Corrected: Green labels, embraced in Europe, new to the U.S., ignored in Canada

May 18th, 2010 No Comments »

The green building industry is relatively new in North America yet there is no shortage of labels, rating systems and standards.   LEED, BOMA Best, Energy Star and Built Green have all become available in Canada in the past 15 years and this is the tip of the iceberg globally.

Speaking at the inaugural Green Building Ottawa Conference held on May 13th, Wayne Trusty, President of Athena Sustainable Materials Institute whose Canadian head office is in Merrickville near the capital said ‘there are over 500 green building labels in the World.’

In the rapidly evolving world of green standards, and in spite of the what may seem like an abundance of rating systems,  there are industry experts who make a case for Canada to consider new green labels that are gaining market acceptance in other countries and being overlooked here.

The Athena Sustainable Materials Institute (ATHENA) is a non-profit organization that seeks to improve the sustainability of the built environment by helping industry professionals evaluate the environmental impacts of new and existing buildings through Life Cycle Assessment (LCA).  It offers the only two software tools in North America for the life cycle assessment of whole buildings and assemblies.

Life Cycle Assessment, like that offered by the ATHENA Institute, is critical to the growth of environmental product standards such as those created by the International Standards Organization (ISO).

ISO 14040 is a series of standards for conducting life cycle analysis and ISO 14025 is for environmental declarations and programs. With reference to these two standards ISO has prepared a methodology for preparing quantified
environmental product data. An Environmental Product Declaration (EPD) based on this data is international, verifiable and accurate information about a good or product that can be used as a green label that is not misleading.

In 2007 ISO released ISO 21930 that describes the principles and framework for environmental declarations of building products, taking into consideration the complete life cycle of a building.

Climate related data can be taken as an excerpt from an EPD where the information is expressed in CO2 equivalents for the life of a product. This information can be used to generate a ‘climate declaration’.

Following the commercial success of green labels like LEED in North America there has been an epidemic of companies that have undertaken to create their own ‘green brands’.  These ‘self declared’ labels have garnered well-deserved skepticism from procurement professionals and the public alike.

What EPD’s offer, that self declared private green brands lack, is a verifiable and accurate process developed through the use of international, scientifically accepted and proven methods for life cycle assessment (LCA) of products and services.   They provide a credible way to compare potential purchases so that professionals can optimize environmental choices, avoid green washing and deliver higher value to their organizations and customers.

Organizations and businesses have emerged that support and help to prepare EPD’s based on the ISO standard and create an international market for products with the declaration. A non-profit called the EPD®system based in Europe is one.  In the original version of this article we incorrectly assumed that it was somehow representative of all EPD’s globally. Nevertheless called the EPD®system website has current information about the tremendous growth in the demand for EPD’s around the World.

An October 2008 news report on the EPD®system website describes 89 EPD’s developed in 6 different European countries as well as Japan. Since the article was published EPDs evolved significantly and are now being used by transit services such as the Swedish rail service The Botnia Line which has issued EPD’s covering railway infrastructure and rail cars.

A recent article in Greener Buildings reports that the U.S. Government, which has mandated a substantial green house gas reduction initiative, is expected to give preference to EPD rated products as part of greening its procurement process.   In addition a U.S. based organization  The Green Standard is offering a Green Purchasing Accredited Professionals training program or GPAP.  Its inaugural course offered in March 2010 was attended by people from CB Richard Ellis.

Asked “What is the most effective step Canada could take toward a greener future?”  Wayne Trusty said ‘more data’.   Data is a vital ingredient for LCA’s,  the building block of EPD’s and similar labeling systems. ‘The EPD process has been ignored here in Canada’ he said.

Ian Theaker, Senior Sustainability Specialist, Halsall Associates, another speaker at the Ottawa conference, said that mandatory ‘energy efficiency labels’ for buildings would be the most powerful mechanism for accelerating the implementation of green building practices in Canada.

Theaker said that a building label that itemized a buildings energy footprint, green house gas emissions and the cost of energy would not be expensive to implement and would provide a market incentive for improving building energy performance. He said that the National Research Council is looking into it.

Since greening a building is entirely voluntary in Canada, Theaker said, there is no incentive for people who own poorly performing buildings to do anything.

The Real Property Association of Canada has declared a voluntary National Energy Consumption target for commercial buildings called 20 x 15.  The goal is for buildings to achieve 20 equivalent kilowatt-hours of total energy use per square foot of rentable area per year in office buildings by the year 2015.   Although this program is not enforceable, Theaker’s point, it does establish a target for reduced energy consumption for the real estate industry.

While energy labeling for homes has been mandated by the European Union, in Canada the Federal Government recently shut down the home based energy conservation program associated with recent Government stimulus money.  Furthermore,  Theaker said, in the housing sector in Toronto only a quarter of the homes that are sold  have a property inspection.

“Canada is falling further, and further behind other countries” in implementing measures that will move the country toward a greener economy according the Theaker “and it will have a difficult time catching up.”

Will the GTA be flooded by PPP opportunities?

May 12th, 2010 No Comments »

In the Greater Toronto Area there are five active public real estate companies: Build Toronto, Toronto Lands Company, Waterfront Toronto, Ontario Realty Corporation and Canada Lands Company owner of Downsview Park. Each organization has been established to develop and manage public property in order to  generate a sustainable revenue stream or enhance the value of its assets or both.

Build Toronto

The newest of these organizations Build Toronto announced that it is open for business today, May 12th at the Toronto Board of Trade.  It was established in 2009 by the City of Toronto under the direction of Mayor David Miller.

Build Toronto has a portfolio of 31 properties representing hundreds of millions of dollars worth of real estate.  The properties include underutilized transit land, parking facilities, libraries, police stations as well as the City’s residential properties.

Four large projects have been identified by Build Toronto as its first priority in the search for Canadian and International investors to partner in unlocking the market value of these sites.   The properties include:

(1) A 54-acre location next to the Downsview subway station.

(2) 154 Front Street at the corner of Sherbourne and Front in the St. Lawrence neighbourhood in downtown Toronto.

(3) A 24 acre industrial property off the QEW highway near Islington Ave. and Lakeshore Blvd. in the city’s west end.

(4) 4050 Yonge St. an under underutilized 2 acre site projected for a 450,000 square foot development at the corner of York Mills Rd. and Yonge St.

All of these are Class A locations with extraordinary development potential.  Under the direction of the Build Toronto Board, which includes leaders in Canadian real estate industry, Build Toronto seemed destined to find suitable partners that will see the properties developed.

In addition to Build Toronto there are four other public real estate companies.  They are:

Toronto Lands Company

The Toronto Lands Corporation was created in September 2007 and incorporated in April 2008 as a wholly-owned subsidiary of the Toronto District School Board.  The TLC’s mission is to maximize the Toronto District School Board’s real estate revenues in order to reinvest in TDSB schools and students.

Shirley Hoy, CEO of Toronto Lands Company said her organization is expected to generate a $30-million surplus annually for the Toronto School Board.

Waterfront Toronto

The Waterfront Toronto website says that it is building the largest urban revitalization project in North America.  It is mandated by the three levels of Government each equally represented on its Board of Director to develop the publicly owned waterfront lands in downtown Toronto.

Ontario Realty Corporation

The Ontario Realty Corporation manages one of the largest real estate portfolios in Canada, consisting of approximately 6,000 buildings and structures and over 80,000 acres of land across the province. The portfolio includes a wide variety of properties ranging from detention centres to office space, courthouses and heritage buildings.

Its major projects in Toronto include 222 Jarvis St., the Keele-Wilson Provincial Campus Redevelopment and the West Don Lands Flood Protection Platform.

Canada Lands Company

Canada Lands Company Limited is an arms length, self-financing Crown Corporation reporting to the Canadian Parliament through the Minister of Transport, Infrastructure and Communities.

In Toronto CLC owns the CN Tower and several downtown office locations as well as other properties listed on its website.

Downsview Park in Toronto is a 572 acre property that was taken over by the Federal Government after the Canadian Forces Base on the property was closed in 1994.  It is operated by PDP a crown corporation and subsidiary of the CLC established in 1999 that received full ownership of the Park in 2006.

While Build Toronto is well positioned to succeed with a strong Board of Directors and an exceptional portfolio of properties all five of these organizations are competing in the same jurisdiction for essentially the same partners and investment.

Does the presence of the five public development organizations work to their advantage or will the GTA becoming flooded with public private opportunities?  Could flooding the market dilute the value of the opportunities to the development organizations and the public?

CPPIB grows its U.S. real estate investments by $1Bln

May 10th, 2010 No Comments »

In the past month the Canadian Pension Plan Investment Board (CPPIB) has announced two real estate acquisitions in the U.S. that combined are worth over $1-billion.

Today, May 10th, the Globe and Mail reported that the CPPIB agreed to pay U.S. $663-million to buy a 45% minority interest in two New York City office buildings.  The two properties, 1221 Avenue of the Americas, also known as the McGraw-Hill building which is part of the Rockefeller Centre and 600 Lexington Ave. have a combined value of about $1.45-billion including CPPIB’s share.

In April Kimco Realty Corporation and the CPPIB announced that they have formed a joint venture to acquire shopping centres through out the U.S.  Their initial investment of $370-million includes five retail properties that Kimco had previously acquired.  CPPIB will hold a 45% interest in the venture while Kimco will retain 55% as well as continuing to manage the properties.

The Kimco and CPPIB joint venture is described by Peter Ballon, Vice-President, Head of Real Estate Investments – America’s as one that will allow CPPIB to continue to expand its retail investment program in the U.S.

The Canadian Pension Plan Investment Board (CPPIB) is Canada’s largest single purpose pension funds and one of the largest in the World.   It has $123.9 billion in assets of which about 42.6% (or $52.8 billion) are invested in Canada.

The fund currently has about 5.8% (or $7 billion) invested in a real estate portfolio comprised primarily of office and retail properties.  Its properties are in Canada, the U.K., and to a lesser extend in the U.S. Mexico, across Europe and in the Asia-Pacific region.

Canadian examples of CPPIB properties include First Canadian Place, 2 Queen St. E., the Royal Bank plaza in Toronto, Oceanic Plaza in Vancouver, Canterra Tower in Calgary and Constitution Square in Ottawa.

The two recent U.S real estate acquisitions by the CPPIB, $663-million for the Manhattan office buildings and $370-million for its investment in the Kimco joint venture add up to $1.03-billion.

These new acquisitions suggests that CPPIB now has closer to $8-billion invested in its real estate portfolio, $1-billion more than mentioned on its website, and that it has also simultaneously increased its foreign investments.

It will be interesting to see where CPPIB, one of several Canadian pension funds buying foreign real estate, will decide its allocation to real estate, and foreign property will end.

Marketing Real Estate Developments in the New Economy

March 10th, 2010 No Comments »

Canadian builders broke ground on condominium and multiple-unit homes in February at a rate that exceeded the expectations of industry watchers.  New home construction has come back to life almost reaching the pre-recession levels of 2008.

The rebound in new housing is concentrated in the multi-unit sector of the market and particularly in Toronto according to CMHC.

Questions remain however about how rising interest rates, introduction of the HST and a sluggish job market in Ontario is going to effect sales of new condo units.   How will changing economic conditions impact real estate developers plans to sell condominiums in the later part of 2010.

In Toronto where the downtown skyline now bristles with new condo towers developers are vying for buyers.  It is  a market that is bound to become more, not less competitive.  Real estate developers who employ new ways of attracting interested purchasers are more likely to be the ones who can sell their condos at favorable prices.

David Allison, Partner in Vancouver based Braun/Allison specializes in the marketing of residential and resort developments.   He is currently working with Canadian firm MacDonald Developments marketing One Lexington, a condominium located in the hard hit Phoenix market.

At One Lexington Allison is applying new techniques for marketing real estate developments that he spells out in his book Sell The Truth.  He has used Marketing Journalism to promote the building as well as social media and other online opportunities to engage purchasers.

This is one example of many that Allison can draw upon to describe effective and targeted marketing campaigns for new condominium developments.

RENX is proud to have David Allison as a regular contributor to our website and also as the keynote speaker at our up and coming Breakfast Seminar in Toronto on March 29th that is going to be held at National Club at 303 Bay St downtown.

Along with David Allison, Hunter Milborne, Chairman of Sothebys International Realty Canada will talk about the Toronto condominium market and Jennifer Podmore Russell is presenting a Canadian real estate development forecast.

For more information and to register online for this event – $25 until March 19thvisit the Braun Allison sign-up page.

A birds’ eye view of Canadian Infrastructure

February 2nd, 2010 No Comments »

Canadian governments at all three levels are spending an unprecedented amount of public money on upgrading and replacing existing infrastructure as well as new construction projects.

How is the average person, really anyone besides the relatively few professionals directly involved in the daily activities associated with infrastructure, able to comprehend the extent and nature of the expenditure of billions of infrastructure dollars?   Do you know anyone who can articulate the rational for the allocation of funds across the country?  At best most people may be familiar with projects underway and proposed in their own municipality but another Province or City?

Those employed in the real estate industry, particularly the commercial sector, have more reason than the average taxpayer to monitor infrastructure news.  In the wake of many projects there is a trail of real estate related opportunities.  The classic case is installation of urban transit and transit stations, each a potential new residential and commercial hub.  There are many other examples; airports, roads, bridges, wind and solar farms where each type of project can generate an associated real estate requirements.

The RENX Canadian Infrastructure newsletter is a unique publication dedicated to assembling and prioritizing news available from on-line sources that provide information about this important topic.  Media sources across the country and government websites release news about infrastructure on a daily basis and RENX is gathering it into one place.

So far RENX has published three infrastructure newsletters.  With each new newsletter we are gaining experience with the character of the information available from this sector.  Later in 2010 we will restructure the newsletter with new headings to reflect this knowledge but for now, although the organization may be less than ideal,  it is still providing remarkable insight into Canadian Infrastructure.

Some simple questions with answers that can be derived from reading the newsletter are what type of infrastructure costs millions versus billions? Which projects take many years to build and which have shorter construction schedules?  When is infrastructure private,   public or P3. When is it a maintenance and replacement project versus new.  When is it a Municipal, Provincial or Federal undertaking and which are in Western and Eastern Canada?

One of RENX observations, to date,  is that in broad terms municipal projects tend to be smaller scale – in the millions – compared to most energy related projects – oil and gas, electrical transmission lines, nuclear power which are in the hundreds of millions and billions of dollars.  This may seem like an obvious conclusion however it is a question of scale of expenditure that helps put into perspective the appeal by the Mayors of Canada’s major cities to continue with a Federal municipal infrastructure budget beyond the current recession related stimulus spending.  More on this topic will be included in future blogs.

RENX Canadian Infrastructure newsletter provides a birds eye view of this dynamic and vital part of the national economy.   You can subscribe to electronic mail versions of our newsletters, all which are supported by advertising revenues and free to the reader, or read recent editions here.

Real Estate Investors Eyeing U.S. Bank Closures

December 15th, 2009 No Comments »

International property investors are keeping a close eye on the Federal Deposit Insurance Corporation in the U.S. for notices about bank closures.

The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by the Congress to maintain stability and public confidence in the nation’s financial system by: insuring deposits, examining and supervising financial institutions for safety and soundness and consumer protection, and managing receiverships.

At the Real Estate Forum, December 2, 2009, Michael McDonald, Managing Director, Eastdil Secured there are approximately 520 banks on the U.S. Federal Deposit Insurance Corporation (FDIC) watch list because they are carrying excess debt, a large proportion of which is commercial real estate. Many of these banks are expected to fail over the next year.   There are about 8,000 banks in total in the U.S.

For investors there may be an opportunity to acquire real estate assets when banks are taken under the wing of the FDIC.   While many U.S. lending institutions have been extending loans to commercial real estate owners, regional banks in particular are reaching their limit with respect to being able to carry a lender in default.

The first page of the FDIC website provides a summary of Bank Closing Information that is updated regularly.

The Copenhagen Summit: Sleeping with a Dinosaur

December 6th, 2009 No Comments »

The discussion at the last weeks Real Estate Forum in Toronto, attended by over 2,000 people, was dominated by the global financial crisis and its implications for the U.K., U.S. and Canadian economies. Throughout a three-day period, in spite of the impending Copenhagen Summit on climate change starting Monday December 7th, there was almost no mention of green buildings and sustainability.

Climate Change DinosaurA prominent theme of The Forum was the decoupling of the Canadian and U.S. economies particularly with respect to real estate. The superior policies and practices of the financial sector in Canada was frequently attributed with preventing an economic crisis here at the scale experienced in other parts of the World and in the U.S. in particular.

For the first time in history Canada seems to have broken free, at least temporarily, from the over bearing economic influence of the U.S. There was little discussion about ‘sleeping with the elephant’ to the south who seems to have been transformed into a far more fragile creature.

While there was a parallel green building conference at The Toronto Forum it is still surprising that climate change was barely raised. Silence on the issue prevailed despite the vast majority of individuals who believe the research pointing to a potential global environmental disaster.

Furthermore, the building sector is attributed with generating about 40% of the green house gas emissions that contribute to climate change. It is considered a sector where existing technologies can be readily applied to make significant and near term reductions in the amount of carbon released into the atmosphere.

The prominent companies represented at the real estate forum almost all have sophisticated sustainability programs. CB Richard Ellis is one of the first global companies to adopt a climate change strategy. Oxford Properties alone has one of the most admired initiatives in Canada to green its buildings and other major pension fund owned property companies have made similar commitments.

To allow the circumstances and issues of the current financial crisis to dominate the agenda with no mention of climate change issues may reflect a perilous denial of the global threat it represents. While the intangible nature of the danger makes it difficult to grapple with its enormity, and complexity of the problem and solution, avoidance is clearly not the answer.

The animal in our bed in Canada may no longer be the elephant to the south but the climate change dinosaur  – a dinosaur whose sleep we should all be aware of disturbing.

The Global Property Market: Highlight of the 2009 Real Estate Forum

November 30th, 2009 Comments Off

Last Friday’s news that Dubai World is not going make payments on US$ 59-billion in debts adds to a mélange of global economic factors influencing the World economy and in various ways directly and indirectly the Canadian real estate markets.

Imagine if this news were announced three years ago, in the absence of information about the financial crisis that has gripped the world for the past year. It would have hijacked almost any headline in Canada but this weekend the Grey Cup results and various domestic tragedies have already taken precedent. (Well in this case perhaps the Grey Cup trumps World Dubai. Phew! What a game!)

There are Canadian companies that are active in construction and development in the Middle East and some in Dubai who are likely severely impacted by the trouble at World Dubai and related companies. Canada’s expertise working in severe climates where extreme cold and hot have common characteristics is a valuable resource in the region. Other companies have invested and participated in development there to get a foothold in another part of the World and diversify their business.

What is particularly note worthy is that Dubai World’s distress is sandwiched between a year and half long financial crisis in the U.S. and the impending unwinding of billions of dollars of lousy commercial real estate debt in the U.S.

This U.S. financial crisis is highlighted by the failure of Lehmann Brothers, the take over of Merrill Lynch by Bank of America, the largest bank failure in U.S. history with the collapse of Washington Mutual and the take over of mortgage giants Fannie Mae and Freddie Mac by the U.S. Government to mention the most significant of the events of the past year. In addition there is the provision of about a trillion of US dollars stimulus dollars and an annual US operating debt also of about a trillion dollars.

The other half of the sandwich is distressed commercial real estate debt in the U.S. It is considered to be in the area of U.S. $1.4 trillion dollars plus an additional $600 million in Commercial Mortgage Backed Securities that are to come due over the next three years. Smaller banks that may not be able to carry the losses hold a significant portion of the debt.

Today we learned from a report in the Globe and Mail that the Toronto Dominion Bank may have as much as $19-billion invested in commercial real estate in the U.S., some of which is likely distressed, more than originally reported. There may be other Canadian financial organizations that may also announce that their financial position has worsened due to continuing declines in the value of U.S. commercial real estate. Individual Canadian investors not subject to public disclosure of their activities are no doubt affected.

The Global Property Market to be held tomorrow, December 1st, in Toronto where experts in the Worlds commercial real estate are presenting their perspective on these issues is sure to be a highly informative event.

Please check Twitter (RENXca) for RENX blow-by-blow coverage of the event. RENX will also be providing a follow-up article to the GPM this week.

Financial institutions can prevent a housing bubble

November 26th, 2009 1 Comment »

The warnings about the potential, if not the existence of a housing bubble in Canada are becoming more frequent and louder.

One of the most compelling and well informed warnings has come from Scotiabank economists Derek Holt and Karen Cordes who have prepared a report titled Is There a Canadian Housing Bubble? The report substantiates its claim that the market is inflated by comparing the U.S. and Canadian markets using the U.S. S&P/Case Shiller as well as home ownership to the rental market.

The Scotiabank report then itemizes the influences that are going to continue to fuel the housing boom well into 2010 including low interest rates, a reduced supply of homes in the major cities, Vancouver and Toronto in particular, and availability of long-term mortgages.

The Scotiabank economists also note that the Canadian situation is distinctly different than in the U.S. where there is a larger subprime mortgage market, mortgage interest is tax deductible and there are lower appraisal standards. The Canadian market they report will not rise or fall to the same extent as the U.S.

ING Direct CEO Peter Aceto was also reported by YourHome this week to have said that some home buyers are acting irrationally and potentially taking on too much debt.

RBC reported that housing costs are becoming more expensive for the first time in a year and a half and that affordability will continue to deteriorate.

What isn’t apparent is if anyone is listening and if it will influence the decision making of prospective home owners and the real estate professionals who benefit from the heated market. In fact all reports suggest the exact opposite. Victoria, Vancouver, Toronto and Ottawa all have housing prices and sales that are climbing beyond all expectations.

When bubbles burst individuals are hurt, banks loose money and eventually all of society pays the price for the failures of a few. If Canada follows the route of the U.S., if only in part, Governments are also called upon to back stop the loses of the institutions and people effected.

Rather than watch the dynamics of this situation continue in a seemingly predictable pattern why not act now to prevent it.

The financial institutions who can so knowingly describe the trends can, if they were inclined, in the face of meaningful information act upon it. They can choose to not wait for interest rates to change, governments to legislate, shareholders and politicians to scream and simply change the policies that are facilitating unwise borrowing.

Canada’s financial institutions have gained the World’s respect for policies and practices that have kept our economy in better condition through the recession than almost all other countries. Lets not see their reputation diluted by indifference to this new economic threat to Canada and Canadians.

Feedback about the Canadian Infrastructure News

November 12th, 2009 No Comments »

RENX is in the process of preparing two new publications, a Listed Property Company newsletter and a Canadian Infrastructure newsletter.  These newsletters are part of two new channels we are launching on our recently opened website.

The Infrastructure news is anyone with a keen interest in Canada’s Infrastructure but primarily for professionals in the Canadian real estate industry.  We are planning to start regular publication of the newsletter in January 2010.

We are at the stage of defining what content will be included in the newsletter and how the content will be presented.

We are asking for the feedback from our readers.

A first preliminary version of a RENX Canadian Infrastructure newsletter has been published on our website on the ‘Recent Newsletters Page’.

To provide comments about the Infrastructure Newsletter you can send an email to the publisher
Ann White.

Feedback can also be provided on the RENX Forum.  Comments made in the Forum  will be direct to other readers for response.