New Partners New Vision

Transcription

1 In this issue of Capital Ideas: New Partners New Vision A Gold Medal Community: Profile of Victor Davis Memorial Court Fed ID Updated Verification Options Rates of Return New Partners New Vision The vision behind the broadened ownership of Encasa Financial Inc. (formerly SHSC Financial Inc.) reflects the increasing sophistication of the social housing community and its growing capacity to collaborate to strengthen the sector in Canada. What is most significant about this new partnership is not the ownership expansion itself: it s about how we are strengthening our company to provide more value to the housing sector in Ontario and beyond, says Howie Wong, CEO of Housing Services Corporation (HSC) Encasa s original owner. Reaching out to providers in other provinces helps us build critical mass so that we can provide broader options to existing and new clients. Encasa was created in 2002 to run the Social Housing Investment Program, enabling non-profit and coop housing providers in Ontario to effectively invest capital reserves and operating dollars such as lastmonth s rents and member deposits. For the past 12 years, it has played an increasingly important role doing just that, while educating providers to make investment decisions appropriate to their financial needs and goals. In September 2014, the company s ownership was expanded, with HSC retaining 40% of the company s shares and three new partners the Co-operative Housing Federation of Canada (CHF Canada), the Cooperative Housing Federation of BC (CHFBC) and BC Non-Profit Housing Association (BCNPHA) each acquiring 20% of the shares. With this expansion, the company was given its new name in November 2014.

2 Encasa will continue to oversee the Social Housing Investment Program in Ontario. Through this program, close to 850 housing providers invest more than $474 million in Encasa s funds (as of September 30, 2014). The two British Columbian organizations could attract a few hundred more organizations to the program. HSC s mission is to ensure the sustainability of housing providers and housing assets, Howie notes. The best way for us to accomplish this is help providers become more financially savvy and to earn better returns on capital. He adds: Building our client base will enable us to spread costs over a larger pool, which will drive down costs for everyone. This will make us more competitive and will ultimately allow us to offer more investment options to our clients. For Nicholas Gazzard, executive director of CHF Canada, the partnership demonstrates how the sector can leverage its effectiveness by working collaboratively. Encasa can build its client base beyond Ontario s borders and deliver service in a way that the partner organizations, acting independently, cannot. Under Nicholas leadership, CHF Canada was one of the original architects of a pooled capital reserve program in the 1990s, before the Ontario government delegated responsibility to HSC. Co-ops created under Ontario legislation were required to participate but in the initial years, many did so reluctantly. Our members will feel an extra incentive to invest in the Social Housing Investment Program, now that it is run by a company that they partially own, Nicholas points out. The two new owners from British Columbia are also excited about the opportunities that this partnership brings to their members. They collaborated in 2008 to create an investment program but soon realized that the sector in British Columbia was not large enough for them to build a robust program for social housing providers to access capital markets. Encasa will increase the capacity of our sector and position housing providers to be more economically independent, says Tony Roy, executive director of BCNPHA. Capital Ideas: December

3 CHFBC executive director Thom Armstrong agrees. BC co-ops will finally have access to investment funds in a portfolio appropriate for their needs, he states. To have this controlled by the housing sector across the country is a huge benefit, and fills a gaping hole. Thom points out that, as BC co-ops approach the end of their operating agreements over the next 10 years, major capital reinvestment will be needed to maintain their aging buildings. The co-ops need to build up their reserves and invest them properly, he says. Until now, the only investment opportunities that have been available are primarily suited to short-term investments. To help co-ops prepare for the changes, CHFBC launched a comprehensive asset management planning service for its members. Being able to offer a suite of funds geared to medium- and long-term needs across a portfolio with a fairly diversified set of assets is a perfect match for the services they are trying to offer our members. Until now, the investment piece was the missing link, Thom explains. Asset management planning is a crucial value-added aspect that we didn t expect to be able to offer them until the Encasa opportunity came along. Tony believes that Encasa might eventually be able to provide a wider range of financial services to the sector. He points out: Before Encasa, it wasn t possible to even envision that type of opportunity. All four owners believe that Encasa will help to transform the social housing sector in Canada. As a sector, we must focus not just on social housing, but on affordable housing, Howie stresses. He points to a recent analysis by McKinsey Global, which suggests that by 2025, 1.6 billion people in urban centres around the world will have challenges obtaining affordable housing. If society does nothing, the money required to meet this demand will be $16 trillion. In North America, over $2 trillion will be required. Two of the four key ways identified in the report to drive down these costs are to aggregate operations, and to leverage size, Howie states. As a sector, we need to work together to achieve this. Encasa is an important beginning. Thom agrees. He notes that, since senior levels of government have stopped funding new affordable housing, the sector needs to develop enterprise operations on its own, to administer the existing portfolio and build new units. When we were approached by HSC to buy into an enterprise with significant scale and proven track record, it was irresistible so we seized the opportunity, he states. This is the first big, visible step that the four stakeholders have taken to show what it means to be entrepreneurial and offer services to our members without relying on government. We look forward to explore more opportunities to find synergies across the country. Capital Ideas: December

4 The Encasa relationship is a shining example of our partnership with HSC, Nicholas notes. The building of partnerships will be key to the success of the housing sector. Already, we are starting to see other areas of operations where we can collaborate and realize savings and efficiencies with partners across the country, notes Tony. We have entered a new era of national partnerships. Encasa is a catalyst for us to realize our own destiny. A Gold Medal Community Some of the tenants at Victor Davis Memorial Court have lived there since the building opened 20 years ago. The keys to this non-profit s success are its preventative maintenance program, balanced investments, and a living environment that makes tenants proud of their home. Victor Davis Memorial Court is a 10-storey non-profit building that opened in 1994 with 114 units (target of 90 subsidized, 24 market units) in Guelph. Its residents are diverse: families, seniors, single families and single residents. Nineteen of the units are wheelchair-modified, and residents in 16 of these units receive services from Guelph Independent Living, which has an office in the building with 24-hour staff to help people with disabilities live in the community. One key strategy that has helped this non-profit succeed is its preventative maintenance program. The organization did a building condition assessment (BCA) in 2005 & 2010, and an energy audit in Wellington County requests a one-year and five-year capital plan each year, listing annual subsidy entitlement and identifying which projects will be done. Each year, Victor Davis Memorial Court reviews the building s condition to determine which projects to undertake, and then adapts its plan, based on Capital Ideas: December

5 actual need. For example, the roof replacement was postponed for two years; it is now scheduled to be done in Preventative maintenance has enabled us to delay taking money out of our capital reserve fund, explains Paulette Bissonnette, Property Manager. We have several contracts in place wherein contractors inspect & maintain the building equipment throughout the year to identify opportunities to stretch the life of building features. By maintaining these features for longer, we don t have to replace things as quickly, Paulette notes. For the first 19 years, our two elevators were checked & maintained monthly. Now with recent TSSA changes, they are checked & maintained quarterly. We rarely have any service calls in between scheduled maintenance, adds Paulette. Fire equipment is inspected monthly and tested annually. Each unit is inspected annually and work orders are issued immediately if repairs are needed. We do the annual work orders based on priority, explains Paulette, and all repairs are done in a timely manner. Other work order requests from tenants are based on urgency but they are all done quickly. Board member Lilly Bowman notes that in 2008 the organization obtained funding under the Social Housing Capital Repair Fund program (SHCRF). Projects included caulking perimeter doors & windows, an asbestos audit, and replacing recirculation pipes and valves. In 2011, the organization obtained funding under the Social Housing Renovation and Retrofit program (SHRRP). Projects included an energy audit, building condition assessment (BCA), thermal inspections (all breaker/electrical panels), replacement of CO detectors in parking garage, and upgrades to fire monitoring equipment. In 2012, SHRRP-funded projects included energy-efficient lighting replacements in hallways, laundry room and parking garage. Existing13-litre toilets were replaced with new models with 4-litre tanks, which led to a significant savings in water usage. Board member Heather Bumstead notes that the organization has taken on projects as needed. Some recent projects include: new water-softening equipment (2014); and 2 new diesel storage tanks for the generator (2013). The non-profit replaced its elevator rope rippers in 2006 and, through a class action lawsuit with ONPHA and Toronto Community Housing Corporation *TCHC), Victor Davis Memorial Court was able to recover two-thirds of the roughly $18,000 cost. This money was returned to capital reserves and reinvested with the Social Housing Investment Program in Capital Ideas: December

6 Remembering a Legend Victor Davis Memorial Court is named to honour the memory of Canadian Olympic and world champion swimmer Victor Davis, who won 31 national titles and 16 medals in international competition. He set the world record in the 200-metre breaststroke at the 1982 world championships, then topped his own standing with a new world record in the 1984 Olympics. In 1988, he swam his fastest relay leg of his career a record that has never been broken. Victor was named Swimming Canada's Athlete of the Year three times and he was made a Member of the Order of Canada. He was voted into the Canadian Olympic Hall of Fame and Canada's Sports Hall of Fame. A few months after retiring from competitive swimming 1989, at the age of 25, Victor was struck by a hit and run driver and killed. His parents knew from previous conversations that Victor believed in organ donation, so they arranged for his heart, liver, both kidneys and both corneas to be donated. In addition to saving or improving the lives of six people, this gesture made headlines, significantly raising awareness about organ donation at a time when the practice of donating multiple organs was quite new. After his death, The Victor Davis Fund was established to provide awards each year to help Canadian swimmers continue with their education while training. Close to 100 young people have benefited from these awards. The pool where Victor trained was renamed in his honour. November 2014 is the 20th anniversary of Victor Davis Memorial Court, and also marks the 25th anniversary of the tragic loss of Victor to his family, the city of Guelph and the country. Victor is remembered for his accomplishments in the pool, and the gifts of life, health and educational support that have been provided to so many since his passing. Victor Davis Memorial Court honours his memory with a large plaque in its lobby and a photo of Victor wearing his medals in the party room. Capital Ideas: December

7 After we update our capital repair/replacement plan, we have used Encasa s Asset Mix Calculator or Model Investment Portfolio Selector to ensure our capital reserve money is placed appropriately among the three funds offered by the Social Housing Investment Program, adds Paulette. As of September 30, % of the capital reserve fund has been placed in the Social Housing Canadian Equity Fund, 20.6% in the Social Housing Canadian Short-Term Bond Fund; 21.5% in the Social Housing Canadian Bond Fund. The board has had the confidence to place most of its money in the equity fund, which is for long-term investing. This is because few repairs have been needed. In the corporation s first five to 10 years, most large items were covered by warranties. This strategy has enabled Victor Davis Memorial Court to build its reserve fund over time. In the past 10 years, the non-profit has earned a return of 5.2%, and in the past 12 months, its return was 12.8%. Through investment returns and the deposit of annual contributions, the non-profit has tripled its reserve fund in 10 years. Paulette s onsite office is open five days a week. In addition, the building superintendent lives on site, and two security tenants are on call at nights and on the weekend. As a result, tenants have someone that they can approach at any time if problems arise. Incidents of vandalism throughout the building in the early years were addressed immediately and as a result, these incidents rarely occur. If someone punches a hole in the wall and you don t repair it right away, people will think you don t care, and punch more holes, notes Paulette. We run a pretty tight ship here, notes board chair Mel Davis, father of the Canadian Olympic and world champion swimmer in whose memory the building was named [See separate story]. Having a good Property Manager on site makes it easier to deal with repairs. Things are just the same, if not better, than when the building first opened. Victor Davis Memorial Court considers it a priority to maintain the overall appearance and condition of the building, in order to attract market tenants and to ensure that all tenants are proud of where they live. Many social housing applicants in the area select Victor Davis Memorial Court as their first choice because of its reputation for strong management and a well-maintained building. This view is shared by existing tenants, several of whom have lived in the building since it opened in Capital Ideas: December

8 FED ID: Updated verification options Phillips, Hager & North Investment Funds Ltd., which uses the trade name PH&N Investment Services, is required under the federal Proceeds of Crime (Money Laundering) and Terrorist Finance Act ( The Act ) to obtain certain information regarding the existence of new corporate or other entity clients (e.g. corporations, trusts, etc.) and the identity of each individual (i.e. signing officers) who is authorized to transact on the investment account. The most straightforward method to verify an individual s identification is via an in-person meeting. PH&N Investment Services can verify your identity in person by reviewing an original identification document, such as your birth certificate, current driver s licence or current passport. An Investment Funds Advisor of PH&N Investment Services is available to meet with you at their downtown Toronto office, Monday to Friday, from 8:00 a.m. to 5:00 p.m. Eastern Time. Please contact an Investment Funds Advisor at if you wish to arrange a meeting. Of course it is not always convenient or possible to check someone s identification in a face-to-face meeting. Although a limited number of ID verification options have previously been available to signing officers, Encasa has been working closely with PH&N Investment Services to bring additional choices to unitholders. Effective immediately, signing officers may select from the following methods to verify the identity of Social Housing Investment Program signing officers. Option A: For existing (personal) clients of RBC: the provision of the 16-digit RBC client card number Option B: Unitholders may choose two of the three following methods: 1. Credit File Method By authorizing PH&N Investment Services to conduct a high-level credit bureau solely for the purpose of ID verification (no financial history). 2. Cleared cheque By providing a $1.00 personal cheque from a Canadian Financial Institution, made payable to RBC Global Asset Management Inc. OR NEW confirmation of deposit account method By having a Confirmation of Deposit Account form completed at their personal financial institution 3. NEW Attestation method By providing an Identification Attestation form, which has been completed and signed by a professional accountant performing accounting services for the corporate entity (non-profit or co-op) Fed ID verification forms are available at Please contact John Osmond at josmond@encasa.ca if you have any questions. Capital Ideas: December

9 Rates of Return Returns for the period ending September 30, 2014 ¹ Rates of return assume reinvestment of all distributions, after deduction of fees ² Annualized returns This chart shows virtual rates of return for each of the five model investment portfolios in our Model Investment Portfolio Selector. These are the percentages that providers would have earned as of September 30, 2014, if they had invested their money since inception based on the recommendations in each of the models. The model investment portfolios provide hypothetical performance information using the stated fund allocations. Each model investment portfolio is calculated based on monthly Social Housing Investment Fund returns and assumes that allocations are rebalanced at the end of each month. Performance information comprises hypothetical returns based on a model portfolio, rather than actual returns. Providers should assess their overall investment objectives and risk tolerance to determine an appropriate asset mix for their portfolios. It is not intended to reflect future values of the Funds or returns on investment. Capital Ideas: December

10 Legal Disclosures This newsletter should not be considered an offer to sell or solicitation to buy securities, including units of the Social Housing Investment Funds. The information in this newsletter is not intended to provide legal, accounting, tax or specific investment advice, and you should not rely on it as such. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Rates of return, unit prices and distributions are for Series A units of the Social Housing Investment Funds. The indicated rates of return are the historical annual compounded total returns, including changes in unit value and reinvestment of all distributions; they do not take into account sales, redemption, distribution or optional charges, or income taxes payable by any unitholder that would have the effect of reducing returns. Mutual funds are not guaranteed, their values change frequently and past performance might not be repeated. Encasa Financial Inc. is the program administrator for the Social Housing Investment Program and the fund manager of the Social Housing Investment Funds. RBC Global Asset Management Inc. (RBC GAM) is the portfolio adviser for all Social Housing Investment Funds. Phillips, Hager & North Investment Funds Ltd. PH&NIF), which uses the business name PH&N Investment Services, is the principal distributor of the units of the Social Housing Investment Funds. RBC GAM and PH&N IF are indirect, wholly-owned subsidiaries of Royal Bank of Canada. PH&N Investment Services is a registered trademark of Royal Bank. Used under license. Capital Ideas is produced and distributed by: Capital Ideas: December