In this issue:
- Provider Profile: Interview with Dave Hall from Stoney Creek Community Homes
- You Asked Us: What’s the Difference Between Worldsource and Encasa?
- Tariff Standoff Continues: Navigating the Impact of the Trade War on Your Investments
- Outreach at 2025 Regeneration Forum
Provider Profile: Interview with Dave Hall from Stoney Creek Community Homes
Dave Hall is the Executive Director of Stoney Creek Community Homes, a non-profit housing provider near Hamilton, Ontario. He also leads Stoney Creek Community Services Corporation, which offers property management services to seven other non-profits: Holcro Non-Profit; Van Norman Community Homes; Harmony Non-Profit; Your Homes of Brantford; Kent Park Community Homes; Simcoe Kinsmen (“Kin Villa”) and Simcoe Community Homes. In total, Stoney Creek owns 369 units of housing, comprising of four buildings and 81 townhouses. However, it manages a grand total of 832 units over 13 sites in the Hamilton, Halton, Norfolk and Brantford Service Manager areas. The portfolio comprises of a mix of seniors’ buildings, apartment buildings, mixed-apartment buildings, semis and townhomes.
Dave joined Stoney Creek in 2017 as Director of Finance and Administration. In 2020, he became the Executive Director. Dave has unique insight into Ontario’s non-profit housing ecosystem. Because each non-profit managed by Stoney Creek has its own board, Dave attends upwards of 40 board meetings a year; he also interacts with four Service Managers on a range of matters. To top it all off, Dave also serves on Encasa’s Advisory Committee, HSC’s Insurance Reference Group and the HSC Board.
Q: What role does Stoney Creek Community Services play regarding investment decisions and capital planning of the non-profits it manages?
DH: We make recommendations, but the boards are the ultimate decision-makers on their investment strategy. Boards vary in their approach to investments – the larger boards tend to have a diversity of professional backgrounds they bring to asset management and capital reserves; some are smaller with perhaps less familiarity with financials, legalities or building science. That said, sometimes these smaller boards have longstanding board members who are deeply knowledgeable about the buildings and the way the sector works.
In my experience if the board has a financial person (e.g., a Chartered Professional Accountant), they tend to be more aggressive in their allocation and equities, whereas other boards tend to be more conservative and lean towards Encasa’s bond funds and the high interest savings account.
Encasa’s been helpful in this regard. We’ve arranged for sessions with Encasa’s investment advisors to talk about asset allocation. This has been educational for the less experienced boards and have enabled them to become more comfortable with investing.
Q: What does the investment profile of Stoney Creek Community Homes look like, the non-profit you own?
DH: We have maintained the same allocation for many years. Back in 2007, you interviewed our previous ED, Carl Henderson, for this newsletter. We held about 80% in equities back then and that’s still the case. We’ve been very consistent with our approach, even though the buildings are almost 20 years older. We now have approximately $4M dollars in our reserve.
Q: How have you been able to manage that and maintain the capital reserve you need for big projects?
DH: The short answer is that we’ve had to work really hard at it and maintain our discipline.
Subsidies and grants from government are not what they used to be. There are also a lot of additional things that non-profits have had to take on that never used to exist. Recently, we’ve had to invest a lot of time, effort and money into our IT infrastructure and staff training for cybersecurity. Like other providers, we’ve also had to spend an increasing amount of time managing conflicts with and between tenants and mental health issues. We’ve noticed that fewer seniors are moving on into long-term care because of the shortage of spaces and the expense. Because of this, we’ve had to increasingly contend with damage to the buildings because people accidentally leave a tap or stove burner on and there’s a flood or fire.
To preserve the reserve and our financial health, we are constantly evaluating expenses and trying to minimize them as best we can, deferring projects where it makes sense or doing tenders for those big-ticket items like landscaping, snow removal or building audits.
We also keep a good handle on what needs to get done. We do Building Condition Assessments (BCAs) every five years, usually with the Replacement Reserve Fund Analysis. But you need to scrutinize these carefully. Sometimes they miss things or underestimate the cost of replacements or repairs. So we use them as high level guidance only. We have our staff in the buildings day in and day out and they know them very well.
Finally, we try to manage costs is by keeping on top of the grants. The funding calls are usually in the spring, so we know they’re coming. The more solid your application is, the more attention you get from the Service Managers. So if we have something that we know we’re going to need to do, we’re going to try to get that project scoped and have quotes back before a grant application deadline. That gives us a solid submission. You tend to get something less than the requested total so you generally need to finance the rest from the reserve.
Q: What types of projects have you completed recently?
DH: All of the buildings now are between 30 and 40 years old, so we’ve been focusing a lot on the elevators. We’ve also done a lot of concrete and asphalt work since we want to prevent slips and falls, particularly in our seniors’ buildings.
In addition to this, we’re currently investigating whether we can intensify our 81-unit townhouse site.
Q: Is there any advantage to being a housing provider and a property manager?
DH: Undoubtedly. I would say the secret sauce for us in terms of how we are able to manage costs is that we are one of the few providers that has our own maintenance staff. Because of this, we have very direct control over certain costs — labor and materials. We can also move staff around to where they’re needed. And we can share things like office expenses between the two entities.
Q: How much do you contribute to your reserve nowadays?
DH: Stoney Creek is in the enviable position where the reserves have been built to the point so that the investment returns cover the bulk of our contribution target and revenues from the property management business provide us a financial buffer. We’re not writing cheques every month and hoping there are no emergencies.
Q: Do you have any words of advice to other non-profits?
Getting your operating model in order is key. It will enable you to have a surplus to drive your reserve balances up. From there, you’ll start to drive income on those balances and that helps you to be more sustainable in the future.
Beyond that, think about what your asset allocation is with Encasa and don’t be fearful of being in the Equity Fund — unless you need the money in the short term. There is a perception that bond funds are safe. But in some cases, they are not risk-free reward, they are reward-free risk. Trust that the Fund Manager understands the importance of these reserves to non-profit housing providers and that you know they will manage the risk accordingly.
You Asked Us: What’s the Difference Between Worldsource and Encasa?
What’s the difference between Worldsource and Encasa? Who does what? Why are there two organizations instead of just one? These are among the most frequent questions our Investment Funds Advisors get when they’re visiting housing providers.
The distinction is a little more complicated than we’d like – but it grows out of the financial regulations under which investment funds are governed and the goals of our program.
Program Goals and History
The Social Housing Investment Program (as it is officially known) grew out of an Auditor General report from 1999. The report called for the pooling of provider capital reserves and the use of professional management to support the financial sustainability of the housing providers. SHSC Financial Inc. (SHSCFI), the predecessor to Encasa, was created to do this. As a sector-based organization, SHSCFI would be focused on investment returns for providers rather than generating profits for itself; it could control costs for providers via the ‘power of the group;’ and it could reinforce the linkage between capital reserves, projects and planning.
However, it wasn’t viable for SHSCFI to be an end-to-end investment firm – due to regulatory complexity, it would take years to build and would be extremely costly. Creating a sector organization that would leverage partnerships was deemed to be more cost-effective and viable. From 2002 to 2013, SHSCFI worked with the same set of administrative partners to deliver the Social Housing Investment Program, focusing almost exclusively on investors mandated by the Social Housing Reform Act, 2000 to participate in the program.
However in 2014, SHSCFI expanded its ownership to include new community housing organizations across Canada – to increase the benefits of the “power of the group” in an effort to reduce costs to investors. It also changed its name to Encasa. Today, we are owned by both the Housing Services Corporation and the Cooperative Housing Federation of Canada.
In 2018, we also made changes to the partnerships associated with the administration of the program to provide a more seamless customer experience and deliver operational efficiencies.
Today these interlocking partnerships look like this:
Our partners help deliver our investment services: the sub-advisers, Genus and Addenda help select the investments underlying the mutual funds; and National Bank Financial and Natcan Trust (both wholly owned subsidiaries of National Bank of Canada) serve important roles in safeguarding investor assets. In short, there is a lot happening to ensure regulatory compliance and investor protection. Although it’s unlikely that you’ll interact with Genus, Addenda or the National Bank, you’ll certainly see their names on the our various regulatory documents, like our simplified prospectus (after the Table of Contents).
Encasa and Worldsource
You will mostly see the Worldsource logo on things, alongside the Encasa logo. If you use the investor portal, you’ll notice that it’s branded as Worldsource. And if you get a business card from one of our advisors, you’ll see that it has Worldsource on one side and Encasa on the other. That’s because, our advisors are agents of Worldsource and employees of Encasa. Encasa’s senior leadership team and board members, however, are not associated with Worldsource ; most have a professional background in community housing.
Why is this the case? To put it simply, Encasa is the program administrator and the fund manager of the Encasa Funds, responsible for the investment funds while Worldsource is the principal distributor, and is responsible for overseeing the distribution of the Encasa Funds and managing the client-facing aspects of the investment process. As such, Encasa sets the strategic direction while Worldsource advisors deliver it as per regulatory requirements.
As you can see from the Venn diagram above, where the work of Encasa and Worldsource overlap most relates to marketing and communications. But basically, anything that can be construed as investment advice or specific to the funds must either be branded as Worldsource alone, or in some cases, co-branded. It’s on this front that people tend to get confused.
Hopefully this explanation helps. If you have more questions (about this or anything else), please feel free to contact us. We’re always happy to help.
Tariff Standoff Continues: Navigating the Impact of the Trade War on Your Investments
Last month, Encasa hosted a webinar discussing the potential impact of US tariffs on your investments. Since then, a series of trade policy announcements have been followed by reversals and exemptions, further intensifying market uncertainty. Below we recap some of the questions that came up during the webinar and update on where the situation stands now.
Where does the trade war stand today?
The current trade war has been anything but straightforward. Q1 brought a series of tariff announcements by the new US administration. A 10% tariff on US imports from China was announced on February 4th. On March 4th, broad tariffs of 25% on steel and aluminum took effect, and 25% tariffs on other goods from Canada and Mexico were announced, although those were modified to provide for 10% tariffs on energy and potash, and tariffs were later postponed on goods covered by the Canada-US-Mexico Trade Agreement. Further tariff announcements followed the end of the quarter, with punitive tariffs on most countries around the world announced and then lowered or delayed.
What has been the impact on the Canadian economy so far?
Although considerable uncertainty remains about the US administration’s tariff policies, markets’ initial reactions show that investors are worried about their potential impacts. A University of Michigan preliminary survey report for March showed a pronounced fall in consumer confidence, and a rise in inflation expectations to near-COVID levels.
On March 12, The Bank of Canada cut its policy interest rate by a quarter percentage point to 2.75 per cent noting trade and economic uncertainty. For an in-depth look at the impact on the market, see the Q1 2025 Economic and Market Commentary.
What is Encasa doing with the current fund mix to mitigate some of the challenges we are seeing?
Encasa’s bond funds are sub advised by Addenda Capital while the equity fund is sub-advised by Genus Capital. Our sub-advisers actively manage the funds – meaning they do the day-to-day buying and selling – while Encasa oversees and directs the overall strategy. During this period of economic uncertainty, Encasa has been in regular contact with both sub-advisers to ensure new developments are taken into account and any necessary changes are made in response.
In both cases, our direction has been to focus on risk management. Whereas last year, we felt comfortable taking a little more risk in order to generate better returns, we are now dialing that back given the current market volatility.
In terms of bonds that has meant bringing the funds in line with the overall markets in terms of interest rate risk and avoiding companies with more credit risk.
On the equity side, while the fund did very well the last year by focusing on technology and growth, we’ve been reducing the focus there. As of March, Genus made a drastic cut to the amount that is allocated to large US tech companies and reallocated some of that to European companies and Asia, which typically have a lower risk profiles.
How should I adjust my investment strategy given the market uncertainty?
It’s important to remember as investors that we don’t need to react to markets’ short-term moves. The key to success in investing is to make sure that our portfolios are aligned with our objectives, time horizon and risk tolerance. With a properly constructed portfolio, investors have the potential to succeed even if we go through some ups and downs in the market.
In this case, one size does not fit all. If you have any questions about your portfolio or want some advice on the right strategy for your organization, we can help.
Outreach at the 2025 Regeneration Forum
Thank you to everyone who stopped by the Encasa booth at February’s Regeneration Forum! We enjoyed connecting with many of you, putting faces to names and discussing investment priorities related to your capital plans.
We always value opportunities to touch base with our clients and having candid conversations about how Encasa can support your financial objectives. If we didn’t get a chance to speak during the event — or if you’d like to continue the conversation — don’t hesitate to reach out. We’re here to help.