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June 2010 |
In This Issue...JUNE 2010 ALTUS IN DEPTH – VANCOUVERIn this issue of Altus In Depth, we highlight some current valuation, construction cost, and property assessment issues. The articles are entitled:
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| GREATER VANCOUVER – THE TALE OF THREE OFFICE MARKETS |
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The Averages are Dangerous!
As markets move from valley to peak in the business cycle, we often become increasingly confident in our use of averages to accurately describe the status and direction of all corners of the marketplace. The performance of Greater Vancouver’s Office Market expressed as average vacancy, rental rates, growth in occupied area, and new supply are interesting but they are dangerous if applied to specific nodes or situations. Investors, lenders, occupants and their advisors will all want to benefit from very specific information and avoid making decisions based simply upon market-wide averages. The following chart depicts the Class A Office Markets for Downtown Vancouver, Burnaby and Richmond where very different conditions, drivers and dynamics are in place that result in very different vacancy and rental rate outlooks. Generally speaking, rents will be stable or increasing in Downtown Vancouver as Tenants seeking larger blocks of space have virtually no options, as compared to much softer rental rate conditions in Burnaby and Richmond, where Tenants have many options. For more information on Altus InSite please click on the following link. www.altusinsite.com or contact Gord Scraper at gordon.scraper@altusinsite.com. 
Even within a specific node, specific buildings may be a pocket of pain while others are in a position of strength. The circumstances of each building, their investor(s) and their manager matter and the averages are dangerous. |
| HISTORIC VANCOUVER OFFICE CAP RATE TRENDS |
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Capitalization rates in Metro Vancouver continue to rank as being the lowest in
Canada. The graphs below shows historical Investment Parameters for a Downtown and
Suburban office buildings. These parameters are sourced from the Altus InSite Investment
Trends Survey, and represent the expectations of buyers and sellers rather than
the results of actual transactions.
Please contact David Eger at david.eger@altusgroup.com if you require specific information on recent sales of Greater Vancouver office buildings. 
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| SENIORS HOUSING UPDATE – CAPITAL MARKET ACTIVITY |
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The second quarter of 2010 has seen capital raising efforts by Canadian listed seniors
housing companies ‘cool down’ relative to recent quarters.
Over the preceding three quarters, $246.3m in secondary equity offerings were completed by three veteran Canadian seniors housing public companies, for a variety of general corporate purposes including mezzanine loan restructuring and funding of acquisitions. Leisureworld Senior Care Corporation (TSX: LW) also completed a $190.2m initial public offering in the first quarter of this year. LW is the third largest provider of licensed long-term care in Ontario. It owns and operates 26 long term care homes, one retirement home and one independent living home as well as a home health care business. The Altus National Seniors’ Housing Practice Group is uniquely positioned to provide insight into this specialized asset class. Please contact David Eger at david.eger@altusgroup.com for a copy of our Focus on Seniors Housing brochure. 
ACC=(Amica Mature Lifestyles), CSH=(Chartwell Seniors Housing REIT), EXE=(Extendicare REIT) |
| FULL EXEMPTION FROM PROPERTY TAXES |
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Vancouver (City) v. Entre Nous Femmes Housing Society, 2010 BCCA 262 In a decision released May 25, 2010, the Court of Appeal of British Columbia upheld previous decisions of the Property Assessment Appeal Board and the Supreme Court of British Columbia on a stated case. Based on an Ontario Court of Appeal decision, the Altus Property Tax Group identified an opportunity to get a full exemption from property taxes for certain properties. Section 396(1)(c)(i) of the Vancouver Charter exempts from property taxation real property owned by an incorporated charitable institution where “the real property is in actual occupation by the charitable organization and is wholly in use for charitable purposes.” In the case at hand, our clients are charitable organizations which provide housing for low-income tenants. The interpretation of “actual occupation” was the issue of this appeal. Both Societies maintain offices in their respective properties, and provide services to their tenants in the nature of identifying needs, referring them to social programs, etc. These services are beyond the purview of a landlord and are within their organizational mandates. It was held that the Societies are in “actual occupation” and therefore fulfill the requirements of the Vancouver Charter. For more information relating to this case please contact Sandy MacLean at 778-329-9298. |
| DESIGN EFFICIENCIES & BENCHMARKING – CAN THEY DRIVE MORE PROFIT? |
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Design efficiencies from our perspective are a good cost effective way to drive
more profit out of a project.
So what are “design efficiencies?” They are a collection of derived statistics from the planned configuration of the building. There are numerous design efficiencies we track. The best “bang for buck” is when these efficiencies are started at project inception and built upon. One example would be Square Foot (SF) of exterior skin / SF of Gross Livable Area (GLA). Floor area above grade is traditionally known as (GLA) while the combined above and below grade floor area is traditionally referred to as Gross Floor Area (GFA). As a rough rule of thumb our benchmarking shows this ratio should fall between 0.52 and 0.65 per SF of exterior skin to SF of GLA. We have encountered projects that fall outside these ratios and these need to be analyzed on a case by case basis. One particular project we were involved in had a ratio of 0.60. This was a $24,000,000 mid rise concrete tower. Reducing this ratio by 5% or 3,000 SF of exterior wall so that the ratio fell to 0.57 resulted in a saving of over $110,000 which would be straight to the bottom line. Other design efficiencies that are well known are saleable to gross floor area, window / exterior skin area, average saleable area / suite, w.c’s per saleable area, square foot contact area of formwork to concrete volume and building volume / saleable area to name a few. Every owner/ developer should get detailed estimates completed that track efficiencies and really get to know all of these efficiencies on their buildings so they can understand where and why they are spending money. For more information relating to this article contact Steve Elias at 778-329-9280 or steve.elias@altusgroup.com. |
If you have any questions or require additional information please
contact
Please click on the links below to view our previous newsletters
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Altus Group Limited |
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