelopment of the property, and (2) Market Value (Value in Use) as it currently exists
without regard to redevelopment potential.
Market Value (Value in Use) is similar to Market Value (Highest and Best
Use) but is based on the assumption that your property could only be utilised
for its existing purpose.
Difference in Value
In this instance the
difference in value was significant: $1.5 million (Market Value - Value in Use)
versus $2.3 million (Market Value – Highest and Best Use). Both values were included and supported in
the report, allowing the bank to make an informed decision on lending.
Looking for explanations on the different types of values listed
above? Visit our Valuation and Advisory
Services site https://www.turnerdrake.org/WhichValue for more information on the various types of values.
Nigel Turner, Vice President of our Valuation Division, can be reached at nigelturner@turnerdrake.com

The Halifax Regional Municipality is in the throes of moving its
long awaited Centre Plan from draft to reality. With the first package of
draft policy and regulation released in late February, it’s come a long way
from the high-level guiding document that Turner Drake assisted with in 2016.
However, there is still a ways to go. As one might imagine, when replacing
multiple planning policy and development regulation documents for the most
dynamic and complex urban environment in Atlantic Canada, the devil is truly in
the details.
One of the biggest details being grappled with is the deployment
of density bonusing, which is principally designed as an affordable housing
tool. Depending on what you read, the current framework may actually backfire by
delivering no affordable housing and even drive up market-rate housing prices
by suppressing supply, or it may be perfectly fine and a good replacement for
present ad hoc negotiations which are falling
short of the Centre Plan’s achievable outcomes. Either way it provides
an opportunity to highlight the perks and pitfalls of this increasingly common
strategy.
What is Density Bonusing?
Density bonusing is a planning policy tool whereby new development
projects can access higher regulatory limits on built area in return for
provision of some public benefit. In other words, trade height for amenities.
It is sound in concept. The value of urban land (but not the buildings on it)
is primarily driven by where it is located, and what can be done on it. Thus,
it is value created by our collective society through the infrastructure and
services provided to it, the legal framework that governs it, and the
surrounding public and private activities which would make one desire a
particular location over another. When local governments “add density” by
increasing regulatory limits over what is currently anticipated by the market
(i.e. already reflected in its price), they literally create additional land
value out of thin air. In requiring a developer to provide public benefits for
this added density, local governments are recapturing the value they created in
the first place.
There is an obvious tension here in terms of why this ‘bonus’
density was not permitted in the first place, but in the messy world of
city-building, ideological purity will always lose to practicality. Density
bonusing thus becomes something akin to racketeering: nice development
application you’ve got there… what say you give us some art and affordable
housing, and maybe that shadow ain’t so bad anymore.
How Does it Work?
While it’s a clear win-win in concept, it can be complex in
practice. There are four important factors that determine whether or not
density bonusing works on a given site:
·
the value of the property as it exists today
·
the value of the land if purchased for redevelopment
·
the value created by adding bonus density
·
the value captured through required public benefits
It is important to note that all but the last factor on this list
are determined by the real estate market. The value captured is set by the
municipality, and is typically based on an estimation of the value of the bonus
density. In HRM, the tradeoff of density for benefits is structured under a
predefined framework. Other municipalities negotiate these arrangements on a
case-specific basis, but this approach it generally used in far larger centres
due to the complexity and sophistication involved.
Roughly speaking, development projects are feasible in areas where
the market price for land exceeds the value of properties as currently
developed. Adding a density bonusing program to the mix will increase the
redevelopment value, but also add a new cost in the form of requisite public
benefits. On net, this is usually a positive value; these programs are designed
to recapture only a portion of the value they create.
It should be apparent that density bonusing is not, in principle,
a drag on development. In fact, a properly designed program should improve the
feasibility of existing projects and even increase the total pool of viable
projects where the net positive addition of value (bonus density minus benefit
cost) actually tips the balance of feasibility. For all intents and purposes,
this is indistinguishable from a basic upzoning.
Where Can It Go Wrong?
There are plenty of opportunities for density bonusing programs to
go awry, but most are the usual pitfalls of any public policy. There needs to
be a logical and efficient administration process. The program needs to be
supported by accurate data so that its function lives up to its intent.
Appropriate buffers needs to be left to account for secondary costs and added
overhead created by the program itself. There needs to be additional mechanisms
in place to deal with the outputs (this is an important topic of conversation
in the Centre Plan context, in which the majority of benefit is supposed to be
in the form of affordable housing while the municipality has no formal
jurisdiction or established programming).
However, the fundamental issue of whether a density bonusing
program works is the value relationship between what is proposed, and what
exists today. Most of the debate and discussion in HRM has been focussed on
aspects of the former: what is the best value capture rate to use, what is the
right threshold for triggering the bonus requirements, what are the correct
value assumptions? Important questions, but their answers are all derived from
the latter issue, not determined in a vacuum.
At the scale of a city, form follows finance. Whether density
bonusing is implemented or ignored by the private sector will ultimately depend
on whether the total value of entitled and bonus density, less the cost of
delivering it (development costs plus public benefit), is a sweeter deal than
exists today. If a profit incentive exists, a badly designed program will still
deliver. If a perfectly designed program equates to a downzoning, don’t count on
anything happening until prices rise, or losses are written off.
How to Get it Right?
As municipal planning increasingly makes use of economic and
market-based tools (and it should) it also needs to expand its understanding of
the principles and systems that underpin them. Weight does need to be placed on
the market conditions of the present given their influence on the future (to
say nothing of the municipality’s complicity in forming them).
The traditional approach would state planning policies cannot be
captive to past practices and existing conditions, otherwise change would never
be possible. While this is true, it is not justification for being willfully
ignorant either. Understanding the basic value relationship between today's
conditions and those proposed under new policy is the key to understanding
whether density bonusing, or any planning policy for that matter, will deliver
on its promise. [1].jpg)
Neil Lovitt, our Senior Manager of Planning
& Economic Intelligence can be reached at 429-1811 ext. 349 (HRM), 1 (800)
567-3033 (toll free), or nlovitt@turnerdrake.com.
The Building Owners and Managers
Association (BOMA) publishes measurement standards for office, industrial,
retail, and mixed use spaces. These
measurement standards provide guidelines for measuring the area occupied by each
tenant within a building and, when appropriate, allocating common spaces.
BOMA states that if a building
contains a single occupancy type comprising 51% or more of the total building
area, the corresponding standard should be used. In other words, the building owner does not
have the right to simply choose the standard that best serves their interests.
Given the ubiquity of commercial buildings that can be used for both office and retail uses, particularly in suburban and
rural areas, it is critical to understand the differences between these
standards.
Boundary Condition
Where does my measure line extend
to? One of the most important differences between the Retail and Office
Standards is how the measure line differs for exterior enclosures. The Gross Leasable Area of a retail building
is measured to the outside face of
the exterior walls. Under the Office Standard
the measure line for the exterior enclosure is the dominant portion of the inside finished surface. The dominant
portion is the finished surface that comprises over 50% of the vertical height,
measured from floor to ceiling (not exceeding 8 ft.). This difference can be significant. The illustration below shows how a unit
measured to the Retail Standard (right) captures more area than a unit measured
to the Office Standard (left) based on this condition:
 Allocation of
Common Area
Under the Office Standard, building
owners can allocate to each tenant their proportionate share of common area. This
process of “grossing-up” the tenant’s space means each unit has two areas: a Tenant Area (the space physically occupied
by the tenant), as well as a Rentable
Area (the Tenant Area plus a proportionate share of common space). In a retail building this is not the case, as
this Standard does not allow for the grossing up of common areas. Under the
Retail Standard, Gross Leasable Area is simply the area designed for the exclusive use of an occupant with no share of
common area.
Consider a hypothetical office
unit with a Tenant Area of 1,250 ft.2 located within a building that
contains three additional units of the same size and 200 ft.2 of common
area. Each unit comprises ¼ of the total
Tenant Area, and is allocated 25% of the common area (25% x 200 ft.2
= 50 ft.2) making the Rentable Area of the unit 1,300 ft.2
(blue overlay on left side graphic below). If this were a retail building the
Gross Leasable Area would be 1,322 ft.2 as this unit would simply be
measured to the exterior face of all exterior walls, while excluding any allocation
of building common areas (green overlay on right side graphic below).

These are just two of the many
differences between the Retail and Office Standards. With a total of six BOMA Measurement
Standards it is critical to verify that the correct standard has been applied
to your building, and that your space has been certified to verify its accuracy. Mitchell Jones splits his time between Turner Drake's Lasercad® and Valuation Divisions. For further information feel free to reach out to him, or any one of our space measurement experts at (902)-429-1811 or toll free at 1-800-567-3033.
Of Heaven and Sea and Earth 
Please be suitably impressed by
this photo: it has all three of a church, a lighthouse and a commercial
heritage building
Five years ago, the Chronicle
Herald reported that some of Nova Scotia’s churches were exploring the option
of deregistering their buildings’
heritage status under the provincial Heritage Property Act. Nova Scotia’s churches are often their town’s
signature property, featuring architectural details ranging from elaborate
stained glass windows to ceilings built by 19th century shipwrights
using the same techniques used on the hulls of wooden ships. But cultural and demographic shifts have
reduced demand for churches in the province. Dwindling congregations mean reduced budgets
unable to cope with the high costs of maintaining and operating historic
properties. Deregistration is required
for demolition, the only option some congregations saw in the face of financial
realities: maintenance requirements outweighed the ability to keep these
architectural gems standing. Recent
years have seen other churches amalgamate congregations, keeping and
maintaining a single building while selling the rest off for (hopefully
sympathetic) redevelopment. 
Wolfville United Church as it was A more literal beacon facing a
similar threat of extinction is the Canadian lighthouse. Changing technologies have rendered redundant
their function, if not their cultural attraction. In May 2008, Parliament passed the Heritage
Lighthouse Protection Act, a bill to designate and preserve lighthouses of
historic significance. It took effect in
May 2010, only to be followed in June by an announcement declaring almost all
Canadian lighthouses surplus, no longer to be maintained by the Coast Guard. Since then, community groups have become the
champions of select historic lighthouses, while the rest, presumably, will
suffer the same fate as many an unfortunate ship along our rocky coasts.  Peggy’s Cove lighthouse, a likely survivor
The foregoing each illustrate the
perils of functional obsolescence: when a building’s functionality no longer
meets market demands only its cultural significance can protect it – and then
only if a champion steps up, e.g. government, community group, or passionate
property owner. Urban heritage
properties are particularly susceptible to rising functional obsolescence due
to the high value of the land on which they sit: the financial rewards of
redevelopment contrast starkly with the economic pitfalls of retaining and
maintaining them. Demolition is tempting.
This year we celebrate Canada 150. With our history and heritage, for better or worse,
on prominent display, we decided to turn our attention to the uphill battle
faced by commercial heritage properties in Halifax.
Size Matters
Hemlines are the
harbinger of stock prices. Construction
of the tallest skyscraper
marks the dawn of recession. Floorplates
sound the death knell of heritage properties?
 Open concept office-in-waiting
Downtown heritage buildings in
Atlantic Canada are at an inherent disadvantage versus modern construction
because they are simply too small. Even
30-year-old buildings are feeling the strain imposed by their new, more
spacious contemporaries, whose design is able to accommodate demand for open
concept offices. In Halifax, total demand
has yet to catch up with new supply. Rental rates are restricted and tenants
can afford to move into the new buildings, leaving the last generation of Class
A office space struggling to stay relevant – and occupied. The trend is toward larger floorplates as companies
are opting for large, open concept offices with collaborative workspaces and
few individual offices. Downtown Halifax
doesn’t have a supply of unused historic warehouses with high ceilings and large
floorplates ripe for conversion well suited to modern tastes. Instead, our heritage
properties are mainly small buildings, 3-6 storeys high and with floor plates
between 1,000 and 6,000 square feet (typically at the lower end of this
range).
Halifax has a few examples of
what can be done to overcome this drawback.
Barrington Espace and the RBC Waterside Centre both maintained the façades
of a number of adjacent heritage properties while completely overhauling their
innards, joining the buildings within to allow for larger floorplates (Saint
John’s CentreBeam Place is another example of where this technique was used
successfully). If done carefully, this
can present a best of both worlds compromise.
If not, the result may be the Disneyfication of heritage: it looks about
right, but there’s no soul. Either way,
it is not an option for detached heritage properties: they are left to find
occupants happy with the original floorplates size. 
Barrington Espace, RBC Waterside Centre, CentreBeam Place…thanks, Google
Street View! Finding a Fit Heritage properties need a
certain tenant. The predominant
competitor of the heritage office building is the home office: to attract a
tenant away from this “free” space, a historic building must provide cachet and
interest, and must find a tenant who wants (or needs) both as marketing tools
for their business. Heritage tenants are
drawn from a pool of largely creative firms represented by public relations and
marketing firms, IT companies, and (interestingly) employment recruiting
agencies. Often, these firms are start-ups;
there is a symbiotic relationship between the two, with the heritage property
providing an inspiring ambiance (and maybe cheap rent: see below), and the
company providing income and life to the building. What the heritage property has more trouble
providing is a flexible workspace that can grow with the company. When they become too large for their space,
they must seek a larger floorplate in a more modern building. There is a happy medium: mid-sized companies
who could occupy an entire heritage property as a single tenant. But in Atlantic Canada, most companies are
either large or small, a by-product of provincial regulatory demands which
force companies to “get large or go under” (Atlantic Canada is made up of four
small provinces each with their own regulatory requirements for businesses:
half the population and half the land area of any other province, but four
times the regulations…but this is a topic for another day). The Champions There are three classes of
champions for heritage properties: passionate owners (hopefully with deep
pockets), community groups who recognize the social benefit of maintaining our
built heritage, and governments which either have a measure of both these
characteristics or are open to the influence of those who do.
Heritage property owners must
appreciate the unique features of old buildings. To quote one (you’ll never guess who), they
“speak to you in a way new buildings don’t.
There is a sense of calm, a personality.
They have been there for centuries, and if the economics can work, they
will be there long after you’ve turned to dust.” Ah, the economics. Heritage properties in Halifax do not attract
a rental premium as they do in some larger cities, such as Toronto’s trendy Distillery District. There may be a purchase premium, albeit not driven
solely by heritage, but location as well, due to the prime situation some
heritage properties enjoy by virtue of having gotten there first. Halifax’s downtown is distinguished by its
waterfront; heritage properties with a connection to it in particular may enjoy
a purchase premium, provided this connection is maintained (pause now to be
thankful for the public outcry that halted “Harbour Drive” before it
started…and hopeful that the redevelopment of its first phase, the Cogswell
Interchange, will be successful in repairing the fabric of the area).  Toronto’s Distillery District, as modelled by a pair of junior TDPers There is a social benefit to
heritage properties, usually external to the site itself. A 2011
study by Place Economics highlighted six areas of positive economic impact
attributed to heritage preservation: jobs, property values, heritage tourism,
environmental impact, social impact and downtown revitalization. Heritage properties differentiate cities from
one another, providing a unique draw to residents, visitors and immigrants
alike. The world’s most successful
cities have vibrant heritage architecture, often interspersed with modern
buildings. Community groups recognize
this and fight to preserve historic built environments, but it is often the building
owners who fund these broader social benefits by bearing the increased costs of
renovation and upkeep. It is here that
governments can play a vital role via heritage preservation policies, but they
must take care that they get them right.
Incentivise or incense? Halifax Regional Municipality
recently commissioned a study to investigate heritage incentives. However structured, these are a means by
which society as a whole, via taxes, can help pay for the social benefit of
heritage properties. Two of the largest
pitfalls of which governments must be wary when enacting policies to protect
heritage properties both involve the risk of (inadvertently) penalizing
property owners. The first is the more obvious
one, wherein the owner of a protected building is prevented from redeveloping a
site to a more lucrative density, diminishing the ability to make money from
the property and potentially its market value.
One avenue available to the city is to compensate the property owner for
the diminished value by purchasing the air rights, i.e. the space above the
building in which they would otherwise be allowed to build, but are prevented
by heritage preservation policy. This
could be accomplished either directly, with the municipality retaining
ownership of the air rights, or by opening the market for air rights trading, allowing
heritage property owners to sell their air rights to developers of non-heritage
sites to increase the allowable height on their sites. (Yes, this has the potential to open another
can of worms, but it’s a good theory if the policy is well thought out). The second potential pitfall lies
in supporting some, but not all heritage properties; such as with the creation
of a heritage preservation zone. While
those properties (and their owners) located within the zone stand to benefit
from financial incentives offered by the municipality, any heritage properties
outside the zone are placed at greater disadvantage. Still competing against larger modern
buildings, they are now on an uneven field against their direct (heritage)
competition. The supported properties
have the money to modernize without deficit to their owners’ bottom line, while
unsupported properties are further penalized physically and financially. For more on heritage rights and
wrongs, don’t miss our Summer 2017 newsletter, coming soon to a mailbox near
you. If you are not already subscribed
to this informative and gutsy publication, please get in touch with us at
902-429-1811 or tdp@turnerdrake.com.
Alexandra Baird Allen is the Manager of our Economic Intelligence Unit,
a position which makes surprisingly good use of her liberal arts degree in
history & cultural studies, as well as her expertise in GIS. For more information on our Economic
Intelligence Products, visit our website or contact Alex at 902-429-1811 ext. 323 or abairdallen@turnerdrake.com.

(Image via Global News)
Symptoms of an Election
In the run up to the now transpiring Nova Scotia provincial election, our governing party engaged in the time-honoured tradition of the spending announcement roadshow. A few million for a community centre here, a few million more for an overpass there, culminating finally in the double whammy of a new outpatient facility in suburban Halifax, and toll-free twinning of several sections of highway.
Unlike most spending announcements, the outpatient facility drew immediate criticism. While the highway twinning has started to attract some rightful critique, the patently foolish choice of locating a medical facility in the retail backlands of a dysfunctional industrial park was apparent to many; not the least of which being senior municipal staff who’d advised the Province of these issues months prior. Embarrassingly, the location is a miserable failure when measured against the Province’s own aging population action plan, Shift, which it had announced along with nearly $14 million in funding mere weeks before.
As an aside: of the opportunities for criticism of the outpatient location, and there are many, the purchase price of the land is not a fruitful one. Without the benefit of knowing the particular details of the deal, the $12.00/ft² paid by the Province for the raw land includes the cost to bring the site to a state of development-readiness. Land in this condition elsewhere in Bayers Lake has sold in the neighbourhood of $11.50/ft², so this is hardly the 12,000% markup insinuated by some reporters and rival politicians. (For future reference, comparing purchase price to assessed values for development land – or any real estate for that matter – can be extremely misleading. Media Types: if you’re looking for a real estate angle on a story, give me a call… I know some people.)
A Bad Prognosis if Left Untreated
So here’s the rub. Atlantic Canada, as we’ve described many times, is facing a serious demographic crunch that will constrain income tax revenue to the provinces, and property tax revenue to municipalities (in Nova Scotia, see Canso, Springhill, Hantsport, and Parrsboro for a preview). Given the scale of these trends, immigration is not likely to alleviate this difficulty. This means public investment utilises increasingly precious dollars; long gone is the time where we could rely on growth to overcome poor decisions.
Yet, public capital spending is and will remain one of the most significant factors in the trajectory of our communities. The provision and location of these facilities influences development trends for decades. A new medical facility is not just a site for convenient patient care. It is also a major employer, and consumer of both public and private services. It generates broader impacts; spinoffs that if harnessed properly can enhance the benefits of other facilities, strengthen neighbourhoods and local business, and mitigate future infrastructure costs. A newly twinned highway is not just a safety improvement for the travelling public, it is a half-billion dollars no longer available to be spent on other priorities. We’ve got to get serious, we’ve got to be scrappy, and we have to be careful to maximise the benefits our public spending generates. Opportunities of an equivalent scale from private-sector activity are few and far between.
By narrowly constraining their site selection study (I presume, as this information is also not publicly available), the government has perhaps saved money on the land for the outpatient facility, only to create far greater costs in the form of municipal servicing expenses, diminished economic spinoff, and foregone social benefits. This short-sightedness is not resigned only to our provincial overlords, municipalities large and small consistently miss opportunities to strengthen and improve neighbourhoods or commercial main streets. At best, we have a habit of placing community facilities in a location that only performs well on measures of land price and vehicular accessibility. At worst, it is directed by decades of parochial bickering and ends up in a location agreed to be equally terrible for everyone.

Nice wellness centre you have there, shame about the sidewalk.
(Image via Pictometry ©2015)
Prescription
As the highway twinning issue has shown, no “overwhelming public consensus” is going to emerge on any policy or funding choice other than those promising a free lunch. It is going to take political guts to lead the way: the decisions we need to make are pound-wise at the risk of appearing penny-foolish. Better analysis can help identify the optimal site selection and communicate the wisdom of that choice. A paltry million saved in cheap land will pale in comparison to full lifecycle costs of poorly located public infrastructure. The property taxes generated by that good natured economic development project might never recoup its initial cost. And increasingly, methods are available to help quantify and communicate the broad community and economy strengthening effects that government undertakings can create. A complete approach to site selection and capital project analysis in a time where each dollar counts is the difference between spending decisions that achieve lasting public value instead of fleeting public relations.
Remember, an ounce of prevention is worth a pound of cure, and we have the skills required to evaluate your options in the context they deserve. Neil Lovitt, our Senior Manager of Planning & Economic Intelligence can be reached at 429-1811 ext. 349 (HRM), 1 (800) 567-3033 (toll free), or nlovitt@turnerdrake.com.
Property tax is by far the most important source of revenue for municipalities in Canada, accounting for 49.5% of revenue in 2008 with an annual average growth rate of 1.6% (1988-2008). As reliance on property tax increases, so does the complexity of administering this regressive but necessary evil. Increased computing power in the mid-1960s prompted a shift towards automation of property tax systems, beginning with simple tasks and culminating in today’s fully automated assessment, notification, and payment systems. Modern Automated Valuation Models (AVMs) allow for rapid processing of data with minimised human-bias… but (and this is a large but) real estate appraisal is a nuanced trade: reducing the role of Appraiser to AVM Technician can have significant negative repercussions.
Service New Brunswick’s ongoing cleanup of their attempt at an AVM is a prospective case study in the dangers of a “hands-off” approach to the valuation process. Massive value errors were created by a computer-driven system with insufficient checks in place to alert users to suspicious results. When reviewed by human appraisers many of the shockingly incorrect valuations were easily overturned based on traditional market comparison valuation. Autopilot replaced the flight crew and actual appraisers are left cleaning up the crash, while their political and bureaucratic colleagues deal with the rightful public outcry.
While seemingly seductive, potential time and cost savings offered by an AVM should never mask the fact that, in order to operate successfully, an AVM must integrate human expertise throughout the valuation process. At Turner Drake the “A” in our in-house AVM stands for Accelerated to reflect the role that expert opinion plays in our two-stage computer-assisted mass appraisal model. Stage One combs through real property sales to select comparable properties based on locally relevant, value-defining attributes such as size, location, and design. Stage Two adjusts and weighs a unique set of comparable sales to create a market-based value estimate for each subject property in an assessment area. Throughout each stage of the model, a professional appraiser defines the selection criteria and adjustment values for comparable properties based on market evidence and local expertise. The model does the heavy lifting but certified appraisers evaluate and refine the results.
Outliers - which no system can avoid - can wreak havoc on the results of an AVM unequipped to handle the inherently diverse nature of real estate. It is critically important to flag potential outliers for review so the model can be adjusted for future assessments. During the initial rollout of an AVM model, refinement is time consuming but absolutely necessary for creating reliable, equitable assessments in successive years. In developing our Accelerated Valuation Model, we put the time in up front so the system flags out of the ordinary results, and the professional appraiser, made aware of the potential issue, is able to quickly and easily account for them.
In a Case Study of condominiums on the Halifax Peninsula, the Turner Drake AVM out-performed PVSC assessment values by a margin of up to 45%. That is, 86% of TDP value estimates were within 5% of an actual time-adjusted sale price versus PVSC’s 41% and 98% of TDP values were within 15% of actual sale price versus PVSC’s 84% in the same pool of properties. Our combination of custom programs and a traditional direct-comparison valuation can produce a list of unique comparables with adjustments for 1,000 properties in about two seconds.
Property tax administration systems are as diverse as the municipalities they serve and every region relies to a degree on the convenience of computers and automation. However, no matter the size or complexity of a property tax system it is important to follow best practices, and learn from the success - or failure - of others. When the pursuit of speed comes at the expense of quality there is a significant risk to the accuracy of valuations and the credibility of the property tax system as a whole.
For more information on how our AVM can benefit you, call James Stephens at 902-429-1811 ext. 346 or email jstephens@turnerdrake.com
Our Economic Intelligence Unit is always on the hunt for new data sources to bolster our maps and feed our spreadsheets: any good analysis begins with high quality data. The majority of our databases are populated with a wealth of information via a process of blood, sweat, and tears (though increasingly data is graciously released by provincial gatekeepers) and it could be that our next trove of valuable data is being cultivated on farms across the Maritimes. The movement of food from field to plate involves numerous stops along the agricultural supply chain and, when property tracked, that data can prove valuable for a host of analytical tasks.
The ability to track an item from Point A to B in a large-scale supply chain is known as traceability. The theory behind it is relevant in all aspects of our lives: be it an Amazon package or a donair pizza, consumers - and businesses - have discovered that real-time knowledge of where a product is, physically, at any point in time is a competitive advantage in terms of marketing and efficiency. Agriculture is no exception. Traceability is already in use as a health risk management tool: it allows for rapid response to health emergencies by identifying exactly where and when afflicted produce or livestock stopped along the supply chain. Efficiently pin-pointing sources of contamination (think E.coli outbreaks) and creating cost-effective responses, such as targeted treatments and recalls, are critical in a modern, globally connected agricultural sector.
In addition to the obvious benefits of using traceability from an epidemiology perspective, there is also major potential for economic spinoff benefits from tracking the movement of agricultural goods. At a recent gathering of Nova Scotian Agrologists, speaker Chris deWaal of Getaway Farm (of Seaport Market fame) touted the very real benefits of offering consumers the entire life history of their food as a competitive advantage over mass-produced “mystery meat.” The introduction of the “Trace My Catch” program for canned seafood provides an example of how seafood processors are embracing traceability as a marketing tool, and provides an indication of the feasibility of doing so. In a province with a growing love affair for all things local it is no surprise that demand for local meat and produce is on the rise.
Benefits beyond health and marketing can be opened with traced agricultural data. Used in conjunction with GIS, the location and density of animals, farms, stockyards, abattoirs, and processing facilities become inputs for site selection and trade area analysis and indicators of economic health in rural economies - an issue of pressing concern for many Nova Scotian communities.
Imagine opening a meat processing and distribution facility to feed growing demand for local, organic products while still maintaining capacity for foreign exports. A standard GIS-based site selection analysis would use static location data (suppliers, purchasers) with network data (highway, rail, sea) to build a short-list of potential development sites which minimize transportation costs for both inputs and outputs. Additional variables such as workforce availability, machinery and equipment suppliers, veterinary services, and property taxes can all be integrated with locational data to suit the needs of the processor. But a standard analysis does not take into account how many animals are produced by individual farms or the variability in production from year to year.
Traceability data can enhance GIS analysis by optimizing site selection so it is based on not just the density of farms within a trade area, but the capacity to bring high volumes of livestock (or produce) efficiently to market. Historic tracking data of individual animals could forecast future production including where livestock are ultimately processed and sold. A savvy processor would use this data to identify opportunities for expansion and generate reliable, defendable business projections.
The agricultural sector already collects traceability data for use in health risk management; leveraging that same wealth of data for marketing and day-to-day business operations is the logical next step. The agricultural sector is a ray of light in the gloom of rural Nova Scotia: according to Statistics Canada’s census, between 2006 and 2011, Nova Scotia was the only province in Canada to see an increase in the number of farms, total farm area, and number of farm operators. Should the 2016 census indicate continued growth, it will clearly indicate that it’s time for all players in the agricultural game to leverage their existing data infrastructure to gain a competitive advantage at home and abroad.
For more information on how spatial analysis can benefit your business, call James Stephens at 902-429-1811 ext. 346 or visit: Economic Intelligence Unit
 Finding Answers in the Bottle
Recently our Brokerage Division closed a deal that will see a mid-century commercial building transition from a hair salon to Halifax’s first cidery – a business dedicated to the production and enjoyment of hard ciders. It is the city’s newest addition to the burgeoning craft beverage industry, and by my count, the fifth such business within short walking distance of our head office. Thanks to double digit year-over-year growth in the industry, such businesses have been setting up shop throughout our region, but I have good reason to believe we at Turner Drake are working in the very nexus of Beer Oriented Development.
The craft beverage industry is booming throughout the continent evidently. However, BOD is a specific variant distinguished by integrating the production element the brewery, with the social gathering element of a retail/food service business, wrapping it all in a locally authentic brand identity and plunking it in walking distance to residential neighbourhoods. The term itself was apparently coined in the weary rust-belt city of Buffalo where a pattern of revitalisation lead by the craft brewing industry has been observed in neighbourhoods otherwise dogged by the Midwest’s manufacturing decline and hard hit by the Great Financial Crisis.
Back in our corner of North America, we can certainly attest to the healthy “third place” function of Beer Oriented Development. That is to say, in addition to the production itself, many businesses serve as a nexus for community development outside of the home and workplace. They are small enough operations to revitalise defunct or underused properties without the timeline and complexity of projects requiring land assembly. The size and design of the retail operation typically creates an enjoyable atmosphere and promotes interaction between customers (who are often neighbours). Where the sale and service activities are able to spill outside onto a patio or sidewalk café, they further add to the vitality and liveliness of the entire street. With seemingly endless groups of engineering school buddies (it’s always those engineers) keen to start their own sudsy venture, why do some areas see a flourish of BOD while others simply get an increase in breweries?
The Broken Window Fallacy
There’s a classic economic parable that goes something like this: A baker’s shop window is broken and he hires a glazer to repair it. Passersby observe the glazer at work and remark on the economic activity stimulated by the broken window. Meanwhile, the baker having spent his money on the window now postpones his plan to purchase a larger oven to increase his production. In this way, the passersby are mistaken about the benefit of a broken window because they consider only what they see, and not what they can’t see. That is, they do not consider the opportunity cost; the lost benefits that would have been generated by things that were prevented, often without conscious purpose, from ever happening in the first place.
We don’t often think about opportunity cost in planning. We like to have the initiative; there are no problems that can’t be fixed through the application of more regulation or better policy. In this mindset, it is sometimes easy to lose sight of the fact that many (perhaps even most) good things tend to happen on their own if we leave the space for it. Nevertheless, Halifax, like many Atlantic Canadian cities, does benefit from not having gone too far off the deep end when it comes to land use regulation… at least compared to standard practices west of our region. Consider the present (if outgoing) land use bylaw for the Halifax Peninsula area where residential land use is governed by 6 zones. Contrast that with London Ontario, a city of comparable population and municipal budget, where no less than 17 zones are needed just to regulate single detached housing! Clearly one approach provides more “regulatory space” than the other.
Six of One Ain’t Always a Half Dozen
London, like Halifax, is a university town with no shortage of thirsty students or courageous engineering buddies. Like Halifax, it has its own litany of recently launched microbreweries. And finally, like Halifax, London did not, and does, not specifically target or promote Beer Oriented Development. What London does have is its hyper specific approach to coding land use which classifies microbreweries as “Food, Tobacco, and Beverage Processing Industries” and among the 20+ flavours of commercial zoning, relegates such uses to the “General Industrial” areas of the city. In Halifax, some microbrewers also set up shop in the industrial areas, depending on their business model. However, Beer Oriented Development is mostly occurring under the General Business zone which allows – to paraphrase – basically any business that doesn’t create problems in the area.
The shocking result? All of London’s new microbreweries are segregated into soulless industrial parks. Sure, they’ve got a quality product, backed by the same witty, self-aware marketing, and most even have attached tasting rooms and offer brewery tours, but to access any of it you’ve got to drive out past electrical suppliers and find their docking bay among the other distributers and warehousers. So while both city economies are benefiting from growth in the craft beverage industry, only Halifax is gaining the additional benefits to neighbourhood revitalisation and contributions to a lively pedestrian atmosphere. These are not just intangible perks for urban hipsters. There is a hard dollar cost to London in terms of lost economics spinoffs and unrealised gains in property value, but that cost is the new oven, hidden behind a broken window.
The Future is Delicious
Beer Oriented Development is just a microcosm of a larger dynamic. No one was anticipating an explosion of craft brewing or the potential of BOD when the zoning codes were written twenty years ago, just as the codes we write today do not address a futuristic possibilities like the rise of distributed manufacturing, or an explosion of artificial intelligence. In truth, it’d be foolish if they did. In dealing with an ultimately unknowable future, it is basic human nature to play it safe; control what is knowable, and regulate the unexpected out of existence. The costs of this approach are easy to ignore because we are never fully aware of paying them. Yet, as Beer Oriented Development clearly demonstrates, there is a benefit, indeed a competitive advantage, to the city that sets itself up to embrace the unknowable future and capitalise on the unexpected.
Our Role
What can you build on your property? The answer to this is determined by interpreting the local planning policy and regulation. However these are living documents, and project timelines are often measured in years. Thus, it is essential to not only look at the present-day context, but peer into the future for additional opportunities. This is precisely why all our Planning Policy and Regulatory Review reports contain a Long-term Outlook section.
For a recent client, this feature paid dividends. For their property, the desired outcome would have required multiple amendments and the negotiation of a Development Agreement under present requirements; an expensive and risky process overall. However, by casting a wider gaze in our investigation, we identified an opportunity to pursue the same goals through a larger policy update the municipality was preparing to make. While this didn’t save our client any time, it lowered the risk, and greatly reduced the cost.
We’re finding our Planning Division lends vital assistance to our other areas of operation, improving the detail and delivery time of Valuation, Counselling, Economic Intelligence, Property Tax and Brokerage assignments. More importantly, it creates value for our clients, aiding with development projects big and small. .jpg)
Whether you’re musing about options or working towards a clear goal, ask Neil Lovitt, our Planning Division Manager, how we can help: 1 (902) 429-1811 (HRM), 1 (800) 567-3033 (toll free), or nlovitt@turnerdrake.com
Every year at this time, the Island welcomes the prospect of summer with an explosion of colour: yellow daffodils, orange tulips, green grass, blue skies and dancing waters. Less welcome is the annual burden heralded by flowering of the 2016 Assessment Notices. If you are a property owner, you should have received it by now. It was officially mailed on May 6th and you have 90 days in which to file an appeal or wear the consequences for the rest of the year. If your property is enrolled in our PAMSTM Property Tax Manager program, you can relax; we are already reviewing your assessment and will file an appeal if the opportunity exists to reduce your tax load. If your property is not yet PAMSTM protected, procrastinate not: you have work to do.
The legislated basis for your Year 2016 assessment is your property’s Market Value on January 1st, 2016. However, the Assessment Act also implicitly includes a “uniformity” provision hidden in the appeal process, so similar properties are required to have similar assessments. You should appeal your assessment if:
(1) Its Assessed Value > Market Value as of January 1st, 2016, or
(2) Its Assessed Value > Assessed Value of Similar Properties.
The first test is to estimate your property’s Market Value on January 1st, i.e. the price it would fetch had it been offered for sale during the last six months of 2015. Purchasers look to the future, but their expectations are usually coloured by recent history. So if, for example, you own a tourist related facility, your 2015 season will impact its value to the degree that it would influence potential purchasers for 2016 and beyond. The Market Value too is based on its anticipated selling price… not the price that would persuade you to dispose of the property.
In 2012, our Economic Intelligence Unit conducted a demographic study of Atlantic Canada for a national client. Their study utilised data from the 2001, 2006 and 2011 Statistics Canada censuses. The rate at which our regional population aged during that period is frightening; the rate at which it will age over the next ten years is terrifying. Last year, a government initiated study was released, which reviewed the changes to the economy resulting from that demographic change. The report studied Nova Scotia but its conclusions apply to all three Maritime Provinces. The report is not a happy read.
If you own a “lifestyle property,” e.g. motel, golf course, vineyard, restaurant, etc., past sales of similar properties may not be a reliable indicator of your property’s current Market Value. This type of property is usually owned by an owner operator, many of whom are now reaching retirement age. Unfortunately, the pool of prospective purchasers is shrinking rapidly as the entire population ages. Fewer purchasers translate into lower values. This is over and above any adverse impact resulting from declining tourist dollars as Americans in particular shun foreign travel.
If you own an office building in Charlottetown, you may be suffering from burdensome vacancy rates. Our most recent survey (December 2015) covered 100% of the rental stock and revealed an overall 15.69% vacancy rate… well above the sustainable economic rate and up from 10.4% from the previous year. Our survey of industrial space recorded an overall vacancy of 14.00%. If you own an office or industrial building, you should carefully consider if an appeal is warranted.
The provincial assessment authority sometimes assesses property at less than its Market Value to forestall appeals. There is an assumption by most property owners that they will not be able to successfully challenge an assessment if it is less than the property’s Market Value… even if the assessment is higher than those of similar properties. This is not the case. Buried in the appeal section of the provincial Real Property Assessment Act is the requirement that “the Minister shall demonstrate the uniformity of the assessment in relation to other assessments” (Section 28 [1]). Thus, albeit somewhat belatedly, does the Assessment Act acknowledge that similar properties should have similar assessments. Comparing commercial properties and their assessments can be a little tricky however, which is why we have built an Assessment Database for the entire province that allows us to conduct peer group comparisons… and quickly determine whether your property is uniformly assessed.
The Bottom Line: Fortune favours the brave.
Action Required: Call our PEI Tax Team members Mark Turner and André Pouliot at 902-368-1811 (Charlottetown) or toll free at 1-800-567-3033. Alternatively, you can email them at markturner@turnerdrake.com or apouliot@turnerdrake.com. Using our proprietary software CompuVal®, our PEI Assessment and Transactional Databases, and basic property information provided by yourself, they can usually determine in a five minute telephone conversation whether you should appeal. There is no charge for this service, nor will big men come to call.
Immigration into Canada is nothing new: the country admits an average of 253,875 immigrants each year. This number is responsible for almost two-thirds of the national population growth from 2005 to 2015. Based on a housing demand projection study conducted by the Canada Mortgage and Housing Corporation (CMHC), a 1% increase in immigrant population causes housing demand to rise by about 0.66%. However, the Maritime housing market is facing a projected decline in the coming years due to three interdependent facors: an aging and shrinking population, a dearth of immigration and very low rates of economic growth. This is not new information: alarms were given by various sources and it’s time to halt the slide.
History has proven that an aggressive immigration policy can help smooth the impact of an aging population (e.g. Ontario and Vancouver). It is not surprising, therefore, that increasing migration into the Maritimes is an effective way of addressing the adverse effects of our aging population. New immigrants will not only help increase the production of goods and services but will also directly increase the demand for housing.
Becoming a Maritime immigrant myself, I have a special interest in exploring the relationships between immigrant and housing trends in this region. I came to Canada in late 2012 as an international student and have seen several immigrants who decided to stay and purchase a house here. Many of them are below age 40, well-educated, and economically independent. Do they represent the majority immigrant group in the Maritime Region? I decided to dig into the data to find the answer.
The Maritime Immigration Trends
Immigrants comprise less than 6% of the Maritime Provinces’ total population, but 20.6% of the national population. Immigrant inflows to the Maritimes fluctuated dramatically from 1991 to 2006, however in the last decade, trends have been rising. This can be attributed to new policy initiatives (e.g. provincial nominee program, skilled worker express entry) aimed at attracting more immigrants to the Maritime region. From 2006 to 2011, the number of immigrants to PEI rose six-fold. Not surprisingly, employment growth in PEI caught up with the national average during the same period. Although this growth is from a small base, it still means the island is attracting more than twice as many immigrants compared to its share of the total population.
Maritime Immigrants: Countries of Origin and Demographic Profile
The United States and United Kingdom were the top two source countries of the Maritime immigrants during the 1980s. The position was taken over temporarily by some Middle Eastern countries (in the aftermath of the Gulf War) and China in the 1990s. In the last decade, the US and UK again became the top two sources of immigrants, but China and other Asian countries are listed among the top five.
The map above shows the percentage of the total population formed by Maritime immigrants in in 2015, along with the most common countries of origin. Immigration to the Maritimes is heavily slanted in favour of Halifax County (NS), Queens County (PE), Westmorland County (NB) and York County (NB). However, according to the immigration demographic profile report provided by the Atlantic Metropolis Centre, more than one-fifth of immigrants who arrived in the Maritimes from 2006 to 2011 declared their intended destinations to be outside a Census Metropolitan Area (CMA), which indicates the potential for allocating new immigrants to rural areas.
The age profile of immigrants in the Maritimes is dominated by the lower age group according to the most recently released Statistics Canada data. About 75% of immigrants who arrived from 2011 to 2015 were under age 45, and 7.5% were under age 25. The corresponding numbers for resident Maritimers aged under 45 and under 25 in 2015 were 44.3% and 14.7% respectively.
The Housing Situation and Needs of Immigrants
There have been many reports and studies exploring the current economic and population trends in the Maritime region: evidence shows Maritimers are now on the brink of an extended period of decline. The unavoidable aging trend is weakening the Maritime housing market and will continue to do so unless effective action is taken. The key to slowing down the aging trend is to be open to the outsiders by targeting and attracting skilled immigrants to the region.
In last month’s TDP trends, we explored the HRM residential house market tipping point. In the Atlantic Region, most first-time buyers are aged 25 to 34, followed by a small portion in the 35 to 59 group. Second-time buyers are also primarily aged 25 to 34. Finding suitable and affordable housing is an essential step in immigrant integration. With relatively lower housing prices (compared to Ontario and Vancouver), the Maritimes have advantages in attracting potential younger aged immigrant home buyers. Such a future can have only one outcome: reversed housing declines in demand for the aging population trend, which will boost the regional economy.
Written by Chen Shi, Consultant in our Economic Intelligence Unit. To learn more about Chen, visit our Facebook page to see her Featured Consultant article.
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