Investment Planning with aTriple Bottom Line

June 2011

Agenda

1.) Overview of the BC Housing asset portfolio;

2.) What is Portfolio Planning?

3.) BC Housing’s “Triple Bottom Line”;

4.) Applied Analytical Tools – Tiering;

5.) Stakeholder Consultation Process;

6.) Asset Maximization Outcomes

7.) Next Steps

8.) Acknowledgements

2

BC Housing Asset Portfolio

3

What are our Strategic Directions – Long Term?

• Homelessness - take a lead role in resolving homelessness in B.C.

• Frail Seniors & individuals with Special needs; - clients with severe physical

disabilities, mobility issues, chronic mental illness or drug & alcohol dependencies;

• Aboriginal Individuals and Families – off-reserve households in core need;

• Women & Children fleeing violence; – victims of spousal violence;

• Low Income Households; – households unable to find housing that is suitable in size

and good repair without spending 50% or more of their income on rent;

• New Home Buyers – consumer protection for the new home industry thru licensing,

research and education;

4

What are some Portfolio Quick Facts?

5

BC Housing

is the largest

residential

landlord in

British Columbia

What is our Key Asset Challenge?

6

HRPFundingImpact

$139Million$39.4Million

Per Year

PostHRPPressure

$249MillionTargetCondi@onFCI=15%

What are the Financial Pressures for our Assets?

CurrentRenova@onPressure

$388Million

7

What is Portfolio Planning?

8

What is Portfolio Planning?

1.) They represent investments made or planned by the organization;

2.) They are aligned with the organization’s strategic goals and objectives;

3.) They typically have some distinguishing features that permit the organization

to group them for more effective management;

4.) The components of discrete portfolio investments are quantifiable; they can

be measured, ranked and prioritized;

A collection of investment programs & projects managed in a coordinated wayto obtain control & benefits not available from managing them individually:

9

Why are we taking a Portfolio based approach ?

• Ownership: How to decide to lease, own or P3?

• Maintenance: How to decide when to invest?

• Adaptability: How do we get maximum flexibility & functionality?

• Technology: How does real property integrate?

• Financial: How to leverage our assets?

• Capital: How to ensure equitable and impartial prioritization?

• Governance: How to improve decision making?

• Optimization: How do we realize the value in our real estate holdings?

10

A Portfolio Plan…

CurrentState

DesiredFuture State

Transition Plan

…is based on an analysis of current conditions, all future needs and a sustainable transition plan to meet those needs.

11

PhysicalInventory

RedevelopmentPotential

ConditionAssessment

ClientDemographics

InventoryDatabase

EnvironmentalConsiderations

The foundation is…

Policy Direction

…a solid “Current State” analysis:

The focus is…

Future DemographicAnalysisStrategic

Direction

GuidingPrinciples

Desired PortfolioCharacteristics

Portfolio AnalysisTools

Market –DevelopmentOpportunities

…a well-supported vision of the desired “Future State” of the portfolio

13

The Transition Plan recognizes…

Service DeliveryStrategies

RevitalizationStrategies

Partnering Strategies

CommunicationStrategies

New HousingStrategies

Governance/Decision-Making

Funding Strategies

…that modernizing the portfolio involves numerous specific strategies

14

Where does our Enterprise Portfolio Plan fit?

Enterprise Portfolio

Management Framework

Enterprise Portfolio Plan

Regional Investment Plans

Investment Analysis /

Asset Management Plans

Annual Property Plans

Multi -Year

Operational Plan

Retention and

Divestiture Plans

Long-Term Capital

Plan

Acquisition /

Development

Plans

Enterprise Portfolio Management

Portfolio Performance

Report

• Vision & Guiding

Principles;

• Portfolio Strategies

& Innovations;

• Portfolio Supply

Characterization;

• Provincial & Regional

Demand Analysis;

• Priority Projects &

Initiatives;

15

What are our key Portfolio Targets & Metrics?

• Majority of Portfolio less than 30 years

old;

• FCI condition targets;

• Greener & more energy efficient housing

(GHG & BEPI targets);

• Number of Redevelopment opportunities

evaluated;

• Ratio of PRHC owned vs leased land and

buildings;

• Maximize additional revenue generation

via assets;

16

• Introduce new financial and service

delivery models;

• Density targets (minimize underutilized

sites);

• Increased # of properties operating

with financial self-sufficiency;

• Low Vacancy;

• Provide innovative range of affordable

housing options;

• Committed long term Operating &

Capital Dollars;

BC Housing’s

Triple Bottom Line

17

How important is the Triple Bottom Line?

60% of the Fortune 500

companies within the next few

years will expand their strategic

goals to reflect Triple Bottom

Line issues;

What is the definition of “Triple Bottom Line”?

• Triple Bottom Line accounting means expanding the traditionalassessment framework to take into account ecological, social andfinancial performance;

• The concept of TBL demands that a company's responsibility lies withstakeholders rather than shareholders;

• “Stakeholders" refers to anyone who is influenced, either directly orindirectly, by the actions of the firm.

• "People, planet and profit" succinctly describes Triple Bottom Linesand the longer term goal of sustainability.

What is the “Triple Bottom Line” to BC Housing?

As a public sector agency BC Housing will complete portfolio

investment analysis on the basis of a “Triple Bottom Line”

emphasizing the following considerations:

a.) Economic / Financial performance;

b.) Social Value to our Clients and Stakeholders;

c.) Strategic Alignment with provincial priorities;

BC Housing must meet its mandate as a social housing agency of

the government of British Columbia, but also ensure that

expenditures are sustainable;

The organization’s Triple Bottom Line analysis weighs important

strategic, economic, and social considerations articulated by the

government when making real property decisions;

We must not only deliver economic accountability to the residents

of BC, but also ensure that quality of life is enhanced for

residents and that the natural environment is protected;

Why do we have a unique “Triple Bottom Line”?

22

What are our indicators for Economic performance?

• Performance Measures:

Facility Condition Index Operating Costs Maintenance Costs Vacancy Rates Assessed Value

• Results are scored on the basis of: High Performer, Performer, LowPerformer.

• Overall ranges: 0.00 to 1.25 (Low Performer), 1.25 to 1.75 (Performer), and1.75 to 3.00 (High Performer)

• Evaluation scale of 1, 2, 3 with case specific evaluation ranges.

Economic/

Financial

Performance

Property

Count Pct

High Performer 104 53.6

Performer 87 44.8

Low Performer 3 1.5

Total 194 100.0

23

What are our indicators for Social Value?

• Performance Measures:

Community Demand Proximity to Amenities Employment Benefits Environmental Attributes Stakeholder Satisfaction

• Results are “scorecard” oriented and segmented on the basis of the followingranges: Diamond (2.40 to 3.00), Platinum (1.80 to 2.40), Gold (1.20 to 1.80),Silver (0.60 to 1.20), and Bronze (0.00 to 0.60).

• Evaluation scale of 1, 2, 3 with case specific evaluation ranges.

Social

Performance

Property

Count Pct

Diamond 29 13.9

Platinum 103 49.5

Gold 14 6.7

Silver 62 29.8

Bronze - - - -

Total 208 100.0

24

What are our indicators for Strategic Value?

• Performance Measures:

Corporate Linkages Future Potential for Development Leverage Opportunities for Partnerships First Nation / Aboriginal Interests

• Results are scored on the basis of: Significant, Moderate, or NegligibleStrategic Value.

• Overall ranges: 0.00 to 1.25 (Negligible), 1.25 to 1.75 (Moderate), and 1.75 to3.00 (Significant)

• Evaluation scale of 1, 2, 3 with case specific evaluation ranges.

Strategic

Performance

Property

Count Pct

Significant 53 27.0

Moderate 76 38.8

Negligible 67 34.2

Total 196 100.0

Applied Tools & Processes – Tiering

25

What are some of the tools we use?

Item Deliverable Tool

#1 Need&DemandAnalysis; MarketSegmenta6onMap

#2 BuildingCondi6onAudit/Assessment; FacilityCondi6onIndex

#3 Tiering TieringModel

#4 MarketAnalysis; CommunityInvestmentStrategy

#5 Innova6on&Op6miza6onAnalysis; AssetManagementPlan

26

What is Portfolio Tiering?

• Tiering ….

is concept used in other public sector organizations to facilitatethe segmentation of inventory.

allows for scarce resources to be assigned to higher priorityprojects.

creates direct linkages to corporate priorities.

identifies areas of potential financial and non-financial benefit.

27

28

What was the scope of the Portfolio Tiering?

• The 2009 / 2010 scope included all Directly Managed inventory(approx. 8000 units);

• Tiering was completed at the “property” level (i.e. a high densitydevelopment is considered a single property);

• Total of 192 developments representing 567 buildings Tiered;

• Assessed Value of the inventory Tiered = $ 761 Million;

• Total Heated Floor Area Tiered = 6.6 Million sq. ft.

• Deferred Maintenance of inventory Tiered = $ 443 Million;

Tiering Logic Model

Adjusted Tier

#2

Adjusted Tier

#3

Adjusted Tier

#4

Adjusted Tier

#1

Economic /

Financial

Value

High Performer

Performer

Low Performer

Social ValueStrategic

Value

Yes

No

Options and

Actions

Options and

Actions

Options and

Actions

Options and

Actions

TIER 1

TIER 2

TIER 3

TIER 4

Property X

Diamond

Platinum

Gold

Silver

Bronze

If, Silver or

Bronze - Future

Social Value

Significant

Moderate

Negligible

Portfolio

Migration

Interests

29

Tiering – Tier Definitions

Tier 1 Solid financial performer and of social and strategic value ;

Tier 2 Good financial and performer of social and strategic value

Tier 3 Fair financial and performer with limited social and strategic value

Tier 4 Poor financial performer of no social and strategic value;

30

Tiering – Options and Actions

Tier 1 Retain and Maintain; Sell and Invest / Swap; Sell-Lease-Back;

Property Bundling; Commercial Opportunities; Densification

Tier 2 Retain, Maintain, and Invest; Partnerships / Leveraging; Densification;

Adaptive Re-use

Tier 3 Market for Sale; Hold Strategy; Interim Re-Use;

Property Bundling; Partnerships

Tier 4 Demolish and Hold; Demolish and Re-build; Demolish and Sell;

Phased Rust Out; Donation; Land Lease; Commercial Opportunities

31

Stakeholder Consultation

Process

32

Where did we start?

Concept Papers April 2009

● Governance● Enterprise Portfolio Plan● Investment Analysis Framework● Business Intelligence systems (Real Property)● Stakeholder Engagement

Executive Vision & Guiding Principles; June 2009

● “Preferred Future State”● Strong Emphasis on “Social Value”● Establish “Boundaries & Constraints”

33

Where did we start?

Roundtable established May 2009 - May 2010

● Cross Functional participation from key business areas;

● “Preferred Future State” elements;

● Governance and framework development;

● Portfolio Objectives and Metrics established;

● “Triple Bottom Line” indicators established

34

35

How were our TBL indicators weighted?

Economic PerformanceWeightings

FCI 0.29

Operating Costs 0.41

MaintenanceCosts 0.59

Total Costs 0.29

Vacancy 0.20

Assessed Value 0.23

Total 1.00 1.00

Social ValueCategories

SocialValue

Weightings

HighestPossible

Score

HighestPossibleWeighted

Score

Community Demand 0.43 3.00 1.30

Income Level

Proximity 0.17 3.00 0.52

Employment Benefits 0.22 3.00 0.67

Environmental 0.11 3.00 0.33

Stakeholder Satisfaction 0.06 3.00 0.19

Total 1.00 15.00 3.00

Strategic Value CategoriesStrategic Value

WeightingsHighest

Possible ScoreHighest PossibleWeighted Score

Corporate Linkages 0.33 3.00 0.99

Future Potential 0.29 3.00 0.87

Partnership 0.25 3.00 0.75

Aboriginal 0.13 3.00 0.39

Total 1.00 12.00 3.00

36

What is our TBL balancing act?

• The Roundtable participated in a weighting exercise betweenthe three pillars of the BCH Portfolio Tiering. The results were:

• Economic / Financial Performance = 37%• Social Value = 23%• Strategic Value = 40%

• The Tiering then includes the segmentation of results by Tier:

• Tier 1 = 70% to 100%• Tier 2 = 60% to 70%• Tier 3 = 50% to 60%• Tier 4 = 0% to 50%

37

Tiering Results – Provincial Level

Tier PropertiesTotalSquareFootage

Tier1 4 632,825

Tier2 75 3,327,176

Tier3 90 2,294,462

Tier4 23 291,684

Total 192 6,546,147

Tiering Results – Provincial Level

Asset Maximization

Outcomes

39

What is Asset Maximization?

• Leveraging value from our assets – gaining access to embedded

value;

• Alignment - Right assets, right place, right time;

• Maximum efficiency of operating dollars – best delivery options;

• Key strategy in government’s Capital Asset Management

Framework (CAMF);

40

Housing solutions for healthier futures

How can you leverage your assets?

41

What is the BCHMC Unfunded Liability Profile?

42

What is the Impact of Minor Capital & Maintenance?

43

What is the Impact of Energy Savings?

44

What is the Impact of long term Portfolio strategies?

ReducedUnfunded Liability

PortfolioStrategies

45

What are our Immediate Options?

PortfolioObjectives FinancialBenefits

PortfolioDisposition

PotentialTimelineToRealizeValue

Alig

nmen

twith

Man

date

Meetem

erging

Need&Dem

and

CaptureUnrea

lized

Value

Add

ressSub

stan

tial

CapitalR

enew

al

Rationa

lize

Und

erpe

rforming

Assets

NetRevenue

Gen

eration

Ope

ration

alSavings

Red

uced

Cap

ital

Liab

ility

RiskTran

sfer

Strategies

A. Own&Operate

B. Divestiture

C.AdaptiveRe ‐Use/AffordableHousing(Stratification)

D.Redevelopment/Densification(Infill)

E. TransfertoNon ‐Profit

0‐3years

P

46

Where do we go next? Pathfinders

Transfer to Non-Profit Transfer to Non-Profit (Sale) (Lease)

Divestiture Redevelopment / Infill Stratification (Houses & Duplexes) (low density sites) (Affordable Housing)

47

Next Steps

48

What are the timelines?

Multiple Iterations to meet all long term objectives

4th Iteration

3rd Iteration

2nd Iteration

1st Iteration

PortfolioObjectives

3rd Phase Projects

2nd Phase Projects

Early SuccessesP

ortfo

lio W

orkp

lan

Timeline

StrategicInitiatives

PortfolioInvestmentStrategies

CapitalInvestmentStrategies

SupplyManagement

49

Acknowledgements

50

Acknowledgements

BC Housing wishes to thank the following for their support in developing

today’s presentation:

- The Corporate Research Group (CRG) - Mr. Jeffrey Wood;

- Heuristic Consulting Ltd – Mr. Bruce Turner;

Questions

52