Paul Morse, in the saddle as Chief Executive Officer of The Real Property Association of Canada (REALpac) for nearly four months, has set himself an ambitious list of tasks to accomplish in his new role.
The former Senior Managing Director Office Leasing at Cushman & Wakefield, who took the REALpac reins from Michael Brooks in March, wants to boost the association’s membership from the current 80 to 85 by year end and eventually reach a long-term goal of 100 or more within the company/organization categories that it draws from currently.
Perhaps more importantly, Morse has been charged by his board of directors led by Chairman Dori Segal (also President and CEO of First Capital Realty Inc.), to continue with efforts to raise the profile of commercial real estate given its status as a $64-billion industry.
“There is more that we can do to promote the industry,” said Morse in an interview. “What can we do to remind government, the public at large and even our members how well the industry has performed over the last decade.”
REALpac has traditionally used an “evidenced based approach” to touting the real estate industry’s contribution to the economy and in that vein, the association recently commissioned a report from Altus Group Economic Consulting in Canada along with the U.S. commercial real estate group NAIOP Research Foundation out of the U.S. that will quantify the positive contribution of the commercial real estate sector on the Canadian economy.
“We have a great story to tell and the question is how do you do it in a professional way?” said Morse. “With the right data and evidence I think we can help our members. Their objective is to grow and what can we do to help them.”
REALpac’s new 30 page report, entitled “The Contribution of the Commercial Real Estate Sector to the Canadian Economy,” is patterned after a report produced regularly by the NAIOP Research Foundation in the U.S.
The draft report provides details on, among other things, the jobs in the industry (about 30,000), investment by sub-sectors and contribution to GDP and provincial and federal tax bases. The $64-billion CRE industry accounts for nearly 4% of the country’s overall economy, the draft report states. It is due out in September.
“With the evidence and good data, there is more that we can do to promote the good work that is has been done to date,” said the new REALpac CEO. “I have seen the first draft and it is quite powerful.”
The new REALpac CEO has also been tasked with increasing the amount of “uniquely Canadian research” for the association’s membership either by the creation of a foundation or beefing up its internal research capabilities.
Tout Those Returns
REIT investors likely know it, but too few Canadians generally know just how well commercial real estate has performed as an investment class over the past decade for pension funds, private real estate companies and investors in public companies. REALpac wants to broaden the knowledge. “The returns our members have generated for the investors out there have been really spectacular,” he said. “That is going to be another theme I see us picking up on going forward.
“There is a good story to tell, we just have to figure out how to tell it.”
Part of the challenge for REALpac is the fact that its member base is so diverse, from REITs to pension funds, private companies such as Minto Group and Menkes Capital and giant public companies like Brookfield. “We have been asked to put our mind to that and part of that is just having more evidence and data to support what the real property industry has done for Canada both on a national and a regional level,” he said. “That helps inform our members, the public and helps inform our discussions when we are meeting with government officials on policy matters.”
More Members But No More Sectors
While there has been discussion in the past about broadening the membership base of REALpac by adding additional categories of companies/organizations, Morse said that the immediate focus will be on servicing the requirements of existing members. In large part, there is reluctance to change the association model which allows the close knit group of CEOs and CFOs to tackle industry issues. “There isn’t another organization in Canada that allows the CEOs to get together with each other on topics that are relevant to them,” he said. “I think we have to be careful about expanding the membership and really asking ourselves why we are doing it, what is the advantage to do it?”
Larger Voice With Government
REALpac has a long list of advocacy issues it is either working on or hopes to deal with. On the front burner is pending federal legislation on REITs that face a number of technical issues which until resolved, place Canadian REITs at a disadvantage to counterparts in the U.S., Australia and other some other countries.
REALpac is also continuing with lobbying efforts for changes that would lower filing fees and create higher review thresholds under the Competition Act for reviewing real estate deals. The Competition Bureau currently charges a $50,000 flat fee, which the association argues is far too high for non-complex transactions. It also argues that there is no evidence to suggest large commercial real property deals are problematic. In fact, there are no real estate transactions that have been heard by the federal Competition Bureau dating back to 1984, based on REALpac research.
REALpac members have been successful on the “sustainability” front through the association’s establishment of the Energy Benchmarking Program to measure power consumption in their buildings. So successful, in fact, it has become self-sustaining. “The members have now embraced this and are galloping ahead,” said Morse. “They are moving faster than we can keep up with them because they see the value in converting their buildings to ensure they are meeting a higher standard, [derive] benefits in their relationships with their tenants and they are able to manage their costs better.”
REALpac is currently presenting the positive results of its Energy Benchmarking program to the federal and provincial governments, not just to show the progress that its membership has made on the sustainability front, but to get participation from government. “They too own (commercial real estate) and are major emitters of carbon so they have a role to play,” said REALpac CEO.