In January 2014, the City of Toronto introduced a program to help support energy efficiency and water conservation improvements in rental apartment buildings. The High-rise Retrofit Improvement Support (Hi-RIS) program started out with a $10 million funding envelope. It is now entering its third and final year with about $6 million left to distribute on a first-come, first-serve basis to help improve Toronto’s apartment buildings and reduce their operating costs.
The financing provided through the Hi-RIS program is intended to help building owners make energy and water-saving retrofits and upgrades to their properties. This innovative financing program offers owners of buildings that are five or more storeys access to low-interest, fixed-rate loans with payment terms of five to 20 years to fund building improvements. In addition, it allows owners to make improvements now and pay over time using their savings to offset the costs. Property owners can receive a loan of up to five per cent of the current value of their property through the program, and can pay back the loan directly through installments on their property tax bill.
The Hi-RIS program is part of the city’s Tower Renewal Program, which offers services for older apartment buildings and their residents. The program helps further the city’s goals of fostering great communities, upgrading the condition and affordability of housing and improving quality of life for residents.
The program is an attractive one for owners of older buildings that may need to improve a large number of their fixed assets. Boilers, heat recovery ventilators, low flow toilets, lighting and lighting controls, new windows and building automation systems are all examples of retrofits that qualify for the program.
“We thought it was a very interesting program and there were a lot of benefits to it, including no need to register a mortgage on the property, which means not encumbering the property’s title. It was quicker, cheaper and easier than getting traditional financing,” says Randy Daiter, vice president of Residential Properties at M&R Holdings. “Usually there are more costs associated with arranging conventional mortgage financing such as appraisal fees, Phase I Environmental Audits, Property Condition Assessments, mortgage broker fees and legal fees, and we were able to save all those fees. Plus, it was easier to make a business case for these retrofits, so it was quicker to obtain internal approval.”
Daiter’s firm owns three buildings that received a total of about $3.5 million in financing from the Hi-RIS program. The buildings he chose to retrofit were about 50 years old and featured original windows and balcony doors that were no longer able to effectively protect inhabitants from the weather outdoors. These single-pane windows allowed air and water infiltration as well as ambient noise from the street.
After initially learning about the Hi-RIS program, Daiter underwent a process to apply for financing, including completing an Energy Audit report. Daiter’s three North York-area properties were retrofitted with new windows and balcony doors, which would save him about $85,000 per year from just one building in gas savings alone. Further, each building will save an estimated 429 metric tonnes of CO2, which is equivalent to the greenhouse gas emissions from 90 passenger cars or 39 homes in one year. In addition, the properties benefitted from a double-digit return on investment and a more aesthetically-pleasing interior and exterior. Following completion of the retrofits, about five per cent of suites were randomly inspected to ensure that the retrofits specified in the application had been installed.
In addition to making his tenants very happy with their suites’ new improvements, Daiter found that the upgrades helped the buildings’ marketing efforts, as he was now able to include details about the new windows and balcony doors in advertisements. Not surprisingly, tenant referrals also increased.
“Since we’ve seen such tremendous success with the buildings we did through the Tower Renewal Hi-RIS program, we are doing windows at multiple sites, so we have several buildings that are having the windows replaced as we speak,” says Daiter. “This has had a really positive impact on us re-aligning our capital expenditure priorities, and we’ve seen such big wins with the window projects through Hi-RIS on a pilot basis that we’re pursuing it in earnest.”
Properties enrolled in the program can receive incentives of up to $100,000 from Toronto Hydro and Enbridge Gas, as well as access to support from the City of Toronto’s Tower Renewal Program staff. Another attractive feature of the program is that the financing obligation is attached to the property, not the owner. This means that if a property owner wants to sell the building before the financing has been paid off, the obligation automatically transfers to the new owner.
“The tenants are absolutely thrilled, and this project helped us get there. It’s got financial, environmental, marketing and aesthetic benefits,” said Daiter. “You build up a lot more goodwill with a project like this than you do by doing garage work, putting in a new boiler or installing a new roof. It’s been a fabulous experience for our tenants, for us as owners and managers and for our staff. It’s been a win-win.”