In for a Nickel: Asset Management for Changing Needs

Transcription

1 In for a Nickel: Asset Management for Changing Needs HSC Regeneration Forum, February 10, 2014

2 Social Housing Asset Management Program (SHAMP) SHAMP provides $750,000 over 3 years to 37 Service Managers who administer less than 4,000 social housing units. The funds help initiate new or supplement existing strategic asset management programs and plans. Recognizing some social housing as municipal infrastructure is important; SHAMP offered in partnership with MOI as part of the Municipal Infrastructure Investment Initiative (MI3). March Ministry of Municipal Affairs and Housing 2

3 Social Housing Asset Management Program (SHAMP) Most Service Managers have purchased asset management software packages. Other funded activities include: conducting Building Condition Audits and/or energy audits developing strategic plans and tools for municipal-owned as well as non-profit stock providing asset management training for staff and Board members March Ministry of Municipal Affairs and Housing 3

4 Asset Leveraging Working Group (ALWG) Formed in 2008 to review, analyze and recommend financing options related to leveraging of social housing assets. Membership includes HSC, ONPHA, CHF, Infrastructure Ontario, Service Managers and housing providers. Successful in advancing the understanding of social housing financing issues. Came to understand that there was no one silver bullet as a solution. March Ministry of Municipal Affairs and Housing 4

5 Asset Leveraging Working Group Current Initiatives Portfolio Review in the Region of Waterloo IO on behalf of ALWG is undertaking a portfolio review in the Region of Waterloo using a lenders perspective. The review includes site visits and evaluating each housing property in the portfolio as a Residential Business Unit. When the review is completed, IO will generate a report that will outline various financial options for the Service Manager and its housing providers. March Ministry of Municipal Affairs and Housing 5

6 Asset Leveraging Working Group Current Initiatives Researching Best Practices The Committee is exploring how Service Managers and housing providers are engaging in asset leveraging and financing. To date, the Committee has discussed seven refinancing and asset leveraging case studies, as shared by housing providers and Service Managers. The Committee is looking for best practices that can be replicated in the broader housing sector. March Ministry of Municipal Affairs and Housing 6

7 Asset Leveraging and Refinancing Research Victoria Park Community Homes Inc. A Section 95 property needed extensive parking garage repairs and window repairs. The property had an existing mortgage. The housing provider took out a $2.5M loan against another Section 95 property that was mortgage free to pay for the repairs. Region of Waterloo Community Housing Inc. (RWCHI) To streamline operations and realize operational savings, the Board of Directors approved ownership transfer of three RWCHI properties to the Region of Waterloo. The Region of Waterloo debentured the cost of mortgages ($6.6M) as part of Region s 2011 debenture issue (all in cost of 2.85% for 10 years). The mortgages were paid out at renewal in The transfer and refinancing of mortgages at a lower rate resulted in savings of $927,000. March Ministry of Municipal Affairs and Housing 7

8 Asset Leveraging and Refinancing Research Ottawa Community Housing Corporation (OCHC) OCHC refinanced existing debt to generate capital to help pay for building repairs. OCHC paid off eight mortgages coming up for renewal in 2012 on their renewal dates and replaced these mortgages with a new 30-year loan from IO. OCHC was able to generate about $18 million in new capital to help pay for social housing repairs. CHF Canada - Co-operative Housing Refinancing Partnership CHF Canada launched a new mortgage loan program for housing co-operatives. The program helps co-operative housing providers to refinance existing CMHC mortgages with credit unions and generate funds for renovations and improvements. March Ministry of Municipal Affairs and Housing 8

9 Asset Leveraging and Refinancing Research Centretown Citizens Ottawa Corporation (CCOC) CCOC is a private non-profit landlord that operates mixed-income housing at 53 different properties in downtown Ottawa. The housing provider has adopted an internal lending policy where it uses a pool of unrestricted reserves to help pay costs of developing new housing projects. For example, CCOC s Beaver Barracks project borrowed $2M from their reserves. Beaver Barracks must repay the funds into the reserves with interest over 40 years. York Region Social Housing Provider Building Repair Loan Program In 2008, Region of York has created a loan program for social housing repairs. Housing provider interested in participating in the program must prepare capital plans for the Region s approval. The loan is registered as a non-performing second mortgage. Repayment of the loan begins upon retirement of the first mortgage. March Ministry of Municipal Affairs and Housing 9

10 Thank You!!! March Ministry of Municipal Affairs and Housing 10

11 Manitoba Housing: A Story of Transformation Brent Timmerman Executive Director, Asset Management

12 A little on Manitoba Housing A Crown Corporation 705 employees Under the Department of Housing and Community Development We cover all of Manitoba From Churchill in the north To the Town of Emerson in the South From Swan River in the West To Middleboro in the East 17,419 Units Owned Direct managed = 14,249 Sponsor managed = 3,170 $2.85B Estimated Asset Replacement Value

13 The Change started in 2007 Previously, the average annual capital budget was around $8M for 4500 properties. Internal and external audits were finding serious problems at Manitoba Housing: November, Office of the Auditor General Due to insufficient budget allocations, the condition of current housing stock of MHA is placed at risk. December, 2007 KPMG Report There is an overall departmental funding shortfall compared to budgeted requirements, and this has been the case for well over a decade.

14 The state of the housing stock in 2008

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19 SO, WHAT WAS THE WAY FORWARD FROM HERE?

20 Make the leadership aware of the problems The government had already started responding to the crisis within Manitoba Housing by increasing the capital budget in 2007 to $24M. Housing requested the KPMG audit, which validated the extent of the deficiencies The story was soon after laid out extensively to the Ministers at the time. They drove forward the cause within government The government undertook to make organizational changes within Manitoba Housing

21 The capital funding picture since 2007

22 Demonstrate good operational business decision-making You can t separate your operational problems from your capital projects you are one organization... Look for short-term wins that give you positive impact in multiple areas, if possible You are trying to gain credibility with the leadership For Manitoba Housing, these short term wins were Pest Control Security

23 Get the right people Seasoned professionals into key roles. Must be willing to support change and to think long-term in their strategic leadership For Manitoba Housing, that meant: CEO, COO, Executive Directors Directors: Procurement, Engineering Professional Services, Capital Planning Front-line Managers Drive the HR issues hard to get the right people

24 Choose your pilot projects for Capital Regeneration Highest profile and most problematic projects For impact Externally visible characteristics Make sure stakeholders can see where their investment is going Make sure your clients and the public can see it too! Before After

25 Tackle solving the organization s process problems. Accounting practices for unprecedented capital funding Business processes needed development Capital Project Management structure Asset Tracking system Approach needs leadership and vision Also needs engagement from the staff can t be only top-down

26 So where is Manitoba Housing today? Still a long way to go! The current capital budget is $98M. Excellent success with asset regeneration to date Rarely in the news, compared to 2007 Going forward Some key people still needed Driving HR issues (hiring, succession planning, classifications, performance management, etc.) Sourcing technology solutions to support the business

27 Thank you... Feb 2014 Getting the right technology solutions Solving the organization s internal process challenges Select the right pilot projects for capital regeneration Get the right people in the key positions in the organization Gain Leadership s trust and confidence from short-term wins Demonstrate good business decision-making at the operational level Make the organization s leadership aware of the scope and extent of the problem contact: brent.timmerman@gov.mb.ca

28 IN FOR A PENNEY NICKEL: Asset Management for Changing Needs February 10, 2014

29 REGENERATION FROM TODAY TO TOMORROW CURRENT SITUATION Asset Base Service Delivery Model(s) Organization

30 REGENERATION FROM TODAY TO TOMORROW STRATEGIC PLAN CURRENT SITUATION Asset Base Service Delivery Model(s) Organization FUTURE SITUATION Asset Base Service Delivery Model(s) Organization

31 REGENERATION FROM TODAY TO TOMORROW STRAGETIC PLAN CURRENT SITUATION Asset Base Service Delivery Model(s) Organization FUTURE SITUATION Asset Base Service Delivery Model(s) Organization Drivers Increased community need of the same Changing community need Change in funding $ s (EOA s) Expiry of Asset

32 Building Regeneration At CHC Built in 1966, contains 76 bachelor units (221 sq ft without kitchen facilities) 2 floors with elevator Design intent was to address lack of long term care facilities for seniors, including: 24 hour nursing services Centralized kitchen/cafeteria on first floor Building currently 40% utilized and very high cost on a per unit basis ($357. vs. $174 per unit [comparable building] ) 2012 MPAC Building value $5.7M Conduct a concept design and feasibility study to re-purpose the building for housing for singles

33 Two Bachelor to One Bedroom

34 Building Regeneration At CHC Joint cooperative project with support services organization and CHC CHC provides second floor of building for program operations CHC operates first floor for graduates of program if housing is needed Funding arrangements are currently in discussions Target completion of renovations and program start is Q4 2014

35 REGENERATION FROM TODAY TO TOMORROW STRAGETIC PLAN CURRENT SITUATION Asset Base Service Delivery Model(s) Organization FUTURE SITUATION Asset Base Service Delivery Model(s) Organization Drivers Increased community need of the same Changing community need Change in funding $ s (EOA s) Expiry of Asset

36 REGENERATION FROM TODAY TO TOMORROW STRAGETIC PLAN CURRENT SITUATION Asset Base FUTURE SITUATION Asset Base Do we have the right mix of assets? Do we need to reconsider the geographical footprint of our assets? Do we have expired assets or close to expiry? Do we have the right quantity of assets? Do I understand the current condition of my asset and the forecasted condition in future years?

37 HISTORICAL ASSET PLANNING PROCESS Primarily a five year focus Excel based very labour intensive to use (input data) Heavy reliance on anecdotal input from Operations Reporting manual reporting processes Limited visibility information and reports reside on server

38 Asset Planner TM Overview License purchased through Housing Services Corp. (HSC) Currently more than 55,000 units in Asset Planner 24 licenced Service Managers HSC Asset Planner databank will have capital data representing almost 50% of the overall possible units excluding TCHC TCHC is an Asset Planner user with approximately 58,500 units under licence

39 Ameresco Asset Planner TM Web based software asset planning tool Asset characteristic data is entered (sq ft, construction year, type of building, # of floors, # of units, etc) Asset Planner TM then builds a model based on input data

40 Asset Characteristic Data Note an asset is considered four exterior walls and a roof and therefore may consist of more than one unit.

41 Ameresco Asset Planner TM Web based software asset planning tool Asset characteristic data is entered (sq ft, construction year, type of building, # of floors, # of units, etc) Asset Planner TM then builds a model based on input data Model includes: Construction components (of known useful life) Replacement cost Capital Repair Actions (incl. dates, cost, priority, etc)

42 Ameresco Asset Planner TM Web based software asset planning tool Asset characteristic data is entered (sq ft, construction year, type of building, # of floors, # of units, etc Asset Planner TM then builds a model based on input data Model includes: Construction components (of known useful life) Replacement cost Capital Repair Actions (incl. dates, cost, priority, etc) Model optimization Construction components Capital Repair Actions Adjust costs (usually downward adjustments) Adjust with historical CHC project data (mainly impacts next replacement date)

43 Asset Management Plan Replacement cost calculated for each building component.

44 Capital Repair Cost By Year Average Annual Capital Repair Cost = $8.1M Current Funding Level = $2.7M

45 Facility Condition Index (FCI) - The Goal FCI = Unfunded Renewal and Repair Costs Asset Replacement Value FCI Target GOOD Range: FCI (0% - 5%) FAIR Range: FCI (5% - 10%) POOR Range: FCI (10% - 30%) CRITICAL Range: FCI (> 30%) FCI Target

46 FCI By Year Critical Poor Fair Good Notes: 1. Assets are in continual decline as indicated by increasing FCI indices 2. Blue ovals indicate critical points in time as they cross a key FCI rating boundary

47 FCI By Year Critical Poor Fair Good Notes: 1. Assets are in continual decline as indicated by increasing FCI indices 2. Blue ovals indicate critical points in time as they cross a key FCI rating boundary

48 CHC Asset Age Profile Average Building Age = 41 Years CMHC report* 64% of housing stock in Canada 30 years in age * Canadian Housing Observer 2012 CHC 70% of building stock 30 years in age

49 CHC Asset Map

50 Regeneration in for the nickel Conclusions and Remarks 1. Think outside the box and consider partners beyond the traditional housing stakeholders 2. Establish and maintain a solid asset plan 3. Know your capital needs, funding and FCI 4. Ensure your asset and regeneration plans are synchronized 5. BCA s can be used to augment asset planning data

51 THANK YOU