In for a Nickel: Asset Management for Changing Needs

In for a Nickel:

Asset Management for

Changing Needs

March-12-14 Ministry of Municipal Affairs and Housing 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-12-14 Ministry of Municipal Affairs and Housing 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

March-12-14 Ministry of Municipal Affairs and Housing 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

March-12-14 Ministry of Municipal Affairs and Housing 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-12-14 Ministry of Municipal Affairs and Housing 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

March-12-14 Ministry of Municipal Affairs and Housing 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 2011. The transfer and refinancing of

March-12-14 Ministry of Municipal Affairs and Housing 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-12-14 Ministry of Municipal Affairs and Housing 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-12-14 Ministry of Municipal Affairs and Housing 10

Manitoba Housing:

A Story of Transformation

Brent Timmerman

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

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, 2004 - 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.”

The state of the housing stock

in 2008

SO, WHAT WAS THE WAY

FORWARD FROM HERE?

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

The capital funding picture

since 2007

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

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

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

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

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

Thank you...

Make the organization’s leadership aware of the scope and extent of the problem

Demonstrate good business decision-making at the operational level Gain Leadership’s trust and confidence from short-term wins

Get the right people in the key positions in the

organization Select the right pilot projects

for capital regeneration

Solving the organization’s internal process challenges

Getting the right technology solutions

Feb 2014

Email contact:

February 10, 2014

IN FOR A PENNEY NICKEL:

REGENERATION

FROM TODAY TO TOMORROW

CURRENT SITUATION

Asset Base

Service Delivery Model(s)

Organization

REGENERATION

FROM TODAY TO TOMORROW

CURRENT SITUATION

Asset Base

Service Delivery Model(s)

Organization

FUTURE SITUATION

Asset Base

Service Delivery Model(s)

Organization

REGENERATION

FROM TODAY TO TOMORROW

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

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

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

REGENERATION

FROM TODAY TO TOMORROW

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

REGENERATION

FROM TODAY TO TOMORROW

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?

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

Asset Planner

_{– 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

Ameresco Asset Planner

• Web based software asset planning tool

• Asset characteristic data is entered (sq ft, construction year,

type of building, # of floors, # of units, etc)

Asset Characteristic Data

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

Ameresco Asset Planner

• 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

_{then builds a model based on input data}

• Model includes:

• Construction components (of known useful life)

• Replacement cost

Ameresco Asset Planner

• 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

_{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

Asset Management Plan

Capital Repair Cost By Year

Average Annual Capital Repair Cost = $8.1M

Facility Condition Index (FCI) - The Goal

GOOD Range:

FCI (0% - 5%)

FAIR Range:

FCI (5% - 10%)

POOR Range:

FCI (10% - 30%)

CRITICAL Range:

FCI (> 30%)

FCI Target FCI Target

FCI

=

FCI By Year

Critical

Good Fair

Poor

Notes:

1. Assets are in continual decline as indicated by increasing FCI indices

FCI By Year

Critical

Good Fair

Poor

Notes:

1. Assets are in continual decline as indicated by increasing FCI indices

CHC Asset Age Profile

CMHC report* – 64% of housing stock in Canada _≥ 30 years in age

* Canadian Housing Observer 2012

Average Building Age = 41 Years

CHC – 70% of building stock ≥ 30 years in age

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