- - - Incidents - - - Home -

AGI Playbooks

"The 165" has been under heavy renovation since 2008 by 4 different landlords. We are now past our 14 year anniversary (in May, 2022) of jackhammers, power tools, noise, dust and disruption on a near daily basis.

Had any of our new landlords stopped and thought this through they should have realized they had just purchased a freshly renovated building that could be rented out for several years before any major repair or capital outlay was needed. But each new owner has been bent upon doing mass renovations regardless of the effect it has on their tenants and regardless of whether the work was necessary or not.

Scanning over the list of renovations by Previous Landlords and the rather ambitious list from CLV Group we see that most everything you can to do a building like this has already been done; multiple times.

So, lets ask the obvious question: "Why would a new landlord would come in here like a drunken bull in a china shop, changing everything in sight, with no regard for what has already been done or for the tenants who live here?"

The Renovation Game

Not so long ago, an apartment building was a long term investment, using rental cash flow to pay the bills until it acquired enough value to sell for a nice profit. But now landlords are trading on the stock market as Real Estate Investment Trusts (REITs) and are far more investor driven than ever before. The time scale for return on investments has gone from years to days. Where keeping their tenants happy was once the goal, now it is their investors they try to please with constantly increasing portfolio values and rising share prices.

But, the province of Ontario has a system of Rent Controls that limit how much a landlord can legally increase rent from year to year. This puts a landlord up against a hard limit. It places a natural cap on their income. Once all their apartments are rented, their income plateaus, increasing only once a year by the amounts allowed by rent controls. They now need to find ways to increase property value and cash flow or they risk an investor sell off that could bankrupt them.

Fortunately for them (but not for their tenants) Ontario's rent controls are rather leaky.

So, landlords come out swinging. When they acquire a new property they immediately launch into mass renovations, making large capital investments in the building to drive up property value and provide their investors with ever increasing returns.

They don't care about the building's history or condition, they're going to do this work anyway. Then, as tenants flee the disruption, they use easy rent increases on vacant apartments and the ability to file AGIs on occupied units to provide even better reports. Then finally they will put on a rental push near the end of renovations, bringing in as many "market value" tenants as they can and catching them into the resulting AGIs. All in the name of showing ever increasing portfolio values to their investors.

Buy > Renovate > Monetize > Sell > Repeat

Essentially these REITs are spending money to make money. The investors just gobble this stuff up; and why wouldn't they? They're getting immediate returns on their investments. Everyone makes out like a bandit... except the tenants.

Seeing The Problem

AGis are not automatic. The landlord does not get to raise the rent just because he spent some money.

AGIs are processed as lawsuits heard in tribunals. To qualify for a rent increase, the work done has to be a structural improvement or repair meeting the rules set out in the Residential Tenancies Act Part 126 and Ontario Regulation 516-06 Section III. If those guidelines are not met, the adjudicator should disallow the claim.

The situation with The 165, being repeatedly bounced from one landlord to the next in a relatively short span of time with each doing their own, often duplicated, round of renovations reveals a rather unsettling truth:

A lot of the work being done isn't necessary and should not qualify for an above guideline increase.

If we take a starting point from the Renovations done by A&L Investments, in 2000. We can see the building was extensively redone and brought "up to code'. In fact it was a pretty nice place to live at that time. The original decor of the building had stood for 35 years, there should be no reason the renovations would be any less durable. Yet, upon acquiring the building, TransGlobe went ahead and completely re-did everything in 2008. Then in 2012 when Starlight took over they also redid everything as did Northview when they took over in 2016 and now CLV in 2021.

The balconies provide a good example of needless duplication:

Common sense should tell us that beyond the work done in 2000, none of this was necessary. The original balconies stood for 35 years should have stood for at least another 25 years without much need of repair. Even if the work in 2010 was somehow justified, the re-do in 2012 wouldn't be. Then, the 2021 round of refurbishments is so minor that one has to question the reasons for it.

These pictures are from hundreds that were taken just a few days before CLV started redoing our balconies. Looking through them, I don't see balconies that were deteriorating or in need of repair. I see balconies in good condition that people were using and enjoying. But, that didn't stop CLV from spending over a year "fixing" them.

(Click for full size image)

A similar examination of the work done on the elevator landings, lobby, apartment doors and in individual apartments will raise the same questions about need and reasons.

It would be quite the mistake for a tenant to think this is some kind of gift from a generous new landlord. For tenants, this is little more than landlords trying to Drive Up Rents and inspire investor interest. The common area and exterior work is most often claimed on an AGI application. The work done in vacant units is easy, they just raise the rents. One way or another, their tenants are paying for it.

It's Not Just This Building

I first got into this issue in 2014, after a disastrous first hearing in SOL-40297-13. It went so badly off the rails that I filed a review request and got an order for a de novo (new) hearing.

When investigating Starlight for the tenant's defence I discovered an Interview with Daniel Drimmer who owned both TransGlobe and Starlight in which he talks about Starlight's corporate strategy for rental management, saying:

"Another difference with the Starlight approach is that the asset manager is going to be aggressively branded with consumers. Within ads or signage, third-party managers will be touted but be secondary to the Starlight brand message."

When looking to discover exactly what that meant, I checked their corporate website and easily discovered a cluster of 18 Starlight Buildings that were painted like ours and had identical tinted glass balconies. Looking deeper I discovered a total of 100 Buildings all done within a two year period. Apparently this was the branding approach; remaking their buildings to look so alike they virtually screamed: "This Is A Starlight Building!"

We need to ask how much of it was actually necessary, restorative work. To claim two or maybe three of those buildings need this kind of extensive renovation at the same time might be believable. But to find a cluster of 100 buildings of differing construction, ages and sizes, all owned by the same landlord, all redone so alike and in such a short time stretches credulity well beyond the breaking point. The odds against even a small portion of this being necessary work are astronomical. The far more likely explanation is that the bulk of this work was done simply to drive out tenants so they could raise the rents on the vacant units and generate AGI applications for the ones who did not flee.

Corporate branding... at the tenant's expense.

AGI Playbooks

The pattern is becoming obvious: Peter is being robbed to pay Paul.

What we are seeing is an "AGI Playbook". A list of renovations to be performed when acquiring a building; whether they are necessary or not. This playbook is followed solely as a means to motivate investors. It drives up rents, increasing cash flow. Through a combination of court-fixed values and lifetimes, it allows amortization of expenses and increases property value. All to give a much larger impression of profitability, drives up share values and motivates investor interest.

But there is another problem: By all indications, almost none of these AGI claims should be approved, yet almost all are.

This practice of unnecessary renovations and bogus AGI applications has remained hidden largely because most people, even authorities and adjudicators see only the landlord's reports and are not familiar with the building's condition upon acquisition. But, it becomes visible when you examine a building like The 165 that is flipped multiple times to new landlords. It is the needless repetition of high value renovations by different landlords that exposes the game.

After continued successes in pushing these manufactured AGI claims through Landlord Tenant Board (LTB) tribunals Ontario's landlords now feel casually entitled to abuse their tenants for the benefit of their investors and shareholders. One has to wonder how many millions in excessive rent is being paid each month because of these AGI Playbooks and it raises big questions about how they are getting past the LTB's adjudicators.

The toll for this goes well beyond simple rent increases. Landlords are acting in near total disregard of their tenant's comfort and safety. Tenants are enduring years of loud noise, filth, and inconvenience just so these landlords can give their shareholders a bigger return on their investments. Moreover; such blatent profiteering can adversely affect local economies and is known to leave people homeless.

This has to stop.

Last Update: 2022-11-26
Continue to... Fixing AGIs