District Energy Advantages and Risks for Condominiums: Research Paper

Phenomenal full envelope failures in the last few years of new development – including Leduc, Fort McMurray, and Calgary all indicate that the industry needs to evolve both the development process, and likely the costs and processes involved in creating multi-unit housing.

For existing buildings, under-funded reserve funds and higher than expected maintenance costs are forcing corporations to find innovative methods (including borrowing against future use) to avoid fiscal hardship or bankruptcy on current owners.

District Energy (the supply of heating or cooling from a central source usually though piped water or steam, also known as District Heating or Teleheating), where available, may be a powerful and sustainable solution for condominiums – both at the development phase and at the maintenance level. Based on experience from existing implementations in Canada, the US and Europe, District Energy may lower development costs, maintenance costs, and reserve fund contributions.

247Condo has released a research paper (with additional focus on the ENMAX implementation in Calgary, Alberta, Canada) that outlines the advantages and risks of tying your condominium to a District Energy solution.

Ministry of Sound – Proactively Being Loud

I’ve never liked the type of person that moves into a new neighbourhood and then complains about the noise, traffic, prostitution, smells, sound and vagrants. They’ve always seems like arrogant pricks to me. When you’re buying into an existing neighbourhood, you are buying into the neighbourhood. The good (hopefully, I mean there must have been something good that would have attracted the person to the block) and the bad.

When it comes to the bad, a big complaint of these new residents is sound.

The Ministry of Sound, a hugely successful nightclub and record label resides in an area of London that in undergoing revitalization and new development. Instead of waiting for the developments to go up, and the new owners’ complaints to come in, the nightclub has – for 2 years – been very active with petitions, leafleting and advertising against the new developments.

This last week Southwark council’s planning committee against the development proposal – a 41 story tower block, proposed by developers Oakmyne, that would have been built near the club.

I’m very excited about this development. It reaffirms that existing businesses (and the Ministry of Sound is a landmark and cultural icon as well) can continue to flourish, and councils recognize that when new development is erected is often has a significant negative impact on existing business. In almost every case the new developments force out old business. This time that whole battle is avoided, and the existing business is respected.

Toronto and Singapore Experience the Shoebox Condo

Some trends cover the world, but the underlying reasons may be different. For example, Singapore and Toronto both are experiencing a surge in shoebox condos (500 sqf or less) but for significantly different reasons.

With Singapore, prices on condominiums are averaging $1185USD/sqf – putting the price of anything lager than shoebox well outside the financial means of most local residents.

In Toronto, price is not nearly as sensitive (running about $630USD/sqf), but tax legislation is pushing units to list at $390k or less or suffer, and one bedroom condominiums now make up almost 60% of new construction. This forces smaller shoebox units to be built in order help create consumer choice in a market that prefers one bedroom condominiums.

In both cases though – Singapore and Toronto are both seeing massive preconstruction sales to investors and foreign buyers. This is likely a strong incentive to build shoebox condominiums, as they become more “affordable investments” and require smaller capital down. If that’s the case, shoebox condominiums are creating a new form of downtown transient population – encouraging renters to populate the cores of each city.

I live in an 1150 sqf 2 bedroom condo – with wife and 2 cats. At 500 sqf, one of those would have to go! (I love you hunny!)

Municipalities Should Never Be Residential Condominium Developers

They were teased by the success of small scale urban development projects that successfully helped their community. But when the Borough of Collingswood NJ decided on being the developer of their own downtown condominium project, they took on a multi-year headache now culminating in over 8 million in debt for the municipality.

The 120 residential units, the commercial units, and the parking facilities of The Lumberyard Condos were the cornerstone plan in revitalizing their municipality. An 18 million loan to the municipality started the project in 2006. Now, 5 years later and with only 2 of the 3 phases completed, Collingswood will issue a six million ordinance to help cover the remaining 8.3 million on the loan and now focus on renting the remaining 14 (of 24 units in phase 2) to help pay down the remainder.

In March, the Mayor James Maley indicated the project was picking up, and 8 of the 24 units had been sold. It appears that things weren’t looking up that much, and only 2 more units sold in the last 6 months.

Development risks should really be left to developers – and not to municipalities where the cost to citizens, as in this case, is expensive against both tax revenue and in the energy expended by the municipality in working with this long losing project.

I agree that municipalities should take a very active role in wooing developers if they feel a population “mini-boom” is required to keep their city alive. I also believe in the municipality, in hand with the wooing, set out strict development requirements that would have generated a project that meets their vision and goals.

But they should always refrain from being the actual developer.

Storage Facilities as Condominium Developments

Building storage spaces as condominiums allows for a whole different approach to long term storage. In particular, a condominium approach allows for large scale storage.

You can certainly rent space from a commercial storage provider, but the space tends to be small – 50 sq feet or less. You can get larger space by actually leasing in a commercial park, but rental costs tend to be higher because the facility allows for businesses to operate, thereby requiring additional costs to maintain.

With a condominium based storage solution you can build only for storage, and build large. South of Sioux Falls they are trying out units large enough to hold touring busses, with a few units as large as 25×50 feet.

The development – Ultimate Space – indicates that the primary purchasers have been businesses to store inventory, but give a story of “the guy with too many cars” needing more space to tinker.

By buying the storage unit, you have a sense of predictable costs, control, the ability to upgrade or modify (within the limits of the bylaws) and a capital investment that may increase in value over time. As storage only units – the monthly condominium contribution should be relatively low as well.

Sounds like a great use of building under condominium governance and maximizing value to the purchasers.

With Great Responsibility Should Come Great Oversight

I’ve been reading about The FBI investigating corruption at the Home Owner Association level in the US, and about laws being proposed to help remedy the situation.

The investigation stems from the board using it’s authority to award contracts to which they have a conflict of interest. The argument outlined proposes that developers and lawyers have been purchasing a single condo in an association, then getting on the board to drive work to their (or associates).

It’s really not a terrible risk – the developer can buy a unit, and rent it (and later sell it) without the likelihood of any financial risk there, while generating millions in work (especially given the growth in building deficiencies).  It’s less of a risk because it’s very hard to find and stop conflict of interest.

Even without a plan to exploit the association or corporation, board members can pay themselves for work that could be done by volunteers, or over the years continually prefer one vendor over another because of perks – gifts, dinners, tickets – all things handed out in the name of marketing. Some – if you had the information – are easier to spot, the same contractor name popping up when they are the highest bidder of solicited quotes.

The problem is spotting these issues, which can be extremely difficult if the board has the same people on for a decade or more (not unheard of). Even the president of the United States has a term limit. No such thing with associations and corporations.

With today’s tools to communicate there should be higher transparency, more access to decisions, and better follow-through. It should almost be a legislative requirement that Twitter like feeds must be used by boards to communicate with their owners’ ongoing issues and solutions with their condo.

It is very clear that many boards act as a sort of Star Chamber and that will only lead to issues later on. I’m all for one on prosecuting these individuals and boards legally for infractions of by-laws and government legislation. With so many thousands of these quasi-legislative (and judicial) organizations, movement needs to be made now on opening communication.

Holmes on Homes on Holmes Approved Home

OK. I’ll admit I’ve always been a fan of Mike Holmes since seeing the first episode of Holmes on Homes. The mixture of anger, resolve, and a powerful moral drive that the world should have been better and people more honest is addictive to me. Add that to an industry which has generated the aura of a helpless homeowner at the knee of the contractor (and that’s not generated out of complete myth), and we have the making of a modern day knight.

And honestly, if the industry wasn’t as rife with incompetency, poor business practices and a history of poor performance – especially at the homeowner level, then the premise of his show would have never generated anything past a pilot episode. Instead, the show survived and Mike has since opened up a business umbrella for several products and services that run on the “honesty and trust” that he developed in the television show. Inspections, products, multiple TV shows, approved products, workwear, and most recent sustainable homes and communities – Holmes Approved Homes.

I’m a big fan of two things (1) Strong industry self-regulation and (2) A big hammer of regulation when self-regulation fails.

This would be a great attempt to build on the self-regulation side, with the creation of a set of standards that are followed and implemented in new building. The program indicates it adds 5-10% to the cost of the building to have a residence that is crafted under the Holmes Approved Homes system. And that sounds cheap if it delivers on its promises.

Having sat at the Alberta review of the Condominium Property Act for the last two years, all I heard from the developers was – any change to legislation would drive prices up so high, that housing would no longer be affordable. They painted scenarios where the costs would skyrocket with massive increases in even basic entry-level housing. At no time did I feel that the price increase that they expressed could be done on 5-10% increase.

So if we can see that real, sustainable, and importantly, trustworthy new development can be had for less than a 10% increase in costs, then I am all for that. I would champion this program.

As always, we do have a 10 year “testing phase” that the commitments made can be delivered, and I also believe that the delivery isn’t in the architecture and materials so much as it is in the physical construction and the quality of the trades. If the trades issue can be solved (based on the massive failings in new condominium developments from poor implementation) then we really have an inexpensive winner of a private building program.

Holmes’ Homes get celebrity inspection

Mixed Zone Development, Perfect for Condominiums

There is an article in the Globe and Mail entitled “Why condo-villes don’t work” by Shelly White which I agree with completely. I don’t get the title – it’s actually a very positive article about the benefits and joys of building community focused developments that include residential, business and commercial in one area. Where everything you need is within your community (read: walking distance, or very short public transport/bike/scooter). It is an approach to development that I have held for a long time.

In Calgary, every planning and development zone is its own, and never shall any overlap or meet. That has led to one of the lowest population densities in North America for a metropolitan centre, and an overly extensive infrastructure to maintain this approach. This is an approach that I find dreadful, and has created for dozens of years a downtown core that literally empties at the end of the work day. A ghost “down”town, as citizens car commute mostly back to their suburbs. If we say that such design costs 70 minutes of commute time a day per person, and 160k people commute, then we kill (70m*160k*250day) 5327 years of productive, enjoyable, life every year to commute (and that’s only if 160k people commute a day – Calgary Transit says it is more).

A mixed zone development approach to all towns – which can be driven by condominiums as the residential part with business on the bottom, would substantially help to increase a quality of life.