Empty nesters transitioning to vertical living often make the mistake of moving into older condominium buildings because the units are bigger and, on a dollar per square foot basis, they\u2019re priced competitively.<\/p>\n
\u201cPeople can get 1,500 sq ft not realizing they may be buying into a potential problem now or in the future,\u201d said Sunny Sharma, broker and co-owner of Leading Edge VIP Realty. \u201cWe shy away from older buildings, and while they usually have larger units, which tend to be attractive for people transitioning from a house, they\u2019re gravitating to older buildings not realizing a lot of problems will come their way shortly thereafter. They can do their due diligence, and that can help identify upcoming repairs, but what if it\u2019s a major one?\u201d<\/p>\n
for reasons ranging from property taxes to a condominium\u2019s location, but older building infrastructure is also a major contributor to escalating costs. Although that problem can be rectified, the price tag is astronomical.<\/p>\n
\u201cTo upgrade a 200,000 sq ft building, it costs about $1 million,\u201d said Chandra Ramadurai, co-founder of Efficiency Capital. \u201cTo save $20,000 a month you may have to invest $1 million up front to optimize the equipment, which most buildings owners don\u2019t want to do.\u201d<\/p>\n
There\u2019s no shortage of the capital required for these , but Ramadurai noted that it is usually allocated toward constructing brand new buildings rather than upgrading boilers.<\/p>\n
\u201cSocial housing is seriously underfunded as well, so it\u2019s more allocation of capital than availability,\u201d he said. \u201cIt\u2019s not that upgrades are inherently risky; the problem with efficiency is you\u2019re saving on something compared to what you did last year, and when you can\u2019t measure something, you don\u2019t know how much you\u2019re making. \u201cBaselining is important, but it\u2019s also not easy. There are mechanisms available but they aren\u2019t widely used, meaning there\u2019s little to no standardization in the industry.<\/p>\n
\u201cCapacity is also a problem\u2014most managers struggle to keep up with their day-to-day activities, so targeting reductions doesn\u2019t happen much because they\u2019re trying to keep their heads above water.\u201d<\/p>\n
The way Ramadurai sees it, closing the fissure between capacity and technological availability is the missing piece of the puzzle. However, that was before the COVID-19 pandemic upended the world and redirected reserve funds towards unplanned costs.<\/p>\n
Efficiency Capital replaces outdated building infrastructure for no or low upfront costs, subsequently receiving monthly instalment payments while retaining ownership of, and operating responsibilities for, the technology. In replacing the technology, for which Efficiency Capital provides building officers maintenance training, Ramadurai says reserve funds are no longer needed. And given that the company has already done 55 buildings, there\u2019s clearly a need in the market.<\/p>\n
\u201cThe building gets new equipment at a reduced cost because instead of paying $1 million, they pay $20,000 upfront and $10,000 a month, and in 10 years we give them the equipment and they get the savings,\u201d he said. \u201cWe\u2019re not lenders; we own and operate the equipment. We\u2019re equity investors who don\u2019t own the building, we own the equipment in the building.<\/p>\n
\u201cBecause we replace the equipment, you no longer need the reserve funds, which means the $1,000 in maintenance fees goes down depending on how underfunded the building is. A condo with adequate reserves will have reductions that are even higher because they don\u2019t need to collect these reserves for the next 10 to 15 years, so there\u2019s a 10-20% reduction on energy costs and another 10-20% on reserves, which means 20-40% is being saved.\u201d<\/p>\n
In addition to benefiting condo unit owners, the entire building\u2019s value increases too, added Ramadurai.<\/p>\n
\u201cTypically, cash flows are counted into value, and by reducing the cost we increase the cash flow, which means that, at the same cap rate, you end up having higher value of the building.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"
Empty nesters transitioning to vertical living often make the mistake of moving into older condominium buildings because the units are bigger and, on a dollar per square foot basis, they\u2019re priced competitively. \u201cPeople can get 1,500 sq ft not realizing they may be buying into a potential problem now or in the future,\u201d said Sunny […]<\/p>\n","protected":false},"author":6,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[4],"tags":[],"acf":[],"_links":{"self":[{"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/posts\/9009"}],"collection":[{"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/comments?post=9009"}],"version-history":[{"count":1,"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/posts\/9009\/revisions"}],"predecessor-version":[{"id":23254,"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/posts\/9009\/revisions\/23254"}],"wp:attachment":[{"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/media?parent=9009"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/categories?post=9009"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.canadianrealestatemagazine.ca\/wp-json\/wp\/v2\/tags?post=9009"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}