1
DEPRECIATION REPORT Nim’s Manor N16 ADDRESS: 800 Mackenzie Avenue Revelstoke, BC
PREPARED FOR: Strata Corporation N16 c/o Box 1528 Revelstoke, BC V0E 2S0
Prepared By: D. Allan Beatty, AACI, P.App
October 15, 2013
2
October 15, 2013 Strata Corporation N16 c/o Box 1528 Revelstoke, BC V0E 2S0 Attention: Bill Carlson, Strata Council Executive Dear Mr. Carlson: Re: Depreciation Report – Nim’s Manor, Strata Corporation N16 ______800 Mackenzie Avenue, Revelstoke, British Columbia________________________________ Pursuant to your request for a Depreciation Report of the above described strata development, I have prepared the attached report for the consideration of Strata Corporation N16 operating as Nim’s Manor. This Depreciation Report, also commonly known as a Reserve Fund Study; describes the reserve fund concepts and major reserve fund items. It provides current and future replacement reserve estimates and recommends reserve fund actions. Although the effective date of this report is October 15, 2013 the first year of the financial model begins January 1, 2014 after the start of the next fiscal year. A Depreciation Report is a financial planning tool and should be viewed as such. A study of this nature is subject to constantly changing circumstances and should be reviewed in detail annually and updated, at a minimum, every three years, as mandated by the Strata Property Act Regulations. In my opinion the current reserve fund position of Nim’s Manor is significantly below its optimum level. In the past few years the strata has been following the legislated requirement to contribute 10% of the budgeted operating costs for each fiscal year into the contingency fund. Prior to that period, however it is unclear if that this model was followed. Regulations for the Strata Property Act cover minimum payments, and do not necessarily adequately provide for future repair cost. In the attached report, we refer to a fully funded model as Option 1. Option 1 involves eliminating the current deficiency over the next 30 years by making regular reserve fund contributions starting at $15,000, increasing incrementally to $50,000 by year 4, then levelling off at $30,000 in year 7, for the remainder of the 30 year model. This suggested contribution equates on average to $48 (per month, per unit) increasing to $160 per month in year 4, levelling off in years 7-30 at $96 per month (per unit on average) augmented by one large special levy, as outlined in the report that follows. The special levy is assigned in year one to assist with the elevator re-build as well as top up the current reserve fund. This assumes you can achieve an average rate of return of 2.00% on the reserve funds held on account. The reserve fund will be in a fully funded position with a strong cash position of $334,500 at the end of the 30 year cycle for funding repairs that will not occur until after that time frame. Per the Strata Property Act Regulations, three funding models are presented for the consideration of the Strata Corporation. In view of these options, this report includes two other models that follow.
3 Option 2 involves a lower level of funding on an annual basis. The two differences between the options is both a lower annual contribution and the long term financial target. While Option 1 achieves a fully fund position at the end of the 30 year model, Option 2 will not. The goal of Option 2 is to achieve a fund that is approximately 75% of the optimum with a 25% deficit at the end of the 30 year projection period. This model also starts at $15,000, increasing incrementally to avoid a negative cash balance based on the scheduled reserve component expenditures, however levelling off in year 6-30 at $22,000 ($71 per month, per unit). The annual contributions are augmented by periodic Special Levies, and based on specific assumptions. Based on our assumptions, a special levy of $100,000 would be required to manage the capital expenditure of the elevator and low reserve fund balance. Additional levies are scheduled around years where larger expenses are anticipated. A small $15,000 levy is scheduled for year 10 ($577 per unit) followed by two larger levies of $80,000 in years 15 and 30 ($3,077 per unit). This combination of regular contributions and special levies should be sufficient to achieve a model which is 75% funded to the optimum balance at the end of the 30 years. This option would leave the fund funded with a healthy cash position however with a reserve deficit of $85,000. This strategy provides lower annual reserve contributions, as an offsetting factor. Option 3 involves borrowing funds periodically to address replacements, with a similar objective of achieving a fund balance which is 75% of the preferred optimum at the end of the 30 years. In this model, regular annual contributions reach $22,000 as set out in Option 2 by year 3 versus year 6. The annual contributions are augmented by periodic borrowing. For the seven years following the borrowing event, annual contributions would be increased to cover the cost of an amortizing loan. We have conducted this analysis on the basis of borrowing money where major expenses are expected over several years. With the assumption of a loan of $175,000 in year 1, the lower "normal" annual assessment would be supplemented by approximately $31,185 for each of the seven years after the first borrowing event ($100 per unit, per month). A second borrowing event for $125,000 would occur in year 15 with an additional annual assessment of $22,154 ($71 per unit, per month). With annual contributions supplemented by periodic borrowing the reserve fund would achieve approximately 75% of the optimum at the end of the 30 year projection period. This option leaves the fund in a healthy cash position by year 30 however a persistent deficit is present throughout reaching as high as $203,000 before the second borrowing event. Years one, seven and eight are years of very low cash balance (less than $10,000) which may beyond the comfort of the strata corporation. An overview of the three options is presented below. Option 1 - Fully Funded (Special Levy) Annual Contributions Special Levy (Year 1)
Option 2 - 75% Funded (Special Levies) Annual Contributions Special Levy (Year 1) Special Levy (Year 10) Special Levy (Year 15) Special Levy (Year 30)
Option 3 - 75% Funded (Borrowing) Annual Contributions Borrowing - Loan Amount (Year 1) Loan Repayment (Years 1-7) Borrowing - Loan Amount (Year 15) Loan Repayment (Years 15-21)
Per Year
Per Unit (Average)
$15,000 - $50,000 $100,000
$48 - $160 per month $3,846
Per Year
Per Unit (Average)
$15,000 - $40,000 $100,000 $15,000 $80,000 $80,000
$48 - $128 per month $3,846 $577 $3,077 $3,077
Per Year
Per Unit (Average)
$15,000 - $22,000 $175,000 84 months repayment $125,000 84 months repayment
$48- $71 per month $100 per unit, per month $71 per unit, per month
4 Any of these models can be customized based on a wide variety of background assumptions. We would be happy to present additional modeling, if you think it would be beneficial for discussion purposes. We appreciate the opportunity of performing this reserve fund study for you. If you have any questions, please do not hesitate to contact the undersigned. Respectfully submitted, KENT-MACPHERSON
__________________________________ D. Allan Beatty, AACI, P.App
5
Table of Contents Page Title Page Letter of Transmittal Table of Contents Executive Summary of Facts and Conclusions Reserve Fund Estimates Recommendation
1 2 5 6 7 8
Part I - General Information
10
Intended Use and Intended Users Purpose of a Depreciation Report Strata Bylaws Property and Boundaries Scope of Investigation Common Property and Limited Common Property Depreciation Report- Definitions and Concepts Reserve Fund Projection Factors
10 10 10 12 13 14 15 16
Part II - Descriptions
19
General Description Observed Condition and Maintenance History
19 21
Part III - Reserve Items: Description and Estimates
24
Reserve Items - Principles and Concepts Reserve Fund Item Descriptions Reserve Fund Estimates Benchmark Analysis 30 Year Cash Flow Projections - Fully Funded 30 Year Cash Flow Projections – 75% Funded with Special Levies 30 Year Cash Flow Projections – 75% Funded with Borrowing
24 26 40 42 47 48
Part IV
49
Limiting Conditions Certification
49 50
Part V – Addenda
51
(A) (B) (C) (D) (E)
51 53 55 58 59
30 Year Cash Flow Spreadsheets – 75% Funded with Special Levies 30 Year Cash Flow Spreadsheet – 75% Funded with Borrowing Excerpts from Strata Act Legislation Site Plan Qualification
6
Executive Summary of Facts and Conclusions This executive summary has been prepared as a quick reference of pertinent facts and estimates of this Depreciation Report, and it is provided as convenience only. Readers are advised to refer to the full text of this Reserve Fund Study for detailed information. Client:
Nim’s Manor Strata Corporation, N16
Date of Inspection:
Date: April 29, 2013
Effective Date of Report:
Date: October 15, 2013
Property/Location:
800 Mackenzie Avenue, Revelstoke, B.C.
Depreciation Elements
Building - Structural and Architectural • • • • •
Foundation & Parking Garage Superstructure & Balconies Building Envelope - Exterior Walls Windows & Doors Roof Cover
Common Amenities and Facilities • •
Interior Finish & Flooring Elevator
Building Systems - Mechanical, Electrical and Utilities • • • •
Plumbing Electrical Life Safety & Access Systems Water and Sewer Supply System
Site Improvements - Grounds • •
Landscaping and Irrigation Concrete Surfaces
Professional Fees •
Depreciation Report Update & Building Envelope Inspections
7
Reserve Fund Estimates
Current Replacement Cost
$448,830
The estimated costs of replacing reserve components at current prices. Future Replacement Cost
$507,212
The estimated costs of replacing reserve components at future prices. Current Reserve Requirement
$332,519
Reserve funds required today, considering the estimated effective age of the components or improvements. Future Reserve Accumulation
$356,257
The current reserve requirements invested at the projected interest rate over the relevant time period. Future Reserve Requirement
$150,955
The shortfall between the future replacement cost estimate and the future reserve fund accumulation. Annual Reserve Assessment
$22,061
Annual amount required to be paid into the reserve fund and to be invested At the projected interest rate to fund the future reserve requirements. Annual Reserve Fund Makeup Contribution Annual makeup contribution required, to fund the shortfall of the reserve fund requirements, to be paid into the reserve fund and to be invested at the projected interest rate to fund the future reserve requirements. Total Annual Reserve Contribution
$27,939 with Special Levies
$50,000
8
Recommendation The Nim’s Manor Strata Corporation has a reserve fund position estimated at $3,200 as of the end of the current fiscal year. Our model suggests that this should be more in the order of $332,520 if the contingency reserve had been adequately funded throughout the past life of the project. To make up this shortfall, a funding level of $15,000 will be required in the first year, along with a special levy. The annual contribution must also increase incrementally until it reaches $50,000 by year four (to help offset a negative cash balance), the decreasing to $30,000 for year 7-30. The annual contingency fund contribution is made up of a "regular" payment of $22,060 per year, with the additional recommended funding comprising a "make-up" contribution. The following recommendations include the recognition of the current reserve fund position, the condition of the property, and the various assumptions implied in this Depreciation Report. A 30 year cash flow summary incorporating this recommendation appears on the following page. 1.
A formal reserve fund plan and strategy should be prepared and implemented. The current level of funding in the reserve account represents a poor cash balance, which provides a less than optimal foundation for a level funding going forward.
2.
The annual reserve fund assessment policy of the Strata Corporation should be amended to provide for a total reserve fund contribution of approximately $15,000 increasing incrementally until it reaches $50,000 for one year to offset a negative cash balance, levelling off at $30,000 for years 7-30.
3.
Reserve funds should continue to be fully invested in qualified securities to earn the maximum interest available at all times. An attempt should be made to achieve investment returns in the 2% range, on average.
4.
Reserve fund expenditures should be planned in advance of contemplated major repair or replacements.
5.
The Reserve Fund Plan or Program should be reviewed annually and updated in accordance with observed conditions and repair or replacement experience, especially if an unexpected expense is incurred. A statement of activities in the fund should also form part of the annual financial review of the strata.
6.
The schedules and underlying assumptions of the Depreciation Report should be reviewed every year and the Depreciation Report in its entirety should be updated every three years, in accordance with legislative requirements.
7.
We have prepared two other models for the consideration of the Strata Council.
9
30 Year Cash Flow Summary of Recommendations
STRATA NES16 Year Ending
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043
Opening Balance
3,200 26,264 24,869 35,582 30,428 56,427 50,590 60,067 79,894 103,501 112,436 137,385 153,498 186,568 199,584 113,706 145,980 133,925 150,163 171,211 196,831 225,617 260,130 295,332 290,809 326,625 363,157 394,921 432,819 453,650
Special Levy
100,000
Recommended Annual Contribution
15,000 30,000 40,000 50,000 40,000 33,500 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000 30,000
Estimated Estimated Percentage Increase Inflation Interest in Recommended Adjusted Earned Annual Contributions Expenditures 2.00%
92,000 31,920 29,785 55,865 14,610 40,465 21,535 11,375 7,990 23,135 7,300 16,635 0 20,715 119,870 0 44,975 16,440 11,955 7,805 5,150 0 0 40,430 0 0 5,500 0 17,825 158,135
64 525 497 712 609 1,129 1,012 1,201 1,598 2,070 2,249 2,748 3,070 3,731 3,992 2,274 2,920 2,678 3,003 3,424 3,937 4,512 5,203 5,907 5,816 6,532 7,263 7,898 8,656 9,073
n/a 100.00% 33.33% 25.00% -20.00% -16.25% -10.45% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Closing Balance
(73,736) 24,869 35,582 30,428 56,427 50,590 60,067 79,894 103,501 112,436 137,385 153,498 186,568 199,584 113,706 145,980 133,925 150,163 171,211 196,831 225,617 260,130 295,332 290,809 326,625 363,157 394,921 432,819 453,650 334,588
10
Part I - General Information Intended Use and Intended Users This report has been prepared for the Strata Council (Nim’s Manor Strata Corporation N16) and through them, the strata unit owners. Only those parties are recognized as intended users of this report, for the sole intended use of establishing a reserve fund strategy and plan. Liability for unintended uses made of this document or to unintended users is expressly denied. It is recognized that this document may be disclosed as part of “Form B” requests; however use of the report is still restricted to the intended users as outlined above.
Purpose of a Depreciation Report The purpose of this Depreciation Report is to identify and estimate the replacement cost of the various reserve items and prepare reserve fund schedules and estimates of reserve requirements, as of January 1st 2014; the beginning of the next fiscal year. This Depreciation Report, which includes an analysis of the required reserve funding, complies with the Strata Property Act, and Regulations, including amendments up to B.C. Reg. 238/2011, December 14, Section 94. The pertinent sections of the Legislation are provided in the Addenda, Section C. The Regulation contains provisions that outline the items to be included in a Depreciation Report, as well as reporting requirements for the financial forecasting section, the qualifications of the person completing the report, and whether there is any relationship between the preparer of the report and the Strata Corporation. As a summary of these provisions, an identification of the physical components of common property and limited common property is required, along with an estimate of their life expectancy, and an assessment of current condition. A minimum of three financial models are required, forecasting the future costs, considering the time period that reserve items will have to be repaired or replaced, which will occur at then-current prices. The objective of the plan is to provide a framework for the Corporation to set aside sufficient funds to provide for such repairs and replacements when they are required. In addition to the Act and Regulations, the Strata Bylaws are an important document in defining those common elements that the Strata Corporation is responsible for. It is also important to understand that the Depreciation Report is only one component of a Reserve Fund Strategy. It provides options for the Strata Corporation to consider in formulating their strategy, and should not be considered as being conclusive on any given point or any specific strategy.
N16 Bylaws The strata council recently adopted new bylaws (May 2013) in keeping with the Strata Property Act. Division 1 — Duties of Owners Repair and maintenance of property by owner
11 2 (1) An owner must repair and maintain the owner's strata lot, except for repair and maintenance that is the responsibility of the strata corporation under these bylaws. (2) An owner who has the use of limited common property must repair and maintain it, except for repair and maintenance that is the responsibility of the strata corporation under these bylaws.
Division 2 — Powers and Duties of Strata Corporation Repair and maintenance of property by Strata Corporation 8 The strata corporation must repair and maintain all of the following: (a) common assets of the strata corporation; (b) common property that has not been designated as limited common property; (c) limited common property, but the duty to repair and maintain it is restricted to (i) repair and maintenance that in the ordinary course of events occurs less often than once a year, and (ii) the following, no matter how often the repair or maintenance ordinarily occurs: (A) the structure of a building; (B) the exterior of a building; (C) chimneys, stairs, balconies and other things attached to the exterior of a building; (D) doors, windows and skylights on the exterior of a building or that front on the common property; (E) fences, railings and similar structures that enclose patios, balconies and yards (d) a strata lot in a strata plan that is not a bare land strata plan, but the duty to repair and maintain it is restricted to (i) the structure of a building, (ii) the exterior of a building, (iii) chimneys, stairs, balconies and other things attached to the exterior of a building, (iv) doors, windows and skylights on the exterior of a building or that front on the common property, and (v) fences, railings and similar structures that enclose patios, balconies and yards. Division 8 Noteworthy Local Bylaws Age Restriction This Age Restriction Bylaw is intended to prohibit a person under a particular age from living in a strata lot. 30 (1) A person under the age of 19 years shall not be permitted to reside in a Strata lot; (2) No other person under the age of 19 years shall occupy a strata lot for a period in excess of twenty-one (21) days in the aggregate in any calendar year and, for the purposes of this section a person who uses the strata lot for his or her overnight accommodation shall be deemed to have occupied the strata lot for one (1) day on each occasion that he or she uses the strata lot for his or her overnight accommodation;
12 Rentals 31 (1) In accordance with the Act, the number of strata lots which may be rented at any one time is limited to 13. (2) An owner must not lease a strata lot or any portion of a strata lot for a period of less than 6 consecutive months, and no subleasing of a strata lot shall be permitted. (3) Where the limit of rented strata lots established in sub-section (1) of this rental bylaw is reached, no further rentals shall be permitted except as allowed under Sections 142 (family rentals), 143 (grandfathering of current rentals) and 144 (hardship application) of the Act. (11) This rental restriction bylaw does not apply to the rental of a strata lot to a member of the owner’s family, where a family member is defined as: (a) spouse of the owner; (b) a parent or child of the owner; or (c) a parent or child of the spouse of the owner. “Spouse of the owner” includes an individual who has lived and cohabited with the owner for a period of 2 years at the relevant time in a marriage-like relationship, including a marriage-like relationship between persons of the same gender.
Property and Boundaries Description: The subject strata comprises one apartment building. The total unit count is 26. Boundary Description: The boundary description as contained on the strata plan is in conformity with the wording of the Act: Strata lot boundaries 68 (1) Unless otherwise shown on the strata plan, if a strata lot is separated from another strata lot, the common property or another parcel of land by a wall, floor or ceiling, the boundary of the strata lot is midway between the surface of the structural portion of the wall, floor or ceiling that faces the strata lot and the surface of the structural portion of the wall, floor or ceiling that faces the other strata lot, the common property or the other parcel of land. (2) If a strata lot is not separated from another strata lot, the common property or another parcel of land by a wall, floor or ceiling, the boundary of the strata lot is as shown on the strata plan. (3) A boundary shown on the strata plan must be shown in a manner approved by the registrar. (4) Despite subsections (1) to (3), but subject to the regulations, in the case of a bare land strata plan, the boundaries must be shown on the strata plan (a) by reference to survey markers, and (b) in compliance with rules, if any, made under section 75 of the Land Surveyors Act for the purposes of this section.
13
Scope of Investigation A site review on the subject property was completed on April 29, 2013. Plans and architectural drawings were available for the site. A thorough interior and exterior inspection was also completed of the common area property including the hallways, lobby, underground parkade, mechanical areas, as well as landscaped areas,. This provided an opportunity to view the state and condition of many of the items that are the subject of this report. The strata documents and available financial statements and/or budgets were also examined. Any additions or improvements made by unit owners to their respective strata lots are not included in these estimates. Documentation provided by the strata corporation includes the recent history of the contributions to and the transfers from the reserve fund as well as various documents including: ¾ ¾ ¾ ¾ ¾ ¾ ¾ ¾ ¾
Bylaws for Strata Corporation Balance sheet as of end of: December 2012, March and May, 2013 Income Statement as of the end of: January - December 2012 and January-March, 2013 Budget 2013 Term Deposit details AGM/SGM – February 2012 and March 2013 Amended bylaws Roof Inspection News letter
Cost data have been investigated, using construction cost services, modified as to time, location and quality of construction. Where such data was incomplete, contractors and suppliers were interviewed with respect to local conditions and costs of similar repair projects.
Conditions and Assumptions In estimating various reserve items, certain assumptions are made in respect to structural and nonstructural repairs and replacements. For example, reserves for exterior walls, most structural repairs, replacements of mechanical and electrical components are difficult to predict and quantify, particularly the exact timing that such repairs or replacements will be required. The only reasonable approach is to provide an approximate time frame and in some cases contingency estimates, where replacement of an entire system may not be required. Where contingency allowances are made, they are described as such, so that the reader of the report is clear on the basis of how these costs were estimated. Reserve fund estimates are subjective and based on an understanding of the life cycle of building components and experience gained from observing buildings over a 30 year period. It must be appreciated that reserve fund budgeting and projections are not exact sciences. They are, at best, prudent provisions for most contingencies, if, as and when they arise. Reserve fund requirements are subject to change and must be reviewed and modified over time, not less than every three years. In essence, the corporation should adopt a long-term policy regarding reserve fund allocations that must be flexible to accommodate changes in reserve fund requirements in the future. Moreover, the corporation should consider the different options available to fund replacement and repair of common property - whether the best option for their unit owners is a fully funded reserve, or some combination of prudent contingency contributions and special levies or accessing credit (borrowing to complete major repairs) when large expenses are required.
14 Insurance Repairs Insurance should cover the buildings and improvements against numerous perils, but it is not intended to be a maintenance program. The difference between an insurance claim and maintenance repairs is not always clear, and it can result in prolonged disputes. For example, an unexpected sewer cave-in and resulting back-up is a legitimate insurance claim, and as such, it should be covered by the insurance policy subject to the stated deductible, whereas the deterioration of a catch basin and sewer connection, which caused a cave-in resulting into a sewer back-up, is a building repair expense.
Common Property and Limited Common Property The Strata Act defines common property as (a)
that part of the land and buildings shown on a strata plan that is not part of a strata lot, and
(b)
pipes, wires, cables, chutes, ducts and other facilities for the passage or provision of water, sewage, drainage, gas, oil, electricity, telephone, radio, television, garbage, heating and cooling systems, or other similar services, if they are located (i)
within a floor, wall or ceiling that forms a boundary (A) between a strata lot and another strata lot, (B) between a strata lot and the common property, or (C) between a strata lot or common property and another parcel of land, or
(ii)
wholly or partially within a strata lot, if they are capable of being and intended to be used in connection with the enjoyment of another strata lot or the common property;
Limited common property is common property designated for the exclusive use of the owners of one or more strata lots such as balconies, storage lockers and parking stalls. These elements may technically be the responsibility of the strata owner to maintain and repair. However, many strata corporations maintain control over these elements to ensure a consistent and timely approach is taken to repair and refurbish these components, as well as to preserve the look of the project. At times, this is a prudent course of action to ensure that a unit owner's failure to act will not affect other units. It is noted that balconies are the responsibility of the subject strata corporation, whereas in some projects this limited common property is the responsibility of the unit owner.
15
Depreciation Report - Definitions and Concepts A Depreciation Report is a financial document, and as such should be viewed as a guide to planning budgets and maintenance programs, and unlike a technical audit, it does not deal with detailed technical matters. Rather, this document takes a business approach to reserve fund management. This Depreciation Report comprises the following elements: (1)
identifies the reserve components, their quality, normal life span and present condition;
(2)
provides a current replacement cost estimate including the cost of removing worn-out items and special safety provisions;
(3)
projects the useful life of components that will require replacement in terms of remaining serviceable years; C O R P V A L U A T I O N S L T D
(4)
projects future replacement costs at an appropriate and compounded inflation rate;
(5)
projects the value of current reserve funds compounded at a long term interest rate;
(6)
calculates current reserve fund contributions required and to be invested in interest bearing securities.
The salient estimates and conclusions of this Depreciation Report are contained in the various schedules that appear at the end of the report, and summarized in the Recommendations section. Any recommendations are for guidance to management and the strata council. In estimating replacement reserves, the component method of valuation is used. Reserve items consist of building or site components, such as roof systems, exterior walls, pavement and sidewalks, each of which has a limited life span, and therefore, must be repaired, replaced or periodically upgraded to maintain the property in suitable condition. Replacement cost estimates are based on the assumption of using quality materials, as specified or built, using union labour and current construction techniques, and including contractors' overhead and profit. No allowance is made for premiums related to overtime, labour shortages or work stoppages during repair projects that may affect costs. In estimating the life span of the various components, physical deterioration, functional obsolescence and environmental factors are considered. In measuring the reserve requirements, depreciation tables and normal life span experience records are combined with personal experience and observation, reference to cost guides and discussions with contractors to formulate the most likely scenario for component replacement. Demolition and Disposal Costs The estimates include provisions for demolition and disposal costs including dumping fees, where applicable. These costs have been rising in recent years. Particularly, dumping of certain materials has become problematic and very costly. It appears that certain codes and environmental regulations will become more stringent in future years, all of which will further increase disposal costs.
16 Structural Deficiencies While not expert in engineering matters, we did not observe any signs of structural deficiency in our inspection of the subject property, nor were any deficiencies brought to our attention by on-site personnel that require immediate attention. The reserve fund plan provides for periodic technical inspection of the building envelope, and certain mechanical equipment to ensure that any potential structural issues can be identified and remediated as and when appropriate, to avoid further deterioration.
Reserve Fund Projection Factors Historically, building costs have been rising at various rates from year to year, depending on business cycles, economic conditions, interest rates, etc. In boom periods, cost increases were fairly pronounced, whereas in recessionary times, cost increases were only nominal or costs even declined. Analyzing long term cost increases, construction cost indices were examined as well as consumer price indices related to building construction. The most recently available data on average annual cost increases are from the two most well respected construction cost guides, the Marshall and Swift Cost Manual, and R.S. Cost Manual for the BC Interior Region are summarized as follows:
Source
Marshall and Swift
RS Means
Canadian Average
Past Year Past 2 Years Past 5 Years Past 10 Years Past 20 Years
2.3% 1.5% 3.5% 3.4% 2.1%
Not reported for full year
3.4% 4.0% 3.4% 3.8% 2.3%
1.6% 2.6% 3.2% 1.9%
Consideration was also made of the widely quoted Consumer Price Index (CPI), which measures the cost of a basket of consumer goods. Sub-Indexes of the CPI do deal with construction costs, and publish them for a number of Canadian centers, including the BC region. More specific to multi-residential construction, cost trends are reported for the Vancouver metropolitan region, which is the closest figure to Kelowna. Construction costs in the interior region tend to lag slightly behind the lower mainland, with the exception of the 2004 through 2008 period, when price increases were similar. Statistics Canada Cost Index
20 years from 1993 to 2013 15 years from 1998 to 2013 10 years from 2003 to 2013 5 years from 2008 to 2013 2 years from 2012 to 2013 1 year from 2012 to 2013
2.87% 3.24% 4.04% -0.13% 3.65% 3.70%
These numbers indicate that the trend of construction inflation rates over the past 20 years has varied, but the overall trend is upward.
17 The significant cost fluctuations over the most recent past reflected in the Stats Canada index include the Olympic "bubble" in the Vancouver area that affected construction cost trends leading up to 2007. Statistics Canada indicates a 14.9% correction in construction costs, due in part to less influence from the Olympic boom, coupled with the economic meltdown in 2008 and 2009 that affected capital markets. Judging by the overall construction cost trends, one may conclude that the longer term rate of inflation in construction will continue to increase over the foreseeable (short-term) future. However, the most recent experience shows rates below the 20 year average. The one, two and five year figures for the interior region (Marshall and Swift and RS Means) average just over 2% per year. We have adopted the rate of 2.25% for annual inflation in calculating the future replacement costs. Interest Rates Investment income can be a significant and increasing source of revenue for reserve funds, and therefore, it is imperative that reserve funds are continuously and prudently invested. Reserve fund investments must be directly or indirectly guaranteed by governments. Bank deposits and various investment instruments such as GICs are insured by the Canada Deposit Insurance Corporation up to a maximum of $100,000, covering principal and interest. These are generally considered low risk and an acceptable vehicle for the investment of funds held on reserve. However, a sound investment strategy also matches expected capital requirements with maturity dates of investments to ensure there is cash on hand at the appropriate time. The ability of Strata corporations to earn the highest rate of interest available in the marketplace, given the restricted conditions of investments, depends on the expertise of financial management and the amount of available funds for investment. Therefore, the reserve fund planner must consider management policies, the historical investment performance and the size of the reserve fund available for investment. In selecting an appropriate interest rate for reserve fund investments for a particular Strata corporation, the balance of the reserve fund is the most critical consideration as it dictates investment options and their corresponding interest rates. Investment opportunities are widely advertised, ranging from bank deposits, term deposits and guaranteed investment certificates (GICs) to money market instruments and government bonds. The following are investment returns achievable for corporations, with low thresholds for minimum deposit amounts, but variable depending on the term of investment: Term
Interest Rates
1 Year 2 Year 3 Year 5 Year 7 Year
1.75% 2.10% 2.22% 2.50% 2.85%
The recent trend in bond and GIC rates is near record low interest rates where they are expected to remain for the foreseeable future. A cogent benchmark is Government of Canada Bond yields, recently reported at 1.10% for a one to three year issues, up to 1.6% for a seven year issue. New bonds are offered at 1.0% for 2 years, up to 3.50% for seven years. GIC rates, which, depending on the selected maturity generate a range in rates from 1.35% to 2.25% (per GIC Direct as of May 2013) for terms of one to five years.
18 Maintaining a fairly conservative strategy, a rate of 2.00% should be achievable. For replacement cost estimates and reserve fund requirements, the following factors were used: Inflation Rate 2.25% Interest Rate 2.00% Reserve fund projections should be regularly reviewed to adjust for changes in inflationary trends and investment returns, as they significantly impact long term reserve fund requirements.
19
Part II - Descriptions General Description
Nim’s Manor is one residential apartment building comprising three floors built in approximately 1977. The building is improved with 25 apartments however 26 strata lots as units 202 and 203 were amalgamated into one unit. The development is improved with an entry foyer, elevator, individual decks and underground parkade. The sauna room is not operational. Rear lane access to building and parkade, located adjacent to Mackenzie Avenue, the main artery through the downtown core. Building areas and dimensions were obtained from the architectural drawings, strata plans conducted on the subject development, as well as on-site measurements. Building
20 Project Data Total Building Area Exterior Wall Area (Common Areas) Exterior Wall Surfaces Decks Roofing Surfaces Landscaping Heating System Air Conditioning System
27,580 square feet 15,950 square feet Stucco and wood 1,660 square feet Torch On (2013) Metal sheeting at perimeter Maturing sod, trees and shrubs, with irrigation Electric baseboard Individual Unit Owners- Wall A/C
Basic Construction Components Site Plan Site plans have been placed in the Addenda, as compiled from strata plans. Excavation and Foundations Nim’s Manor is built on full concrete subterranean foundation and parkade with concrete slab on grade with concrete grade beams and footings (assumed). Some mold of the ceiling surface was noted during inspection. According to Strata Council, a fungal report is pending to determine if there is any cause for significant remediation. For the purpose of the Depreciation Report it is assumed that no significant remediation will be required. Building Structure/Exterior Walls The subject building has a wood frame exterior wall structure and finish including: stucco and wood siding with single strip areas of wood shingle accents on the street entry wall surface. Exterior Windows and Doors Double glazed, sealed window units. Doors are a mixture of solid core wood and sliding glass balcony doors. Exterior doors security controlled. Custom wood main entry door with inset glass and wood trim décor. Metal doors at emergency exit and mechanical areas. Some unit doors have been upgraded to a higher quality solid core door. Original windows have not been replaced. Roof Construction Flat roof finished with tar and gravel was recently replaced with a modern SBS Bitumen Torch On roof. A small portion of roof was already replaced with a torch on roofing over the breezeway and refuse bin area. Perimeter has metal sheeting. Interior Construction Wood frame construction, with gyproc wall and textured drywall ceiling finish. Corridors and lobby area has dated carpet flooring. Sofa and tables are located in the foyer. Small coat room off foyer. Plumbing Standard plumbing fixtures. Two in-line water heaters (boilers) service the hot water tank.
21 Electrical Standard electrical type lighting and electrical. Electric baseboard heating throughout common areas. Individual air-conditioning units are not included within the components of this report. Concrete Surfaces and Walkways Concrete walkways to front entry area and emergency exits. Concrete stairs and landing at main entry with parking ramps at both side entries, however only one ramp is currently used to gain access to the parkade. Landscaping The subject site is landscaped with well maintained mature sod, trees and shrub with underground irrigation. Underground Services Water distribution lines, storm water collection and sanitary sewer lines connected to the city services. Electrical distribution lines are a mixture of above and below ground. Quality of Construction Quality of construction is considered to be average.
Observed Condition and Maintenance History Management Policy Discussions with the strata council indicate that the council is currently operating under their own bylaws and the Strata Property Act, (1998). Most strata corporations establish their own specific bylaws to outline key areas related to the division of responsibilities between the Corporation and individual unit owners. We have examined the updated bylaws of Strata N16 and found them to be in line with standard bylaws as compared to similar strata developments. Bylaws were amended and passed on May 5, 2013. Financial statements indicate that reserve fund contributions of $3,000 (2011) and $3,600 (2012) have been made for the past few years based on surplus from the operating fund equating to approximately 10% of the operating budget. This is on-side with the current legislation. Past practices however indicate that this 10% model was not always followed. With a ¾ vote the Strata Corporation may exceed the former cap of 100% of the previous year's operating budget. The budget for 2013 does not specifically address the contribution for this year. The reserve fund balance as of April 1, 2013 was $13,157 held in laddered term deposits. Due to significant expenditures from the recent roof replacement the reserve fund has been nearly depleted. The Contingency Reserve as of October 2013 was indicated to be at approximately $3,159.82 which is made up of one remaining Term Deposit with the Revelstoke Credit Union with a maturity date of January 2015, earning approximately 3% interest. Depleting either the contingency reserve or the operating fund is not financially prudent as it does not leave the funds in a position to respond to unexpected or premature component failure or to manage two large capital expenditures in a relatively short period of time without significant cash calls (special levies).
22 The contingency reserve funds historically have been invested in laddered term deposits, well within the legislated investment restriction resulting in a prudent approach to the Strata Corporation’s finances. Financial statements also indicate that there is no cash carried in the contingency. It is advisable to ensure there is cash on hand within the contingency reserve for any immediate or unexpected expenses. Historical Reserve Fund Operation In consultation with the strata council, it appears that contributions have been made to the Contingency Reserve account based on surplus from the operating account with few withdrawals from the fund to pay for any replacement of repair of common area facilities. It can only be concluded that required repair and replacement costs have been funded from the operating account; however, the costs in this regard have been relatively minor over the past few year. For purpose of the reserve fund estimates, an opening balance of $3,200 is used in the calculations. Project Condition The subject project is rated as average in terms of its physical condition. The exterior closure (cladding, windows) of the building was noted to be in average condition. Some cracking was noted on the wood shingle sections of the cladding. Council has reported that there was bulging on an exterior unit window, potentially due to a deficiency with the frame. During the onsite review the tar and gravel roof cover was noted to have reached the end of its life expectancy. It has recently been replaced with a two ply torch on roof with a 15 year warranty. Although dated, the interior of the building is average condition. New waterproof membranes and wood joists where necessary were reported to have been updated 4-5 years ago. Lower balconies are concrete with waterproof membrane. The sump pump was replaced 3-4 years ago and the one hot water tank had a burner replacement recently. Mechanical systems appear to be functioning normally. The underground parkade door and opener was replaced 2-3 years ago. Council reports that the elevator inspector indicated that the elevator was not up to current standards with the absence of an emergency telephone and electronic eye. Council was hopeful that with regular monthly maintenance and updating the required elements, the elevator would continue to function for at minimum five more years. Modern elevators often operate for 45 years. Recent issues with the elevator mechanical system, difficulty in obtaining parts and general safety concerns of the elevator, council has recommended the re-build be expedited to ensure the safety and comfort of all unit owners. As such, the elevator re-build has been scheduled for year one of the Depreciation Report at the quoted fee that the strata council has obtained for the service. Some mold of the ceiling surface was noted during inspection. According to Strata Council, a fungal report is pending to determine if there is any cause for significant remediation. For the purpose of the Depreciation Report it is assumed that no significant remediation will be required. Site Improvements The concrete is heavily cracked on the parkade ramp, near the drain and at the front sidewalk entry. Sealing the affected areas is advisable as well as remediating loose concrete pieces (near the ramp drain) to avoid negative impact on the metal grates above the drainage area. The rear open deck has a membrane which resembles asphalt or a tar topping. The stucco walls below the drains and lower deck have been affected with heavy dark staining from the deck surface deposits. Periodic power-washing the affected areas may create some aesthetic restoration to the area.
23
Wood Shingle Require Repair
Parking ramp concrete cracks
Concrete cracking near parkade grate
Stains on stucco from the deck surface deposit
Mold on parkade ceiling finish
24
Part III - Reserve Items - Description and Estimates Reserve Items - Principles and Concepts Definitions In estimating reserves required for maintaining the building components and improvements at desired standards, the various reserve components, estimated replacement costs and project cost estimates are made in accordance with anticipated life spans. Therefore, it is essential that the terminology and methodology are clearly understood. Reserve Item
Identification and description of the building component or improvement.
Current Replacement Cost
The estimated cost of repairing or replacing an item at current prices including the cost of demolition and disposal.
Expected or Normal Life Span
The estimated life expectancy of an item in terms of years under normal conditions.
Actual Age
The chronological age of the project or reserve item expressed in years.
Estimated Effective Age
An observed condition estimate of improvements not necessarily the actual age, expressed in years.
Remaining Life Span
The difference between the expected or normal life span and the estimated effective age of a reserve item.
Projected Inflation
An estimated long-term inflation factor used in projecting cost estimates.
Projected Interest Rate
An averaged long-term interest rate used in calculating interest earned from the investment of reserve funds.
Future Replacement Cost
The estimated cost of replacing a reserve item at future prices, based on the projected long term inflation rate.
Current Reserve Requirement
Reserve fund levels required today considering the estimated effective age of the improvements.
Future Reserve Accumulation
The current reserve requirements invested at the projected interest rate over the relevant time period.
Future Reserve Requirement
The shortfall between the future replacement reserves and the future reserve accumulation.
Annual Reserve Assessment
Annual amount required to be paid into the reserve fund and to be invested at the projected interest rate to fund the future reserve requirements.
25 Component Analysis Once the requirements for existing and anticipated future repairs and replacements are formulated, an analysis is made of the current reserve account. The stated policy/strategy that the council is following with respect to annual contributions to the reserve fund account is also examined. This analysis essentially matches the recent operations to the long-term requirement to set aside sufficient funds in order to meet all future obligations. There are certain assumptions required in order to formulate the future reserve requirements, especially in those areas where it is difficult to forecast, with certainty, when some items will require repair or replacement. In those cases, a contingency allowance has been made. There are also certain items that may require attention more than once over the 30 year forecast period. For example, scheduled replacement of common area floor coverings may well be required more than once over the period that this study covers. Accordingly, the cost to complete this replacement must be included two or more times over the cash flow horizon, at a suitable cost to complete the replacement when it is expected to occur. In other words, if the carpet is replaced every ten years, this event will occur several times through the study period. Therefore, the amount of funds set aside for carpet replacement must respond to a number of events for the same item. Furthermore, certain components may not require replacement over the forecast period; however, they will require replacement at some point beyond that time frame. The fund must be sufficient to also respond to those replacements while maintaining a relatively level annual contribution. For example, a component such as the exterior siding may have a service life that is beyond the cash flow forecast period. If this life span is 35 years, and the forecast covers a 30 year period, the siding will only have a life expectancy of 5 years at the end of the study period. There must be sufficient funds in the reserve account to respond to such a replacement even though it doesn't occur within the forecast period. Therefore, the commentary that follows covers all items that will normally be expected to be replaced or refurbished before the full life expectancy of the overall project is reached. The fund is a combination of event-driven contingencies, plus an allowance for partially depleted building components.
26
Reserve Fund - Item Descriptions Structural and Architectural Reserve Component: (1) Foundation and Parking Garage The parkade will or should last the life of the building, as will foundations and structural supports for the buildings above. A contingency allowance is still necessary, however, to deal with repair and replacement of parking ramps and the waterproof membrane. Mechanical and lighting systems are each treated under those respective headings. An allowance of 10% of the parkade cost is appropriate for this item.
Unit Quantity:
8,655
Unit Cost Estimate:
$15.00 per Sq Ft
Replacement Cost Estimate:
$12,983
Sq Ft
@ 10%
Life Span Estimates:
Normal Life Expectancy: Effective Age: Estimated Remaining Life:
Reserve Fund Estimates:
(1) Current Replacement Cost: (2) Future Replacement Cost: (3) Future Reserve Accumulation: (4) Future Reserve Requirement (5) Annual Reserve Assessment:
30 27 3
Years Years Years $12,983 $13,879 $12,399 $1,479 $483
Component Analysis: While the structure is expected to last the life of the building periodic repair of ramps and the waterproof membrane will be required. The membrane would not be expected to fail all at once, but periodically portions of it will require refurbishment. The cost will be spread evenly in between years 4 and 7.
27
Structural and Architectural Reserve Component: (2) Superstructure and Balconies This component includes the basic building framing and structural components. Most of these components would be expected to last the entire life of the building and should not require a reserve contribution unless some unexpected deterioration becomes evident. Balconies are also included under this heading and involve two different aspects. Balcony deck covering will normally require replacement in the 15 year time frame, at which time an allowance is also appropriate for repair to a proportionate share of decking surface and floor framing members on the wood frame decks. Deck railings are also included under this heading, but shouldn't require replacement for 25-30 years and often last the life of the deck. Prorated life expectancy of 25 years is appropriate. Unit Quantity:
1,700 760
Sq Ft Lin Ft
Unit Cost Estimate:
$5.50 $15.00
per Sq Ft per Lin Ft
Replacement Cost Estimate:
$16,075
Balconies Railing
Life Span Estimates:
Normal Life Expectancy: Effective Age: Estimated Remaining Life:
Reserve Fund Estimates:
(1) Current Replacement Cost: (2) Future Replacement Cost: (3) Future Reserve Accumulation: (4) Future Reserve Requirement (5) Annual Reserve Assessment:
25 10 15
Years Years Years $16,075 $22,444 $8,654 $13,790 $797
Component Analysis: The dura-deck finish and some decking surface was replaced 4-5 years ago. For cash flow modelling, the deck cover and minor repair is calculated on the basis of 50% of deck cover and 10% of deck framing that will require attention in year 15 of the projection period and again towards the end of the 30 year model. The railings are original and are exceeding life expectancy. The railings may require replacement in the future however it may be for aesthetic reason versus wear. The railings will be also scheduled in year 15 to match the deck membrane replacement.
28
Structural and Architectural Reserve Component: (3) Building Envelope - Exterior Walls This component comprises the exterior wall finishes only - doors and windows as part of the building envelope are considered under a separate heading. The exterior stucco siding is expected to last the life time of the building given regular maintenance and periodic re-painting of the stucco at 25-30 year intervals. Wood siding and wood shingles are expected to last 35 years with regular maintenance and re-painting/staining. Unit Quantity:
16,000 Sq Ft
Unit Cost Estimate:
$2.00
Replacement Cost Estimate:
per Sq Ft
$32,000
Life Span Estimates:
Normal Life Expectancy: Effective Age: Estimated Remaining Life:
Reserve Fund Estimates:
(1) Current Replacement Cost: (2) Future Replacement Cost: (3) Future Reserve Accumulation: (4) Future Reserve Requirement (5) Annual Reserve Assessment:
30 27 3
Years Years Years
$32,000 $34,209 $30,563 $3,646 $1,191
Component Analysis: To maintain the integrity of the building exteriors, periodic building envelope inspections should be conducted as a preventative maintenance item. These are scheduled at 8 year intervals, and are included under professional services. A certain amount of re-caulking of windows and doors would be expected as part of this service. There were no obvious deficiencies in these components at the time of inspection with the exception of few cracked wooden shingles which can come out of the operating fund. The wooden siding will require re-painting within the next few years. Half of the cost will be assigned in year 2 for the wooden elements and the remaining portion in year 6 for the stucco repainting.
29
Structural and Architectural Reserve Component: (4) Building Envelope - Windows and Doors This reserve component comprises the doors at the main entry, emergency exits, stairwells, suite entry and balconies, mechanical rooms and fire safety doors located in the corridors. For reserve purposes, an average life span of 25-30 years is appropriate for doors, and 35 years for windows. It is noted that at worst only 50% of the windows and doors are scheduled for replacement, as those with relatively lighter use will last indefinitely.
Unit Quantity:
136
#
Unit Cost Estimate:
$700
Average
$47,600
@50%
Replacement Cost Estimate:
Life Span Estimates:
Normal Life Expectancy: Effective Age: Estimated Remaining Life:
Reserve Fund Estimates:
(1) Current Replacement Cost: (2) Future Replacement Cost: (3) Future Reserve Accumulation: (4) Future Reserve Requirement (5) Annual Reserve Assessment:
30 27 3
Years Years Years
$47,600 $50,886 $45,462 $5,424 $1,772
Component Analysis: Given the age of the development the doors and windows are exceeding their life expectancy, as there currently have not been any window replacements. Suite entry doors are being replaced intermittently. Both the failure rate and timing of these replacements could vary and therefore a contingency allowance of 20% of the total cost will be applied in year 2. The remaining cost for this item is scheduled in 2 year increments beginning in year 4. The Strata may wish to replace the doors and windows on a per floor basis.
30
Structural and Architectural Reserve Component: (5) Roof Cover Roof cover consists of a new flat torch on roof cover with corrugated metal roofing at the perimeter. A typical flat roof cover will last approximately 15-20 years. The metal roof is expected to last the life of the building with regular maintenance however a small allowance is appropriate. Many factors can influence the actual life of the roof system such as the number of severe weather events, severity of temperature changes between seasons and so forth.
Unit Quantity:
8,890 2,415
Sq Ft Sq. Ft
Unit Cost Estimate:
$7.50 $4.75
per Sq Ft per Sq Ft
Replacement Cost Estimate:
$78,146
Torch On Metal
Life Span Estimates:
Normal Life Expectancy: Effective Age: Estimated Remaining Life:
Reserve Fund Estimates:
(1) Current Replacement Cost: (2) Future Replacement Cost: (3) Future Reserve Accumulation: (4) Future Reserve Requirement (5) Annual Reserve Assessment:
15 2 13
Years Years Years $78,146 $104,359 $13,479 $90,881 $6,191
Component Analysis: Normal life expectancies are expected for the roof cover in the case of the subject property. The new torch on roof was replaced in the summer of 2013 and has a 15 year warranty. The perimeter metal roofing was installed approximately 15 years ago, replacing an original cedar shake design. Costs include removal of old roof cover prior to applying the new roofing material. For cash flow modelling, the torch on roof is scheduled for year 15. A second roof replacement is scheduled in year 30 with an allowance for the metal roof at the same time.
31
Common Areas and Facilities Reserve Component: (6) Interior Finish & Flooring This component includes interior painting of all common walls and ceilings. Typically corridors are repainted every 8-10 years due to high traffic. Flooring is also included under this component. Carpeting is replaced in a similar timing as painting. The carpeting has well exceed its life expectancy and will be assigned and increased life expectancy of 15 years. The carpeting in the corridor, stairwell and foyer is original and is recommended to be replaced due to aesthetic reasons versus wear. Unit Quantity:
3,615 Sq Ft 10,115 Sq. Ft
Unit Cost Estimate:
$6.50 per Sq Ft $1.50 per Sq Ft $38,670
Replacement Cost Estimate:
Flooring Walls
Life Span Estimates:
Normal Life Expectancy: Effective Age: Estimated Remaining Life:
Reserve Fund Estimates:
(1) Current Replacement Cost: (2) Future Replacement Cost: (3) Future Reserve Accumulation: (4) Future Reserve Requirement (5) Annual Reserve Assessment:
15 13 2
Years Years Years
$38,670 $40,430 $34,868 $5,562 $2,753
Component Analysis: Some of the items under this heading are discretionary and can be delayed if the strata does not have funding in a given year. For modelling purposes interior painting will be scheduled in year 4 and then again in years 14 and 24. The ceilings will be scheduled during year 4 and then again in year 24. The flooring will be assigned over three years in 15 year intervals beginning in year 2. The flooring can be replaced floor by floor beginning with the first floor to increase the over all appearance of the lobby and main floor. Furnishings and art work can be replaced as surplus becomes available.
32
Common Areas and Facilities Reserve Component: (7) Elevators This reserve component is for the hydraulic elevator. The normal service life of a modern hydraulic elevator is type is 45 years. The subject elevator is under a full maintenance contract. In some projects, the interior finish of the car is renewed at about the mid point of the life cycle of this style of unit. The interior of the cab appears well maintained. Unit Quantity:
1
Unit Cost Estimate:
$90,000
Replacement Cost Estimate:
$90,000
Unit
Life Span Estimates:
Normal Life Expectancy: Effective Age: Estimated Remaining Life:
Reserve Fund Estimates:
(1) Current Replacement Cost: (2) Future Replacement Cost: (3) Future Reserve Accumulation: (4) Future Reserve Requirement (5) Annual Reserve Assessment:
45 44 1
Years Years Years
$90,000 $92,025 $89,760 $2,265 $2,265
Component Analysis: The normal life expectancy is based on normal use and assumes that the ongoing maintenance will be performed as set out in the full service contract. It is noted that the elevator, given its age, does not have an internal telephone system or electronic eye for door safety. Recent mechanical issues with the elevator have been reported indicating that the elevator may not achieve a typical expected life and it may be more economical to complete a total re-built of the elevator versus continue to repair it for the next ten years. For modeling purposes this cost will be projected in year one to coincide with the anticipated early re-build of the elevator.
33
Building Systems Reserve Component: (8) Plumbing Plumbing is limited to the replacement of the domestic hot water storage tank, in-line water heater and the sink in the mechanical room,. A contingency allowance is also added to account for components of the plumbing system that penetrate the common area between floors and walls and/or through other units. Typical life expectancy for plumbing fixtures is 15 years, but this can vary widely. Unit Quantity:
27,580 Sq Ft
Unit Cost Estimate:
$9.50 per Sq Ft $8,000 Allowance
Replacement Cost Estimate:
$47,302 @ 15% of RCN + Allowance
Life Span Estimates:
Normal Life Expectancy: Effective Age: Estimated Remaining Life:
Reserve Fund Estimates:
(1) Current Replacement Cost: (2) Future Replacement Cost: (3) Future Reserve Accumulation: (4) Future Reserve Requirement (5) Annual Reserve Assessment:
30 27 3
Years Years Years $47,302 $50,567 $45,177 $5,390 $1,761
Component Analysis: This calculation is comprised of two components. An allowance is divided between year 7 and year 10 for the cost of the domestic hot water storage tank and in-line water heater. The total cost new for plumbing systems is estimated at $9.50 per square foot, and the contingency allowance is based on 15% of the total cost, less the RCN of the fixtures as estimated in the first category. This cost is shared evenly between year 3, 5 and 7.
34
Building Systems Reserve Component: (9) Electrical Electrical components that require consideration include the service mains, switchgear, distribution fans and breakers as well switches, plugs and lights for the common areas and electric base board and in-wall heaters in stairwells and corridors. The major components of the electrical system have an normal service life of 40 years, but this can vary quite widely. Switches, lights and plugs typically have a shorter life expectancy. For reserve purposes, an average of 30 years is appropriate. The components that require replacement represent approximately 10% of the cost for the whole system.
Unit Quantity:
27,580 Sq Ft
Unit Cost Estimate:
$9.25
Replacement Cost Estimate:
per Sq Ft
$38,267 @ 15%
Life Span Estimates:
Normal Life Expectancy: Effective Age: Estimated Remaining Life:
Reserve Fund Estimates:
(1) Current Replacement Cost: (2) Future Replacement Cost: (3) Future Reserve Accumulation: (4) Future Reserve Requirement (5) Annual Reserve Assessment:
30 27 3
Years Years Years
$38,267 $40,909 $36,549 $4,360 $1,425
Component Analysis: Given the number of pieces of equipment in this category it is inevitable that there will be some unexpected and premature failures. While these are impossible to predict, at least some allowance should be made to allow for unexpected early replacements in particular that the actual effective age was reduced to reflect the good working condition of the current system The cash flow allows for 10% of these components to be replaced in year 3, 15% in year 5 with the remainder in year 7.
35
Building Systems Reserve Component: (10) Fire Protection, Access and Communication The building has a fire annunciator panel, fire extinguishers, emergency back up lighting and intercom system for occupant-controlled access. This "system" service life of 20 years life span is estimated. Unit Quantity:
1
Unit Cost Estimate:
$20,000 Allowance
Replacement Cost Estimate:
$20,000
Life Span Estimates:
Normal Life Expectancy: Effective Age: Estimated Remaining Life:
Reserve Fund Estimates:
(1) Current Replacement Cost: (2) Future Replacement Cost: (3) Future Reserve Accumulation: (4) Future Reserve Requirement (5) Annual Reserve Assessment:
20 18 2
Years Years Years
$20,000 $20,910 $18,727 $2,183 $1,081
Component Analysis: Batteries in emergency lighting fixtures and fire extinguishers will be replaced periodically as needed - this cost should come from the operating account. The allowance here is for the replacement of the whole system for fire alarm and intercom access. These systems are rated at an effective age that is less than their chronological age. The allowance will be shared between years 2, 4 and 6.
36
Building Systems Reserve Component: (11) Water and Sewer Supply System This item includes the water and sewer lines throughout the site coming from the City connections in the street. An average length of run is used in the calculation. With current materials, barring an unforeseen event, the sewer lines should have a 50 year life. Unit Quantity:
1
Unit Cost Estimate:
$10,000 Allowance
Replacement Cost Estimate:
$10,000
Life Span Estimates:
Normal Life Expectancy: Effective Age: Estimated Remaining Life:
Reserve Fund Estimates:
(1) Current Replacement Cost: (2) Future Replacement Cost: (3) Future Reserve Accumulation: (4) Future Reserve Requirement (5) Annual Reserve Assessment:
50 30 20
Years Years Years
$10,000 $15,605 $8,916 $6,689 $275
Component Analysis: Allowance for the water and sewer distribution lines is on a contingency basis, since their replacement will not be required until well beyond the end of this study period. A contingency allowance will provide a reserve in the event of an unexpected failure in either the plumbing or water distribution lines. The contingency factor is established at a small percentage of the cost new, since the failure rate on these systems is not expected to be a high probability to be shared equally between years 10 and 20.
37
Site Improvements Reserve Component: (12) Landscape and Irrigation This component includes the landscaped surface areas, including sod, shrubs, lamp posts and the underground sprinkler system. Most of the ongoing work required in this category falls under the annual maintenance budget such as maintaining sod and shrubs and trees. However, the irrigation system and lamp posts will require replacement at some point. A 35 year normal life expectancy is assigned to the reserve item. Unit Quantity:
13,000 Sq Ft
Unit Cost Estimate:
$1.50
Replacement Cost Estimate:
$5,850 @ 30%
per Sq Ft
Life Span Estimates:
Normal Life Expectancy: Effective Age: Estimated Remaining Life:
Reserve Fund Estimates:
(1) Current Replacement Cost: (2) Future Replacement Cost: (3) Future Reserve Accumulation: (4) Future Reserve Requirement (5) Annual Reserve Assessment:
35 25 10
Years Years Years
$5,850 $7,308 $5,094 $2,214 $202
Component Analysis: The area involved in this component is calculated on a percentage of overall site area, after netting out the areas covered by the building and concrete areas. It should be treated as an approximate area. Some items in this category would also fall in the category of being discretionary items, where their replacement is not critical in a given year. For purposes of the cash flow analysis, the cost is adjusted to $1.50 per square foot to cover only those elements that require replacement. A contingency allowance of 30% is applied in year 11.
38
Site Improvements Reserve Component: (13) Concrete Surfaces This component includes the concrete surface area of the front entry walkway and stairs, sidewalk to emergency exits, parking ramps and rear open deck areas. Typically these hard surface areas are expected to last indefinitely however some cost is added for contingency purposes. A 35 year normal life expectancy is assigned to the reserve item. As with a number of other components, it is unlikely that total replacement of the site improvements will ever be required - an allowance of 50% of the cost new should be adequate.
Unit Quantity:
1,700
Sq Ft
Unit Cost Estimate:
$6.25 $2,000
Replacement Cost Estimate:
$7,313 @ 50%
per Sq Ft Allowance
Life Span Estimates:
Normal Life Expectancy: Effective Age: Estimated Remaining Life:
Reserve Fund Estimates:
(1) Current Replacement Cost: (2) Future Replacement Cost: (3) Future Reserve Accumulation: (4) Future Reserve Requirement (5) Annual Reserve Assessment:
35 27 8
Years Years Years
$7,313 $8,737 $6,609 $2,128 $248
Component Analysis: Cracking is noted on the front walkway. Periodic sealing of the cracks is recommended to maintain the integrity of the hard surface and avoid lifting which may create a trip hazard on the front walkways. The parking ramp that is currently in use has heavy cracking with smaller portions of loose concrete located near the drainage grates. Continued sealing of the cracks is recommended. The loose concrete should be repaired to maintain the structure around the grates. A small allowance will be applied in year 1 for the broken concrete near the grate. Although the second ramp is not currently in use, routine maintenance of the cracks is advisable. Half of the remaining cost is assigned to year 3 with the remainder in year 7.
39
Professional Fees Reserve Component: (14) Professional Fees This item includes periodic building envelope inspections and updates to the Depreciation Report/Reserve Fund Study. By legislation, the updates are required every 3 years. After two updates, a full study should be considered (i.e. in year 9). A building envelope inspection should occur around year 8 of the projection period and every 7 to 10 years thereafter. Unit Quantity:
7 3 3
Depreciation Report Update Depreciation Report Envelope Study
Unit Cost Estimate:
$1,475 Update $4,250 DR $3,000 ES
Replacement Cost Estimate:
$4,625 Avg per 3 years
Life Span Estimates:
Normal Life Expectancy: Effective Age: Estimated Remaining Life:
Reserve Fund Estimates:
(1) Current Replacement Cost: (2) Future Replacement Cost: (3) Future Reserve Accumulation: (4) Future Reserve Requirement (5) Annual Reserve Assessment:
3 0 3
Years Years Years
$4,625 $4,944 $0 $4,944 $1,616
Component Analysis: The annual allowance provides for some inflation over time for the two types of professional services required or recommended. This should provide a sufficient allowance within the pool of funds to have these studies completed. If additional technical inspections are required, they should also come from the reserve fund, however, these are impossible to reliably predict. An average of $7,750 every five years will be scheduled beginning in year 5.
40
Reserve Fund Estimates Benchmark Analysis Reviewing the various reserve fund items in terms of their condition and life cycle, and analyzing the contingencies for such items as exterior walls, roofing, windows and doors, interior finish, mechanical systems and various common area improvements of the site. In estimating the replacement costs of reserve items, we relied on Building Service and Costing publications, such as the Means Repair & Remodeling Cost Data, and Marshall and Swift Cost Service. In addition, we verified some estimates by seeking quotations from local contractors, fabricators and suppliers as well as our own cost compilations. The result of this benchmark analysis provides an estimate of how much cash should be in the Contingency Reserve as of the date of analysis. The recommended level of funding closely matches the Contingency Reserve requirements recommended under the Strata Act, if the present level of contribution is increased over the next few years. The Reserve Fund Estimates for Nim’s Manor are shown in Reserve Fund Estimates - Benchmark Analysis on the page that follows. In summary, the schedule indicates that an annual contribution averaging $22,061 (Column K) would be required, under normal circumstances to replace all common property of the corporation as it wears out. If this amount had been contributed since the project was new, a total of $332,519 would be on hand today (Column H). This compares to an actual fund balance of $3,200 which suggests a significant deficit position. This issue is considered in the cash flow schedules that follow. By way of explanation of the Benchmark Analysis, current replacement costs are the reserve fund provisions at current prices and under current economic conditions. The fund must be capable of responding to the future costs, inclusive of the inflation between the date of this study and the date of actual replacement. This cost is shown in Column G. Column J quantifies the difference between the accumulated fund (Column I) at current replacement costs and the amount required to replace these same components at their inflated cost. The last column, Column K, indicates the amount that is required to be collected each year, to fund the replacements as they come up. The Benchmark Analysis provides the following estimates relative to the next steps in the process: There is just over $448,830 of common property and limited common property that the Strata Corporation is responsible to maintain, refurbish or replace based on today's cost. This includes a number of items that should only require partial replacement over time. Allowing for inflation between the date of analysis and the first replacement of each component, these elements will cost approximately $507,200 in aggregate at their respective dates of replacement, some of which are as far out as 20 years, averaging 6 years. Of the 14 components, components (2) balconies and (5) roof cover will not require total replacement until years 15 and 13 with a current replacement cost of $94,220. The future replacement cost for these two items alone is estimated to cost $126,800 at their dates of replacement reinforcing the need for a strong cash balance in the middle of the projection period. To alleviate the cost of component (11) Water and Sewer Supply System the expense was scheduled as a repair event in five year increments versus a full event-driven contingency at the end of the effective life of the component. In addition, other components that were repaired or replaced earlier in the projection period will also be aging and may require a second replacement or repair after the 30 year time frame such as interior painting and flooring.
41
Reserve Fund Estimate "Benchmark Analysis"- N16
C RESERVE COMPONENTS Construction Cost Inflation Index
2.25%
Interest rate
2.00%
E
F
G
H
I
J
K
EXPECTED EFFECTIVE
D
REMAINING
CURRENT
FUTURE
CURRENT
FUTURE
FUTURE
ANNUAL
LIFESPAN
AGE
LIFE SPAN
REPLACEMENT
REPLACEMENT
RESERVE
RESERVE
RESERVE
RESERVE FUND
Years
Years
Years
COST
COST
REQUIREMENT
FV=PV(1+I)^n
PV*EA/NL
FV=PV(1+I)^n
FRC-FRFA
MT=FV*I/((1+I)^n-1
FV=F7(1+0.02)^E7
F7*D7/C7
FV=H7(1+0.05)^E7
G7-I7
T=J7*0.05/(1.05^E7 483
ACCUMULATION REQUIREMENT
ASSESSMENT
BUILDING - STRUCTURAL/ARCHITECTURAL 1
Foundations and Parking Garage
30
27
3
12,983
13,879
11,684
12,399
1,479
2
Superstructure & Balconies
25
10
15
16,075
22,444
6,430
8,654
13,790
797
3
Building Envelope - Exterior Walls
30
27
3
32,000
34,209
28,800
30,563
3,646
1,191
4
Window s and Doors
30
27
3
47,600
50,886
42,840
45,462
5,424
1,772
5
Roof Cover
15
2
13
78,146
104,359
10,420
13,479
90,881
6,191
6
Interior Finish and Flooring
15
13
2
38,670
40,430
33,514
34,868
5,562
2,753
7
Elevator
45
44
1
90,000
92,025
88,000
89,760
2,265
2,265
8
Plumbing
30
27
3
47,302
50,567
42,571
45,177
5,390
1,761
9
Electrical
30
27
3
38,267
40,909
34,441
36,549
4,360
1,425
10 Life Safety & Access Systems
20
18
2
20,000
20,910
18,000
18,727
2,183
1,081
11 Water and Sew er Supply System
50
30
20
10,000
15,605
6,000
8,916
6,689
275
12 Landscaping and Irrigation
35
25
10
5,850
7,308
4,179
5,094
2,214
202
13 Concrete Surfaces
35
27
8
7,313
8,737
5,641
6,609
2,128
248
14 Professional Fees
3
0
3
4,625
4,944
-
0
4,944
1,616
$356,257
$150,955
$22,061
COMMON AREAS AND FACILITIES
BUILDING SYSTEMS
SITE IMPROVEMENTS & PROFESSIONAL FEES
TOTAL RESERVES
$448,830
$507,212
$332,519
42
30 Year Cash Flow Projections - Fully Funded Reserve Fund Cash Flow Projections and Reserve Fund Estimates "Deficiency Analysis"; presents a 30 year reserve fund projection showing cash positions, cash flows and cash expenditures in a form and detail which conforms to standard financial statement presentation of reserve fund operations. The objective of the exercise is to illustrate the impact of the recommendations that are formulated based on the benchmark analysis. This is not to suggest that cash flows will follow the pattern indicated in the spreadsheet; rather this is a tool to ensure that available cash does not go below zero in any one year, and allows a matching of the overall fund operation to the combination of regularly required reserve fund contributions and an orderly catch-up provision to fully fund the reserve. The following spreadsheet is organized under the following headings:
Opening Cash Balance This is the reserve fund position at the beginning of each and every fiscal year showing the cash resources available that consist of (1) bank deposits, (2) qualified investments, and (3) accrued interest earned. Cash Flows These are the regular reserve fund contributions (as calculated in 30 Year Cash Flow Projections), reserve fund interest income and any make-up contributions, based on 2% of the opening yearly balance generated as interest. Total Cash Resources These represent the total cash resources available in any fiscal year and include the current year's cash flow. Reserve Fund Expenditures These are annual expenditures listed in the categories established in the benchmark analysis Records or ledger accounts of these expenditure categories, should be kept showing reserve fund allocations and charges in a chronological order for control and reference. Closing Cash Fund This is the reserve fund position at the end of each and every fiscal year, which is carried forward to the next year. Surplus/Deficiency Analysis The Reserve Deficiency has been projected by formula taking into account the inflation factor, interest rates and reserve fund expenditures. The 30 year cash flow is used as a guideline as most major replacements would occur during that time line. It must be kept in mind that certain replacements will not occur during the 30 year cash flow horizon, so a fund will also have to be in place to accommodate those replacements as well as replacements that will occur on a cyclical basis, such as floor coverings, roof coverings, etc. In fact, over a long enough period, virtually all of the reserve items identified in the study will require further replacement or refurbishment.
43 From a Depreciation Report perspective, the end of that (30 year) period never arrives, as the study should be renewed and re-calibrated at regular intervals. This allows the incorporation of the actual experience in the project so that the projected reserve amounts are continually reflective of the long-term requirements of a well planned contingency reserve. In order to formulate the recommendations, a series of tests were applied to the cash flow projections in order to ensure that, according to the forecasts, the cash balance of the reserve account never reaches zero (or a negative figure) and allow a reasonable reserve fund surplus by the end of the period. The first test that was applied was at the current annual funding level approximately $3600 per year. In the first year, there would be a reserve fund deficient of $85,000. This deficit would grow to over $959,000 by year 30. By year 2 there would be a negative cash flow which would increase significantly to $790,000 by year 30 A number of models were tested in order to find the best fit. Legislation governing depreciation reports requires that at least three options be presented for the consideration of the strata corporation. We have developed the following models to more fully examine options for funding. Cash Flow Models 1)
Fully Funded with (1) Special Levy
A fully funded reserve calculates contribution requirements over time. The goal is to maintain the reserve at or near 100%. It is fully funded to meet the future renewal costs augmented by one (1) large special levy to assist with a large capital expense. 2)
75% Funded with Special Levies
The goal is to keep the reserve cash balance above zero. The annual contributions are lower than Option 1, augmented by periodic special levies in order to raise funds to perform the work. The goal is to achieve approximately 75% of the optimum cash balance at the end of the 30 years, leaving a 25% deficit. 3)
75% Funded with Borrowing
The third model illustrates the strata borrowing funds at a future date when several larger expenses are expected, to be re-paid over a seven year horizon, resulting in a higher annual contribution matched to the budget plus the cost of amortizing the loan.
The Fully Funded Model
The first cash flow schedule is the fully funded model, which is the recommended model. Our recommendation is for a $100,000 special levy next year. The recent trend in annual reserve contribution should be increased to $15,000 in year 1, increasing incrementally until it reaches $50,000 in year 4, and then levelling off in year 7 where it remains constant at $30,000 throughout the remainder of the projection period. With this model, the deficit is eliminated by year 30 with a strong cash position to fund future repairs beyond the projection period, with a nominal reserve fund surplus.
44
30 Year Cash Flow Projection
As of January 1st. Reserve
Fully Funded with Special Levy - Years 1-15
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
3,200
26,264
24,869
35,582
30,428
56,427
50,590
60,067
79,894
103,501
112,436
137,385
153,498
186,568
199,584
15,000
30,000
40,000
50,000
40,000
33,500
30,000
30,000
30,000
30,000
30,000
30,000
30,000
30,000
30,000
64
525
497
712
609
1,129
1,012
1,201
1,598
2,070
2,249
2,748
3,070
3,731
3,992
56,789
65,367
86,293
71,037
91,055
81,602
91,269
111,491
135,571
144,685
170,133
186,568
220,299
233,576
Estimate OPENING BALANCE Reserve Fund Contributions Reserve Fund Interest Income
2.00%
Special Levy
100,000
Total Cash Resources
118,264
RESERVE FUND EXPENDITURES 1
Foundations and Parking Garage
2
Superstructure & Balconies
3
Building Envelope - Exterior Walls
11,684
7,095
7,585
6,430
15,915
28,800
4
Window s and Doors
42,840
5
Roof Cover
10,420
6
Interior Finish and Flooring
33,514
7
Elevator
88,000
8
Plumbing
42,571
9
Electrical
34,441
10
Life Safety & Access Systems
18,000
11
Water and Sew er Supply System
6,000
12
Landscaping and Irrigation
4,179
13
Concrete Surfaces
5,641
14
Professional Fees
16,730
18,285 10,400
10,880
11,375
11,890
12,435 93,090
8,190
8,375
31,070
20,715
90,000 14,000
14,610
9,675
5,000 4,090
7,000
7,300
6,415
7,600 6,245 7,300
2,000
3,910
0
4,275
3,500
3,700
3,900
4,200
4,450
Total Expenditures
92,000
31,920
29,785
55,865
14,610
40,465
21,535
11,375
7,990
23,135
7,300
16,635
0
20,715
119,870
Closing Balance
26,264
24,869
35,582
30,428
56,427
50,590
60,067
79,894
103,501
112,436
137,385
153,498
186,568
199,584
113,706
240,519
235,471
232,456
203,301
214,818
200,710
205,250
220,041
238,513
242,209
261,814
272,476
299,986
307,332
215,669
-214,255
-210,601
-196,874
-172,873
-158,391
-150,120
-145,183
-140,147
-135,011
-129,772
-124,429
-118,978
-113,418
-107,748
-101,963
$48
$96
$128
$160
$128
$107
$96
$96
$96
$96
$96
$96
$96
$96
$96
DEFICIENCY ANALYSIS Reserve Requirem ents Reserve Fund Surplus Contributions - cost per unit, per m onth Special Levy - cost per unit
332,519
$3,846
45
30 Year Cash Flow Projection
As of January 1st. Reserve
Fully Funded with Special Levy - Years 16-30
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
0
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
60,855
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
465
Estimate
0 0
OPENING BALANCE
113,706
145,980
133,925
150,163
171,211
196,831
225,617
260,130
295,332
290,809
326,625
363,157
394,921
432,819
453,650
5,215,170
30,000
30,000
30,000
30,000
30,000
30,000
30,000
30,000
30,000
30,000
30,000
30,000
30,000
30,000
30,000
928,500
2,274
2,920
2,678
3,003
3,424
3,937
4,512
5,203
5,907
5,816
6,532
7,263
7,898
8,656
9,073
104,303
0 Reserve Fund Contributions Reserve Fund Interest Income
2.00%
Special Levy
100,000 0
Total Cash Resources
145,980
178,900
166,603
183,166
204,636
230,767
260,130
295,332
331,239
326,625
363,157
400,421
432,819
471,475
492,723
6,347,973 0
RESERVE FUND EXPENDITURES
0
1
Foundations and Parking Garage
11,684
2
Superstructure & Balconies
3
Building Envelope - Exterior Walls
28,800
4
Window s and Doors
42,840
5
Roof Cover
10,420
6
Interior Finish and Flooring
33,514
7
Elevator
88,000
8
Plumbing
42,571
9
Electrical
34,441
10
Life Safety & Access Systems
18,000
11
Water and Sew er Supply System
6,000
12
Landscaping and Irrigation
4,179
7,300
13
Concrete Surfaces
5,641
10,185
14
Professional Fees
14,680
6,430
17,825
33,740 35,015 56,980 152,335
11,435
11,690
11,955
35,130
245,425 138,560 90,000 43,285
33,540
44,045 21,900 7,805
0
4,750
14,050
5,150
5,300
5,500
5,800
46,250 0
Total Expenditures
0
44,975
16,440
11,955
7,805
5,150
0
0
40,430
0
0
5,500
0
17,825
158,135
801,415
145,980
133,925
150,163
171,211
196,831
225,617
260,130
295,332
290,809
326,625
363,157
394,921
432,819
453,650
334,588
5,546,558
0 Closing Balance
0 DEFICIENCY ANALYSIS Reserve Requirem ents
0 332,519
242,044
223,970
234,071
248,858
268,091
290,364
318,232
346,657
335,221
363,987
393,327
417,755
448,171
461,370
334,523
8,517,203
-96,064
-90,046
-83,908
-77,647
-71,260
-64,746
-58,102
-51,325
-44,413
-37,362
-30,170
-22,834
-15,352
-7,720
65
-2,970,645
$96
$96
$96
$96
$96
$96
$96
$96
$96
$96
$96
$96
$96
$96
$96
2,976
0 Reserve Fund Surplus
0 Contributions - cost per unit, per m onth Special Levy - cost per unit
3,846
46
30 Year Cash Flow Projection
Fully Funded with Special Levy - Chart
500 Reserve Fund Contributions Total Cash Resources Total Expenditures
400
Closing Balance Reserve Fund Surplus Special Levy
DOLLARS, '000's
300
200
100
0
-100
-200
-300 2014
2016
2018
2020
2022
2024
2026
2028
YEARS
2030
2032
2034
2036
2038
2040
47
30 Year Cash Flow Projections – 75% Funded with Special Levies The second option is based on the same Benchmark Analysis figures, but approaches the funding side differently. In this model, a lower annual contribution is projected, augmented by special levies at different intervals in the 30 year projection period. There are numerous options for a model of this nature, which could include smaller, more frequent special levies, or it could allow for special levies that are tied to specific events, related to some of the larger events, for example, a levy to cover the cost of new roof cover for the entire project, or refurbishing the exterior of buildings. These are matters to be decided in the Contingency Reserve Plan that the Strata Council ultimately decides upon. For this modeling exercise a lower level of funding on an annual basis begins at $15,000, increasing until it reaches $40,000 in years 3 and 4, levelling off at $22,000 in year 6 for the remainder of the projection period; augmented by periodic Special Levies, and based on specific assumptions. Based on our assumptions, a special levy of $100,000 would be required in years 1 a second levy of $15,000 is scheduled in year 10 and additional levies of $80,000 in years 15 and 30. These additional levies assist in the model achieving approximately 75% of the optimum fund balance at the end of the 30 years. Advantages to this model include the lower annual contributions and the potential to accumulate larger reserves (and more interest accruing) if the projected repair events occur later than planned. In addition, the cash balance still never goes below zero. Disadvantages include the unpredictability of future events. For example, if roof replacement is put off for a few years, and an unexpected repair occurs (like major repair to electrical) that cannot be put off; larger special levies may be required. The assumptions for this model provide for a healthy cash balance in year 30 ($249,000) however, there is a persistent deficit, from year one onward. This may be beyond the risk profile preferred by the Strata Corporation. It is also possible that smaller and more frequent special levies could be made to alleviate the concern over these large deficit positions Supporting graphical documentation is located in Addenda A.
48
30 Year Cash Flow Projections – 75% Funded with Borrowing
Option 3 involves borrowing funds periodically to address replacements, with a similar objective of and achieving a reserve fund that is approximately 75% of the optimum by the end of the 30 years. Similar to the Special Levy model, the use of borrowed funds could be triggered by a specific requirement or project, such as a roof replacement. In this model, regular annual contributions begin at $15,000 where they quickly level off for the remaining projection period at $22,000 by year 3, augmented by periodic borrowing. For the seven years following the borrowing event, annual contributions would be increased to cover the cost of an amortizing loan. We have conducted this analysis on the basis of borrowing money where major expenses are expected over several years. With the assumption of a loan of $175,000 in year 1, the lower "normal" annual assessment would increase by approximately $31,185 for 7 years after the first borrowing event. A second borrowing event for $125,000 would occur in year 15 with an additional annual assessment of $22,154. This option leaves the fund in a reasonable cash position by year 30 ($248,000 cash balance) however a persistent deficit is present throughout the projection period. The advantages and risks of this model are similar to the Special Levy model. It is also evident that the cash balance never goes into the negative; however there is a persistent deficit throughout with a 25% deficit by the end of the model. This could be offset by more frequent and smaller loans or larger loans for the prescribed periods - with the trade-off of more frequent periods of higher annual contributions.
Supporting graphical documentation is located in Addenda B.
49
Part IV Limiting Conditions The legal and survey descriptions of the property as stated herein are those that are recorded by the Registrar of the requisite Land Titles (Registry) Office and are assumed to be correct. The architectural, structural, mechanical, electrical and other plans and specifications of the building or buildings and improvements are assumed to be correct. Furthermore, all buildings and improvements are assumed constructed and finished in accordance with such plans and specifications, unless otherwise noted. Sketches, drawings, diagrams, photographs, if any, presented in this report, are included for the sole purpose of illustration. No legal survey, soil tests or environmental impact studies, engineering investigations, detailed quantity survey compilations, nor exhaustive physical examinations or destructive testing have been made. Accordingly, no responsibility is assumed concerning these matters, or other technical and engineering techniques that would be required to discover any inherent or hidden condition of the property. The report assumes that the Corporation desires to maintain the building and grounds in a condition consistent with their original condition over the expected economic life span. In order to arrive at supportable replacement cost estimates, it was found necessary to utilize both documented and other cost data. A concerted effort has been put forth to verify the accuracy of the information contained herein. Accordingly, the information is believed to be reliable and correct, and has been gathered to standard professional procedures, but no guarantee as to the accuracy of the data is implied. The utilization of the cost estimates is valid only within the context of this report. The estimates herein must not be used in conjunction with any other appraisal or contingency reserve fund study and may be invalid if so used. The client to whom this report is addressed may use it in deliberations affecting the subject property only, and in so doing, the report must not be extracted, but must be used in its entirety. Possession of this report or any copy thereof does not carry with it the right of publication nor may it be used for any purpose by anyone but the client without the written consent of the author, and in any event, only with the proper qualifications. The agreed compensation for services rendered in preparing this report does not include fees for consultations and/or arbitration, if any. Should personal appearances be required in connection with this report, additional fees will have to be negotiated. Unless otherwise noted, all estimates are expressed in Canadian currency, and are net of any taxes.
50
Certification A personal inspection of the subject property was conducted on April 29, 2013 by D. Allan Beatty, AACI, P.App. and Kari Benum, Senior Analyst, CRP. Data collection and report preparation was completed by Allan Beatty and Kari Benum. Some quantifying research was provided by others on behalf of KentMacpherson. Some costing research was provided by others on behalf of Kent-Macpherson. The report has been made in conformance with and is subject to the requirements for a consulting assignment of The Standards of The Appraisal Institute of Canada. In accordance with those standards, it is hereby certified that: ¾ To the best of my knowledge and belief, the statements of fact contained in this report are true and correct and verified where possible; ¾ All pertinent factors affecting this Depreciation Report were considered to the extent felt necessary in rendering reliable recommendations; ¾ There is no past, present, or contemplated personal interest in the property, nor any personal interest or bias with respect to the parties involved. Neither the employment to prepare this Depreciation Report nor the compensation is contingent on the amount of reserve fund estimates reported. ¾ We are acting as contractors for the client as named herein. There is no direct or indirect relationship between the person preparing this report and the Strata Manager nor the Strata Corporation; ¾ The requirements of the Appraisal Institute of Canada's mandatory recertification program have been fulfilled for the current recertification period; ¾ The person preparing this report has the competence to complete this assignment. This activity is in direct compliance with the Appraisal Institute of Canada's professional liability insurance coverage for errors and omissions; ¾ The report is subject only to the assumptions and limiting conditions listed in the report, and the report identifies all of the limiting conditions including terms of the assignment imposed by the appraiser; ¾ The opinions expressed herein are unbiased professional opinions; ¾ No significant professional assistance was provided except for those individuals identified herein.
Respectfully submitted,
___________________________________ D. Allan Beatty, AACI, P.App
October 15, 2013 Date Prepared
51
Addenda A - 30 Year Cash Flow Projections
As of January 1st. Reserve
75% Funded with Special Levy Years 1-15
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
3,200
26,264
24,869
35,582
20,428
36,227
18,486
19,321
30,333
44,949
59,713
75,607
82,485
106,134
109,542
15,000
30,000
40,000
40,000
30,000
22,000
22,000
22,000
22,000
22,000
22,000
22,000
22,000
22,000
22,000
64
525
497
712
409
725
370
386
607
899
1,194
1,512
1,650
2,123
Estimate OPENING BALANCE Reserve Fund Contributions Reserve Fund Interest Income
2.00%
Special Levy
100,000
Total Cash Resources
118,264
15,000 56,789
65,367
76,293
50,837
58,951
40,856
41,708
52,939
82,848
2,191 80,000
82,907
99,120
106,134
130,257
213,733
RESERVE FUND EXPENDITURES 1
Foundations and Parking Garage
2
Superstructure & Balconies
3
Building Envelope - Exterior Walls
11,684
7,095
7,585
6,430
15,915
28,800
4
Window s and Doors
42,840
5
Roof Cover
10,420
6
Interior Finish and Flooring
33,514
7
Elevator
88,000
8
Plumbing
42,571
9
Electrical
34,441
10
Life Safety & Access Systems
18,000
11
Water and Sew er Supply System
6,000
12
Landscaping and Irrigation
4,179
13
Concrete Surfaces
5,641
14
Professional Fees
16,730
18,285 10,400
10,880
11,375
11,890
12,435 93,090
8,190
8,375
31,070
20,715
90,000 14,000
14,610
9,675
5,000 4,090
7,000
7,300
6,415
7,600 6,245 7,300
2,000
3,910
0
4,275
3,500
3,700
3,900
4,200
4,450
Total Expenditures
92,000
31,920
29,785
55,865
14,610
40,465
21,535
11,375
7,990
23,135
7,300
16,635
0
20,715
119,870
Closing Balance
26,264
24,869
35,582
20,428
36,227
18,486
19,321
30,333
44,949
59,713
75,607
82,485
106,134
109,542
93,863
240,519
235,471
232,456
203,301
214,818
200,710
205,250
220,041
238,513
242,209
261,814
272,476
299,986
307,332
215,669
-214,255
-210,601
-196,874
-182,873
-178,591
-182,224
-185,929
-189,708
-193,563
-182,495
-186,206
-189,991
-193,852
-197,790
-121,807
$48
$96
$128
$128
$96
$71
$71
$71
$71
$71
$71
$71
$71
$71
DEFICIENCY ANALYSIS Reserve Requirem ents Reserve Fund Surplus Contributions - cost per unit, per m onth Special Levy - cost per unit
332,519
$3,846
$577
$71 $3,077
52
Addenda A - 30 Year Cash Flow Projections
As of January 1st. Reserve
75% Funded with Special Levy Years 16-30
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Estimate OPENING BALANCE Reserve Fund Contributions Reserve Fund Interest Income
2.00%
93,863
117,740
97,120
104,622
116,760
133,290
152,806
177,862
203,419
189,057
214,839
241,135
262,458
289,707
299,676
22,000
22,000
22,000
22,000
22,000
22,000
22,000
22,000
22,000
22,000
22,000
22,000
22,000
22,000
22,000
1,877
2,355
1,942
2,092
2,335
2,666
3,056
3,557
4,068
3,781
4,297
4,823
5,249
5,794
Special Levy
5,994 80,000
Total Cash Resources
117,740
142,095
121,062
128,715
141,095
157,956
177,862
203,419
229,487
214,839
241,135
267,958
289,707
317,501
407,670
RESERVE FUND EXPENDITURES 1
Foundations and Parking Garage
2
Superstructure & Balconies
3
Building Envelope - Exterior Walls
11,684 6,430
17,825
28,800
4
Window s and Doors
42,840
5
Roof Cover
10,420
6
Interior Finish and Flooring
33,514
7
Elevator
88,000
8
Plumbing
42,571
9
Electrical
34,441
10
Life Safety & Access Systems
18,000
11
Water and Sew er Supply System
6,000
12
Landscaping and Irrigation
4,179
13
Concrete Surfaces
5,641
14
Professional Fees
152,335 11,435
Closing Balance
11,955
35,130
33,540 7,805
0
Total Expenditures
11,690
4,750
5,150
5,300
5,500
5,800
0
44,975
16,440
11,955
7,805
5,150
0
0
40,430
0
0
5,500
0
17,825
158,135
117,740
97,120
104,622
116,760
133,290
152,806
177,862
203,419
189,057
214,839
241,135
262,458
289,707
299,676
249,535
242,044
223,970
234,071
248,858
268,091
290,364
318,232
346,657
335,221
363,987
393,327
417,755
448,171
461,370
334,523
-124,304
-126,851
-129,448
-132,098
-134,801
-137,558
-140,370
-143,238
-146,164
-149,148
-152,192
-155,297
-158,463
-161,694
-84,988
$71
$71
$71
$71
$71
$71
$71
$71
$71
$71
$71
$71
$71
$71
DEFICIENCY ANALYSIS Reserve Requirem ents Reserve Fund Surplus Contributions - cost per unit, per m onth Special Levy - cost per unit
332,519
$71 $3,077
53
Addenda B - 30 Year Cash Flow Projections
75% Funded with Borrowing Years 1-15
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
3,200
70,079
58,311
51,692
18,861
26,628
8,695
9,334
23,146
40,619
43,296
61,862
71,464
97,894
104,137
15,000
18,750
22,000
22,000
22,000
22,000
22,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
64
1,402
1,166
1,034
377
533
174
187
463
812
866
1,237
1,429
1,958
Loan Proceeds
175,000
31,185
31,185
31,185
31,185
31,185
31,185
125,000
Loan Repayment
-31,185
-31,185
-31,185
-31,185
-31,185
-31,185
-31,185
-22,154
Total Cash Resources
162,079
90,231
81,477
74,726
41,238
49,160
30,869
As of January 1st. Reserve Estimate OPENING BALANCE Reserve Fund Contributions Reserve Fund Interest Income
2.00%
34,521
48,609
66,431
69,162
88,099
97,894
124,852
2,083
234,065
RESERVE FUND EXPENDITURES 1
Foundations and Parking Garage
2
Superstructure & Balconies
3
Building Envelope - Exterior Walls
11,684
7,095
7,585
6,430
15,915
28,800
4
Window s and Doors
42,840
5
Roof Cover
10,420
6
Interior Finish and Flooring
33,514
7
Elevator
88,000
8
Plumbing
42,571
9
Electrical
34,441
10
Life Safety & Access Systems
18,000
11
Water and Sew er Supply System
6,000
12
Landscaping and Irrigation
4,179
13
Concrete Surfaces
5,641
14
Professional Fees
16,730
18,285 10,400
10,880
11,375
11,890
12,435 93,090
8,190
8,375
31,070
20,715
90,000 14,000
14,610
9,675
5,000 4,090
7,000
7,300
6,415
7,600 6,245 7,300
2,000
3,910
0
4,275
3,500
3,700
3,900
4,200
4,450
Total Expenditures
92,000
31,920
29,785
55,865
14,610
40,465
21,535
11,375
7,990
23,135
7,300
16,635
0
20,715
119,870
Closing Balance
70,079
58,311
51,692
18,861
26,628
8,695
9,334
23,146
40,619
43,296
61,862
71,464
97,894
104,137
114,195
240,519
235,471
232,456
203,301
214,818
200,710
205,250
220,041
238,513
242,209
261,814
272,476
299,986
307,332
215,669
-170,440
-177,160
-180,764
-184,440
-188,190
-192,015
-195,916
-196,895
-197,894
-198,912
-199,952
-201,011
-202,093
-203,195
-101,474
$71
$80
$80
$80
$80
$80
$80
$80
$80
$71
$71
DEFICIENCY ANALYSIS Reserve Requirem ents Reserve Fund Surplus Contributions - cost per unit, per m onth Borrow ing cost per unit, per m onth
332,519
$48
$60
$71
$71
$71
$71
$100
$100
$100
$100
$100
$100
54
Addenda B - 30 Year Cash Flow Projections
75% Funded with Borrowing Years 16-30
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
Year
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
114,195
141,479
124,334
135,380
151,133
171,351
194,628
223,520
252,991
242,620
272,473
302,922
328,481
360,050
374,426
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
2,284
2,830
2,487
2,708
3,023
3,427
3,893
4,470
5,060
4,852
5,449
6,058
6,570
7,201
7,489
22,154
22,154
22,154
22,154
22,154
22,154
Loan Repayment
-22,154
-22,154
-22,154
-22,154
-22,154
-22,154
Total Cash Resources
141,479
169,309
151,820
163,088
179,156
199,778
223,520
252,991
283,050
272,473
302,922
333,981
360,050
392,251
406,915
As of January 1st. Reserve Estimate OPENING BALANCE Reserve Fund Contributions Reserve Fund Interest Income
2.00%
Loan Proceeds
RESERVE FUND EXPENDITURES 1
Foundations and Parking Garage
2
Superstructure & Balconies
3
Building Envelope - Exterior Walls
11,684 6,430
17,825
28,800
4
Window s and Doors
42,840
5
Roof Cover
10,420
6
Interior Finish and Flooring
33,514
7
Elevator
88,000
8
Plumbing
42,571
9
Electrical
34,441
10
Life Safety & Access Systems
18,000
11
Water and Sew er Supply System
6,000
12
Landscaping and Irrigation
4,179
13
Concrete Surfaces
5,641
14
Professional Fees
152,335 11,435
Closing Balance
11,955
35,130
33,540 7,805
0
Total Expenditures
11,690
4,750
5,150
5,300
5,500
5,800
0
44,975
16,440
11,955
7,805
5,150
0
0
40,430
0
0
5,500
0
17,825
158,135
141,479
124,334
135,380
151,133
171,351
194,628
223,520
252,991
242,620
272,473
302,922
328,481
360,050
374,426
248,780
242,044
223,970
234,071
248,858
268,091
290,364
318,232
346,657
335,221
363,987
393,327
417,755
448,171
461,370
334,523
-100,565
-99,637
-98,690
-97,725
-96,740
-95,736
-94,712
-93,667
-92,601
-91,514
-90,405
-89,274
-88,120
-86,944
-85,743
$80
$80
$80
$80
$80
$80
$80
$80
$80
$80
DEFICIENCY ANALYSIS Reserve Requirem ents Reserve Fund Surplus
332,519
Contributions - cost per unit, per m onth
$80
$80
$80
$80
$80
Borrow ing cost per unit, per m onth
$71
$71
$71
$71
$71
55
Addenda C - Excerpts from the Act and Regulations The Strata Property Act [SBC 1998] CHAPTER 43 Part 1 — Definitions and Interpretation 1 (1) Definitions and interpretation….. "common property" means (a) that part of the land and buildings shown on a strata plan that is not part of a strata lot, and (b) pipes, wires, cables, chutes, ducts and other facilities for the passage or provision of water, sewage, drainage, gas, oil, electricity, telephone, radio, television, garbage, heating and cooling systems, or other similar services, if they are located (i) within a floor, wall or ceiling that forms a boundary (A) between a strata lot and another strata lot, (B) between a strata lot and the common property, or (C) between a strata lot or common property and another parcel of land, or (ii) wholly or partially within a strata lot, if they are capable of being and intended to be used in connection with the enjoyment of another strata lot or the common property; "contingency reserve fund" means a fund for common expenses that usually occur less often than once a year or that do not usually occur, as set out in section 92 (b); Repair of property 72 (1) Subject to subsection (2), the strata corporation must repair and maintain common property and common assets. (2) The strata corporation may, by bylaw, make an owner responsible for the repair and maintenance of (a) limited common property that the owner has a right to use, or (b) common property other than limited common property only if identified in the regulations and subject to prescribed restrictions. (3) The strata corporation may, by bylaw, take responsibility for the repair and maintenance of specified portions of a strata lot. Strata Property Regulation [includes amendments up to B.C. Reg. 238/2011, March 1, 2012] Depreciation Report 6.2
(1)
For the purposes of section 94 of the Act, a depreciation report must include: (a)
a physical component inventory and evaluation that complies with subsection (2);
56 (b)
a summary of repairs and maintenance work for common expenses respecting the items listed in subsection (2) (b) that usually occur less often than once a year or that do not usually occur;
(c)
a financial forecasting section that complies with subsection (3);
(d)
the name of the person from whom the depreciation report was obtained and a description of: (i) (ii) (iii)
(2)
(e)
the date of the report;
(f)
any other information or analysis that the strata corporation or the person providing the depreciation report considers appropriate.
For the purposes of subsection (1) (a) and (b) of this section, the physical component inventory and evaluation must (a)
be based on an on-site visual inspection of the site and, where practicable, of the items listed in paragraph (b) conducted by the person preparing the depreciation report,
(b)
include a description and estimated service life over 30 years of those items that comprise the common property, the common assets and those parts of a strata lot or limited common property, or both, that the strata corporation is responsible to maintain or repair under the Act, the strata corporation's bylaws or an agreement with an owner, including, but not limited to, the following items: (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x)
(c)
(3)
the building's structure; the building's exterior, including roofs, roof decks, doors, windows and skylights; the building's systems, including the electrical, heating, plumbing, fire protection and security systems; common amenities and facilities; parking facilities and roadways; utilities, including water and sewage; landscaping, including paths, sidewalks, fencing and irrigation; interior finishes, including floor covering and furnishings; green building components; balconies and patios, and
identify common property and limited common property that the strata lot owner, and not the strata corporation, is responsible to maintain and repair.
For the purposes of subsection (1) (c), the financial forecasting section must include: (a)
(b) (c) (d) (e)
(4)
that person's qualifications, the error and omission insurance, if any, carried by that person, and the relationship between that person and the strata corporation;
the anticipated maintenance, repair and replacement costs for common expenses that usually occur less often than once a year or that do not usually occur, projected over 30 years, beginning with the current or previous fiscal year of the strata corporation, of the items listed in subsection (2) (b), a description of the factors and assumptions, including interest rates and rates of inflation, used to calculate the costs referred to in paragraph (a), a description of how the contingency reserve fund is currently being funded, the current balance of the contingency reserve fund minus any expenditures that have been approved but not yet taken from the fund, and at least 3 cash-flow funding models for the contingency reserve fund relating to the maintenance, repair and replacement over 30 years, beginning with the current or previous fiscal year of the strata corporation, of the items listed in subsection (2) (b).
For the purposes of subsection (3) (e), the cash-flow funding models may include any one or more of the following:
57 (a) (b) (c)
balances of, contributions to and withdrawals from the contingency reserve fund; special levies; borrowings.
(5)
If a strata corporation contributes to the contingency reserve fund based on a depreciation report, the contributions in respect of an item become part of the contingency reserve fund and may be spent for any purpose permitted under section 96 of the Act.
(6)
For the purposes of section 94 (1) of the Act, "qualified person" means any person who has the knowledge and expertise to understand the individual components, scope and complexity of the strata corporation's common property, common assets and those parts of a strata lot or limited common property, or both, that the strata corporation is responsible to maintain or repair under the Act, the strata corporation's bylaws or an agreement with an owner and to prepare a depreciation report that complies with subsections (1) to (4).
(7)
The following periods are prescribed: (a) (b) (c)
(8)
for the purposes of section 94 (2) (b) of the Act, 3 years; for the purposes of section 94 (2) (c) of the Act, 18 months; for the purposes of section 94 (3) (a) of the Act, the one year period immediately preceding the date on or before which the depreciation report is required to be obtained.
A strata corporation is prescribed for the purposes of section 94 (3) (b) of the Act if and for so long as there are fewer than 5 strata lots in the strata plan. [en. B.C. Reg. 238/2011, Sch. 1, s. 2.]
Management of Contingency Reserve Fund 6.3
(1)
For the purposes of section 95 (4) of the Act, the strata corporation may only lend money in the contingency reserve fund to the operating fund if both of the following conditions are met: (a) (b)
(2)
the loan is to be repaid by the end of that fiscal year of the strata corporation; the loan is for the purpose of covering temporary shortages in the operating fund resulting from expenses becoming payable before the budgeted monthly contributions to the operating fund to cover these expenses have been collected.
The strata corporation must inform owners as soon as feasible of the amount and purpose of any loan made under this section
58
Addenda D – Site Plan
59
Addenda E – Qualifications
Mr. D. Allan Beatty, AACI, P.App
Professional Experience & Qualifications September 2006 - Present
•
Under Contract to Kent-Macpherson Appraisals – Completion of all types of valuation and consulting assignments including industrial, commercial, multi-family and resort developments, partial takings, life cycle costing and recreational property.
April 1992 – 2006 Valuation Consultant Manager of Real Estate Division Suncorp Valuations Ltd.
•
Under contract to Suncorp Valuations Ltd, trained, and supervised staff of 7 appraisers including review of assignments for Real Estate Division. Completion of complex commercial assignments, and valuations for insurance and heavy industrial property, property tax consulting, fire insurance arbitration and lease arbitration.
1990-1992 Managing Partner Prairie Appraisals Ltd.
•
Completion of complex commercial and industrial assignments.
1977-1990 Senior Appraiser Perry Appraisals Ltd.
•
Completion of complex commercial and industrial assignments.
Professional Memberships & Associations: • • • • • • •
Toronto Valuation Accord 2005 to Present– Appointed as Chair in 2005 Canadian Institute of Chartered Accountants 2004 to 2007 – Member of the Standards Advisory Council Appraisal Institute of Canada – Standards Board 1999 to 2007 - Appointed to assist in the rewrite of Canadian Uniform Standards, served as Chair for 2003 through 2005 Appraisal Institute of Canada - National President 1996-1997. Served at Chapter, Provincial and National levels since 1984. Past Chair of Professional Liability Insurance Committee, National Admissions Committee and Finance Committee. Appraisal Institute of Canada - Awarded Rank of Fellow, 1997 - For meritorious service to the Appraisal Institute of Canada and the appraisal profession. Appraisal Foundation – 1997 – 2003 – Trustee on the Board of Trustees, Chaired Governance Restructure Committee and International Relations Task Force. Director, Union of Pan-American Valuers – 1996-1998 – Appointed as Canadian representative to this Board
60 Expert Witness and Special Projects •
Appeared as an Expert Witness before Court of Queen's Bench, Saskatchewan Planning Appeals Committee and the Assessment Appeals Committee of the Saskatchewan Municipal Board, the New Brunswick Municipal Board, and the British Columbia Assessment Appeal Board.
•
Have represented property owners in various board related appeals, and consulted with assessment agencies for the City of Saskatoon, City of Regina, Saskatchewan Assessment Management Agency, Service New Brunswick, the Province of Manitoba Assessment Department and BC Assessment.
•
Contributing author to the Canadian Appraiser magazine and to UBC educational material for Appraisal Institute of Canada core education program. Prepared Continuing Professional Development on-line course module.
•
Appointed as arbitrator for variety of fire insurance and other valuation disputes such as lease renewals. Prepared, presented and defended evidence in hearings on these matters, as well as numerous property assessment appeals.
•
Session Lecturer for Appraisal Institute of Canada theory courses 1101/1102. Approved lecturer for Ethics, Standards and Claims Prevention Seminar for Appraisal Institute of Canada.
•
Completed land use and land value studies for major institutional clients including the City of Saskatoon and CP and CN Rail.
•
Consulting assignments on deep sea terminals - Prince Rupert and Squamish.
•
Valuation and expert witness testimony on PILT program - munitions depot.
•
Valuation of properties for the Eco-Gift Program, administered by Environment Canada.
Education 1988 2004 1998-2002 1998 1979 1976
Granted- Accredited Appraiser Canadian Institute (AACI), Appraisal Institute of Canada REIC Course on Reserve Fund Studies American Society of Appraisers – Course series on Machinery & Equipment Valuation, courses M&E 201, M&E 202, M&E 203 and M&E 204 successfully completed. Marshall Swift Cost Estimating - Lecture series on Calculator, Segregated and Unit-inplace applications of the Marshall Swift Manual. Boeckh Cost Estimating-Introductory and Intermediate Building Cost Estimating Boeckh Valuation. University of Saskatchewan - College of Arts and Sciences
