Canadian developers continue to creatively recycle obsolete non-residential real estate into an ever-expanding array of unit styles and lifestyle choices that has added the most high-profile conversion -- lofts -- to the list of standard Canadian housing options. Conversions are a response to changing demographics, renewed commitment to preserve architectural diversity, and the necessity to reduce construction costs for the benefit of both developers and buyers.

In communities across Canada, unused warehouses, factories, office buildings and even redundant hospitals, schools and religious edifices have been transformed into residences ranging in price from affordable entry-level to luxury-plus. Conversions create condominiums and rental apartments in traditional styles and in a wild variety of eclectic customizations.

Conversions address the need for affordable housing in neighbourhoods where new construction does not satisfy demand. Government support can overcome some obstacles that might cause problems for mainstream development. For instance:

• The City of Montreal, faced with growing demand for affordable housing, transferred a vacant school building, which had been repossessed for non-payment of taxes, to a local housing co-operative in 1997. By 2001, the unused real estate was converted to 48 urgently-needed affordable residential units. The Couvent de Saint-Henri Co-op project faced several obstacles, including local regulations and a site contaminated by former industrial use. The City and the Government of Quebec made the project possible through a combination of grants and by "flexibly interpreting" some regulations.

• In Kitchener, Ontario, a Fire Hall was converted into affordable housing in an section of downtown that had seen little redevelopment. When a new Fire Headquarters was built in 1999, the City sought proposals to recycle the 1960-built Fire Hall. The resulting Fire Hall Lofts project created 19 affordable units in the obsolete building. To be successful, the project required city support for severance and rezoning, financial and tax considerations from the provincial and regional governments, and financial assistance from the federal government. Under the Canada Mortgage and Housing Corporation Residential Rehabilitation Assistance Program - Conversion, which was created to assist in conversions of nonresidential buildings into affordable housing, developers commit to ensuring rents remain affordable for a period of 15 years, in accordance with rent guidelines established by the government.

Preserving the historical and cultural essence of neighbourhoods is often at the heart of warehouse and factory conversions. Disused industrial buildings are among the structures recycled into loft condominiums and rental complexes to maintain the distinctive character of many Canadian neighbourhoods. Historic areas like Old Montreal thrive as tourist meccas because of concerted efforts to conserve the neighbourhood's colourful past through protection of varied industrial architecture and the diverse styles of individual buildings.

Conversions, even when favoured over complete demolition, are not always the most cost-effective approach. The conversion of an abandoned Quebec monastery transformed a badly-damaged four-storey building constructed around 1910 into luxury condominiums. The cost of restoring the monastery building envelope alone was about C$1,145,000.

Buyers and investors interested in conversions would do well to learn what measures were used to improve the durability of building envelopes, reduce the risk of construction failure and to overcome specific renovation challenges faced for the project. Developers should be proud to explain the measures they have taken to overcome any short-comings of the site and to enhance the value of their project. Old buildings facing conversion represent many problems, often aggravated by lengthy vacancy, that must be cost-effectively resolved before creation of the new residential units may begin, including:

• Water damage and resulting mold problems.

• Demolition of interior structures and removal of debris.

• Incorporation of existing systems with new heating/cooling and other systems.

• Environmental issues raised by buried oil tanks and industrially-contaminated soil.

• Hazardous material disposal of asbestos, vinyl-asbestos floor tiles, PCB-contaminated fluorescent light ballasts, and other substances no longer permitted by building codes.

• Normal wear and damage to concrete and other structural and foundation elements.

• Preservation of exterior architectural elements while creating new saleable residential units according to local bylaws and codes.

In many cases, conversion projects are marketed as new developments even though they may not qualify for provincial new home warranty programs. The credibility of the development should be based on a thorough, relevant warranty program backed by the developer.

Conversions create exciting, even exotic, individualized living spaces, but don't get so caught up with interior design selections that you forget the catchwords of smart real estate buying and investing: Buyer Beware.

Published: April 5, 2005

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