|Do post tension structures experience stigma?
|Has the City of Calgary over-assessed
buildings containing post tension cable construction by
not allowing for additional costs in three areas: 1) annual
inspection, 2) delay in due diligence for mortgage/sales,
|Do properties with extensive post tension
construction repair suffer from an additional real or
imagined loss in value, i.e. stigma? If there is a value
loss, does it occur before the repairs are undertaken,
after, or both. If this is so in one case, does the negative
influence of the stigma extend to all properties containing
post tension construction?
Rickard Realty Advisors Inc. have been involved in the
fair and equitable valuation of property for municipal
assessment for fifteen years, primarily in Western Canada.
Presentations are regularly made by Rickard Realty to
oversight committees, who in turn determine assessments
which distribute the cost of operating a municipality
equitably amongst property taxpayers. The following accumulated
research in this field will help property owners, managers,
and valuers recognize that in some circumstances found
in Calgary, there is loss in real estate value due to
the effects of stigma.
A phenomenon occurred in Calgary during the ten-year period
from 1975 to 1985 which has given rise to measuring the
impact of stigma on structures containing post tension
construction. The boom in Alberta, driven by record high
oil prices, put an unprecedented demand on the rapid construction
of new structures. Many of these buildings used a recently
developed, for the time, technique of Post Tension Construction
A simplified review of PTC systems shows high tension
cables pulled taught through hardened concrete, which
then helps prevent cracking and settlement. Cable failure
has unseen and unexpected harmful effects, ranging from
simple monitoring or deteriorating structural capacity
to building condemnation.
Calgary acquired more than average numbers of PTC structures
during this period, due to a number of factors. Architects,
using pre-manufactured PTC slabs could expect faster erection
times because of prompt delivery from a local plant. PTC
structures were known to be less expensive because fewer
posts and beams are required. They also provided greater
free span distances in parkades, making a designer’s
When, in hindsight, PTC installation techniques were found
to be inadequate, significant numbers of buildings experienced
extraordinary expenses for repair. It is understandable
that property owners sought to minimize the impact of
PTC related expenses by adopting various strategies. After
this initial stage, most repairs were put off unless they
were imperative. Monitoring became prominent. Canada Mortgage
and Housing Corporation called for annual testing and
maintenance programs on all high-rise condominiums.
When repair work was done, techniques varied from replacing
the cables to a floor reinforcement system. Each system
has its own drawbacks. Stringing new cables, ranging in
cost from $400 to $1000 each, does not guarantee the integrity
of the building unless it is part of a comprehensive cable
replacement program. Rather than all new cables, there
is the option of installing a new steel substructure at
rates between $20 and $25 per square foot. This extraordinary
measure is usually undertaken in conjunction with replacing
some cables, but can also be used together with grease
injection and cable drying techniques. A least cost solution
is usually used due to the impossibility of guaranteeing
the restoration results.
Since cables lay in an undulating manner and are not straight,
there is no guarantee that damage at one inspection hole
does or does not exist further down the length of the
cable. This fundamental flaw becomes paramount once the
moisture proofing has been violated. Air drying and grease
injection techniques are not guaranteed to stop corrosion.
Corrosion detection is therefore a hit and miss affair.
At this point all that is available is the ‘best
efforts’ of contractors and engineers. Contrast
this with the virtually unlimited guarantee that can be
offered for the structural integrity of a building constructed
with typical reinforced concrete construction methods.
While the actions of owners and managers of PTC structures
in minimising expense is understandable, it is inappropriate
to confuse deferred maintenance with value loss. Determining
the impact of any value loss is therefore squarely on
the shoulders of those involved in valuing the real estate.
This study, while not intended to quantify the amount
of value loss in any given structure, does explore the
various forms of value loss. Moreover, the study makes
abundantly clear that substantial evidence does exist
for the ongoing systematic reduction of value in some
A rule of convenience has developed regarding the treatment
of ‘cost to cure’ items, sometimes called
deficiencies, in valuing real estate. The rule begins
with establishing the value of a property independent
of any deficiencies, after which deductions are made for
irregularities. Assuming that the property under review
is in average condition, its value can be derived despite
any imperfections. This rule works well for situations
where the cost to cure is outside knowledge normally possessed
by real estate market place practitioners. This type of
situation may occur when valuing a contaminated property
or major structural defects in a building.
Turning to the survey of Calgary property mangers, 114
companies were contacted with a thorough questionnaire.
When the responses were tabulated, 87% of the 52 companies
that participated in the telephone interview were found
to have first hand or indirect experience with PTC structures.
The completed survey results are shown in the questionnaire
Notice that in Chart 1 only 13% of the respondents were
able to identify the magnitude of the issue in Western
Canada, (only 7 of the 52 respondents knew that there
were more than 300 PTC structures). In fact, the Calgary
Assessment Department reports that there are 400 PTC structures
in their jurisdiction. This construction system is still
popular throughout North America. It has, however, worked
better in dryer climates where there are fewer examples
of a loss in value due to cable corrosion and breakage.
Chart 2 is where the real impact of PTC, outside the cost
to cure items, comes to bear. Note that five separate
costs are identified. A consistent percentage of individuals
felt that both mortgage and insurance costs are higher
(23% and 52% respectively) for structures containing PTC.
In a similar vein, renovations were thought to be more
expensive by 75% of the respondents. Fifty-six (56) %
per cent of those answering said that monitoring for cable
breakage added a new expense. The costs varied depending
on the size and condition of the building, but ranged
from $500 to $5,000 annually.
One of the surprising discoveries was that only 8% of
respondents felt that it would take longer to rent space
that was affected by post tension construction. Seventy-nine
(79%) per cent said there would be no change in the time
it took to lease out space in a PTC building.
National companies are known to specify properties which
do not expose their employees to any risk. Breaking cables
and the interrupted service that results from PTC deficiencies
would be of concern to knowledgeable tenant’s agents.
It could be that the people surveyed in ‘A’
grade buildings were not knowledgeable in this area because
they are not responsible for leasing space. Further research
is appropriate with leasing managers to establish the
true impact of PTC on tenant preferences.
When thinking of acquiring or subsequently disposing of
a PTC property, it was found that almost half of the participants
agreed that this type of real estate was unique. The length
of time and cost to acquire a PTC structure was considered
to be greater by 65% of the respondents. Similarly, when
relinquishing this type of structure (given that all else
was equal), 48% of participants estimated that it would
take longer to sell. Almost half (46%) said that market
value would be negatively affected by the presence of
In the last set of questions, participants were asked
about the impact of PTC on the life cycle of a structure.
Twenty-five (25%) per cent said that PTC life span was
shorter than conventional construction, although only
a few had an opinion. Forty-six (46%) per cent said that
the original construction costs were less than cast in
place concrete with standard reinforcing steel bars. Demolition
was thought to cost more by 42% of respondents. To date,
however, there have been very few demolitions of PTC structures.
The issue of de-stressing the cables has obviously not
been adequately explained to property managers, as only
22 of 52 had an opinion.
This investigation asked several questions at the outset.
It can be said that, yes, there is a value loss due to
stigma in larger Calgary structures, built between 1975
and 1985. Since it is faulty construction that gives rise
to the value loss, that portion due to stigma is dependent
on the date when a restoration is discovered to be necessary,
and ultimately, the magnitude of the restoration. The
evidence of this extends to all structures containing
PTC. The exception occurs when a structure has had its
PTC tendons de-stressed by some type of alternative support
system. Knowledgeable investors are aware of the technological
improvements that have been made in the late 1980’s.
In summary, the reasons for a value loss due to post tension
construction failures in Calgary are numerous. Mortgage
and insurance costs are found to be higher than normal.
Renovations are more expensive. Monitoring costs are unique
to this type of construction. Getting into and out of
this type of real estate ownership is identified as more
expensive and time consuming. While construction costs
are lower going into a project, demolition is considered
to be higher. In addition, some felt that the life expectancy
of PTC structures was shorter. In the final analysis,
46% of the respondents felt that the market value of a
property would be negatively affected by the presence
of PTC. On average, the value loss is estimated to be
10% of the property’s market value.