CAPREIT

2012 a record year

CAPREIT
Wednesday, July 24, 2013
By Erin Ruddy

Tom Schwartz knows a good investment when he sees it. As the president and CEO of CAPREIT – Canada’s second largest REIT (after Boardwalk) – the company’s 2012 acquisitions included iconic Olympic Village in downtown Montreal, a high-quality, self-contained residence surrounded by beautiful parkland and recreational facilities. With 980 suites overlooking 25 acres of impressive landscape, the luxury residential units were among the many thousands acquired in 2012 that brought the company’s total portfolio up to 37,488 units across Canada – acquisitions that will likely reap the company huge rewards.

“We acquired almost 7,000 units last year, our best year since 2004,” says Schwartz. “We were obviously benefitting from the low interest rates, raising money at under three per cent for 10 years, which helped fuel growth. Also, our management initiatives had all kicked into high gear. Our procurement programs have become very profitable; our energy management programs are driving a lot of money to the bottom line, so I think that gives you the picture of where that record year came from.”

All that plus a hard-working, dedicated team. CAPREIT currently has 915 employees spread across Canada, whom Schwartz accredits for much of the company’s recent success. He says the philosophy at CAPREIT is to nurture staff members and encourage them to climb the ranks – to become “service-oriented” leaders who will one day help pave the way to future growth.

“We really promote upwards mobility, so there have been numerous promotions,” he says. “We built a really strong team. We have a service culture. We develop leadership and we want to continue to attract the best people to our company.”

To help entice the best people, CAPREIT has been participating in the 50 Best Employers in Canada, an awards initiative launched by Aon Hewitt in 1999. Though CAPREIT hasn’t won its coveted place in the rankings yet, the company hopes 2013 will be its year.

“We believe people are our largest asset,” says Jodi Lieberman, vice-president of human resources. “To ensure we remain competitive with our HR offerings, and as we strive to become a best employer in Canada, regardless of the industry, we participate annually in the Top 50 Employers in Canada benchmarking survey. Our rankings in the survey have been consistently increasing as we take the results each year and adapt our organization to the wants and needs of our employees. Engaged employees are known to be happier, more valuable and productive. Put all that together and success is inevitable.”

Managing the challenges
With record growth comes record challenges, and with more than 30 years experience in the business of multi-residential real estate, Schwartz knows all too well what those challenges are.

“Absorbing the growth is the hard part. The goal is to grow profitably, and we did, but it certainly wasn’t easy,” he says. “We had to deal with rising cost pressures, property taxes, operating costs that continue to go up faster than rents go up. We are in a rent controlled environment in virtually all our buildings, except for those in Alberta where there is very light rent control. So our top line growth is fixed yet our costs go up sometimes faster than the top line.”

Operationally, managing such a vast portfolio is a logistical feat in itself. But a feat that posed more opportunity than it did difficulty, according to COO Mark Kenney.

“Our tremendous growth over the last year has presented some great opportunities for the operations team to apply CAPREIT processes to a variety of acquisitions,” says Kenney. “Our proven methodologies and approach have allowed us to quickly and almost seamlessly integrate new sites into our portfolio and realize financial benefits in a very short period of time. We have integrated our new buildings with little or no increase in infrastructure or staff, other than some building employees. One of our advantages is we are able to easily scale up to run an increasingly growing portfolio.”

Financials and operations aside, another challenge – and an important one – is ensuring tenants remain happy.

“We don’t get many complaints but the ones we do get typically relate to (noise and inconveniences) caused by construction,” says Schwartz. “We do a lot of capital work on our buildings, which is part of our philosophy – spend the money to bring the buildings up to a certain standard. To manage that, we’ll have a pre-construction meeting with tenants. We’ll tell them what we’re doing. We’ll have our engineers and construction people in to talk about the work, and if there are issues we try to deal with them. We had a student building, for example, with exams the third week in June, so we didn’t jackhammer during that time. It’s just a matter of being responsive.”

The business of being social
Schwartz has no illusions about the type of business he’s in. With the primary goal being to make money, ultimately that path is paved by building strong relationships.

“We’re in the people business,” he says. “It sounds trite, we deal with buildings, but at the end of the day it’s the people who really make the difference. Anybody can have a pretty building. But if you have the right people, the right service culture, and if the tenants are happy, safe and secure, that’s where your success comes from.”

Social media has been a valuable tool that’s helped CAPREIT keep its relationships strong – and build new ones. In fact, the company boasts the industry’s first mobile website, which allows users to rent an apartment from anywhere they happen to be, right on their smart phones.

“We have followers on Twitter and friends on Facebook. We have four or five people here who spend a lot of time doing social media,” he says. “It’s a different kind of marketing. And it’s not just young people using social media, it’s everybody. One of our primary markets is newcomers to Canada who typically rent before they own. They can be off in some other country looking around for apartments on their computers or phones. We offer them that ability.”

Moving forward
Aside from securing its place atop the 50 Best Employees in Canada list, CAPREIT’s goals for next year and beyond include continued growth.

“Growth is always a goal. We want profitable growth,” says Schwartz. “Another goal of ours is refinancing. We want a very strong balance sheet so we are taking advantage of these low rates. We’re bringing certain mortgages forward. So we’ll break a mortgage, pay the break fee and refinance at these low rates.”

He also notes CAPREIT’s commitment to maintaining the dedicated service culture despite all its growth.

“We have an extremely hands-on management style. When I started the company that was something I believed in strongly. A good service culture allows us to be very profitable because we are going to attract the best tenants and be able to charge the highest rents. You go to any of our buildings and they’re clean and the staff smiles at you. That won’t change.”

Erin Ruddy is the editor of Canadian Apartment Magazine.

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