Opening Doors Conference November, 2018 Prepared by Altus Group Economic Consulting

Preserving and Increasing Affordable Housing Stock

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Affordable Housing for Whom?

2

Non-Market

Market

Shelters Transitional

Housing Supportive Housing

Social Housing

Rental Assistance Provided in Private Market

Market Rental

Housing Home

Ownership

Temporary shelter

food and other

services

Non-profit housing

providers offer stable housing as

a step between shelters

and permanent

housing

Housing providers

offer permanent housing in purpose-designed buildings

or in scattered sites with ongoing supports

Social or subsidized

housing requires capital

grants or ongoing

government subsidies to

reduce rents for

low-income households Operated

by housing providers,

government

Rental Assistance Program

Private housing make up

most rental

housing includes

secondary market

Fee simple, condominium ownership,

shared equity

ownerships

High

Level of Government Assistance

None

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Mind the Gap

Source: Smarter Growth Initiative

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Means to an End: Providing People with Affordable Housing

Thinking Like a Real Estate Investor

5

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Private Development – Depends on Demand and Absorption

6303 7467

5320

903 764

1840

4603 1450 3974

0

2000

4000

6000

8000

10000

12000

14000

2001-2006 2006-2011 2011-2016

Annu

al U

nits

Calgary CMA, Household Growth by Structure Type

Single Row Apartment

outside of city limits

21%

SW 14%

NW 27%

NE 14%

Centre 11%

NE 13%

Absorptions by Quadrant, Share of Total 2017

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Real Estate is an Asset

7

Private Real Estate Investor Decision Rule

• Analyze the Market to explore new opportunities

• Analyze the Portfolio to optimize returns

• Leverage to grow and maintain the portfolio

Profit (or ROI) > 0

Non Profit Decision Rule Social = Economics

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Leverage

Small amount of effort to produce a disproportionately big result

Consider:

1) The ability to leverage or use assets as collateral gives you financial flexibility.

2) Leverage can increase cash flow.

3) Leverage can expand your total assets.

Take a Page from a Developer’s Play Book

Assets (land and

buildings)

Access to Capital (Money)

Partnerships (private

developers)

8

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Portfolio Management

Operational performance

Property Condition and Value

Property Life Cycle

Holding Strategy

Demographic Trends (Demand)

Household Income

Changing Age Distribution

Population Growth Dynamics

Household/Family Structure

Market Dynamics (Supply)

Housing stock

Construction trends

Market Prices

Economic Climate

Portfolio Optimization and Growth

9

Data Based Decision Making

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Real Estate Portfolio Asset Management 1) Important to Know for each asset:

1) Gross, rentable, and useable square foot by property 2) Number of units and RGI/market unit distribution, vacancy statistics 3) Revenues and occupancy costs per unit 4) Energy and water efficiency 5) Locations, building profile 6) Property Condition reports 7) Property value information 8) Site Size 9) Zoning 10) Community Characteristics

10

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Real Estate Portfolio Management for Growth

11

Real Estate Holding Strategy Options

- Acquiring

- Creating (New Building)

- Redeveloping

- Selling/Disposing

- Repurposing

- Refinancing

Key: Does the property support program service

delivery requirements?

(compare asset performance to service requirements)

Does it make economic sense to invest in redevelopment or renovate?

Acquisition

Re-investment/ Maintain

Disposal

DATA SOLUTIONS

Market Dynamics

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Purpose-Built Rental Universe, Calgary CMA

Source: CMHC, Altus Group Economic Consulting, 2018

44,557 43,167 43,245

42,336 41,416

40,333

38,150 36,858 36,174 35,512 34,814 34,212 33,933 34,362

35,227 36,523

38,348

5,322 5,281 5,203

4,797 4,759

4,513

4,122 4,008 4,017 3,896 3,843 3,878 3,895 3,932

3,960 4,017

4,037

25,000

30,000

35,000

40,000

45,000

50,000

55,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Num

ber o

f Uni

ts

Townhouse Apartment

13

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Household Income Bracket Distribution by Primary Maintainer Age Groups, Calgary CMA, 2016

Source: Statistics Canada, Altus Group Economic Consulting, 2018

30,845 21,615

34,360 19,390

11,780 6,125 2,610 1,270 580 270 150 285

12,625

9,765

23,845

29,570 33,445

32,825 24,765

19,380 13,345 8,330 5,225 11,360

12,210

8,085

16,920 20,610 24,110

25,340

22,170

18,015 15,005

12,425 8,535

29,415

11,110

6,215

15,360 17,620 21,135

22,420

19,020

14,980

12,735

10,425 7,680

32,305

12,440

7,220

16,480 16,285 18,000

17,945

14,815

10,980

9,000

7,185

5,085

24,500

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

Under $5,000(including

loss)

$5,000 to$9,999

$10,000 to$19,999

$20,000 to$29,999

$30,000 to$39,999

$40,000 to$49,999

$50,000 to$59,999

$60,000 to$69,999

$70,000 to$79,999

$80,000 to$89,999

$90,000 to$99,999

$100,000 andover

Tota

l Pop

ulat

ion

with

the

Age

of 1

5 an

d Ab

ove 75+ 65 - 74 55 - 64 45 - 54 35 - 44 25 - 34 15 - 24

14

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Historic Apartment Rental Trends, Calgary CMA

Source: CMHC, Altus Group Economic Consulting, 2018

$531 $520 $561

$657

$702 $721

$851

$1,031

$969

$1,039

$1,118

$1,213 $1,212

$1,143 $1,128

2.0%

5.5% 5.9%

0.5%

2.8%

1.3%

2.9%

4.4%

0.5%

1.5% 2.1%

5.3%

3.6%

1.9% 1.3%

1.0%

1.4%

5.3%

7.0%

6.3%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

$400

$500

$600

$700

$800

$900

$1,000

$1,100

$1,200

$1,30019

90

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Aver

age

Vaca

ny R

ate

Aver

age

Ren

tal R

ate

Average Montly Rent Vacancy Rate

15

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Apartment Rental Rates by Year of Construction, Calgary CMA

Source: CMHC, Altus Group Economic Consulting, 2018

1,034 1,059

1,157

$1,047

$1,401

$1,281

$1,564

$1,413

$500

$700

$900

$1,100

$1,300

$1,500

$1,700

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Ren

tal R

ate

($)

Before 1960 1960 - 1979 1980 - 1999 2000 or Later

16

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Case Study #1

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Number of Units: 65

Structure: Woodframe TH

Site Size: .48ha

Current Zoning: M-C1

Max Units per ha: 148

Actual Units per ha: 134.5

Upzone Potential: Yes

No. of additional units

(without rezoning) 13.5/ha or 6

Age: 49 years

Analysis

-woodframe buildings at 49 years old very likely in need of significant capital investment to extent the lifecycle

-the site could be densified if rezoned, which would require demolishing the existing buildings and constructing new

-the recommendation to renovate vs demolish and rebuild depends on the current condition of the buildings and the capital investment needed to modernize and upgrade the buildings and the estimated extended lifecycle of the buildings

If the cost to renovate is more than half the cost of estimated current replacement cost (FCI) then it likely doesn’t make economic sense to do so

Case Study #1: Midtown Townhomes

20

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Case Study #2

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Number of Units: 46

Structure: Concrete

Site Size: 19,526 sq ft.

FAR: 5

Current Zoning: CC-MH

Allowable Built Area: 97,630 sq ft

Actual Built Area: 62,698 sq ft.

Upzone Potential: Yes

Age: 50

Analysis:

-site has the potential to increase built area by 56% if demolished and rebuilt making it an attractive sale site

-the drawback is that the site is relatively small which will limit building design

-Located in a high-density area, close to downtown, near transit, services and employment centres therefore also desirable for both an affordable rental building

-a major renovation to bring the building up to current efficiency standards could extend the life of the building by another 50 years.

-recommend preparing comparative proformas to evaluate the two options

Case Study #2: City Centre Mid-Rise

22

Building Condition Reports

Project Management

Cost Management

Needs And Demands Studies

Municipal Finance

Highest And Best Use Studies

Portfolio Assessments

Property Appraisals

? How Can Altus Group Help?

Contact Elsa Sawatzky

Senior Consultant

Elsa.sawatzky@altusgroup.com

@altus_group

403-508-7810

National Economic Advisory 33 Yonge St., Toronto, Suite 500 2020 - 4th Street SW, Calgary, Suite 310 1055 West Georgia Street, Vancouver, Suite 2500