Annual 2015 / Issue 11
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FEATURE:
What’s Next for Canada?
REALNET® Top 10 YTD* Apartment Transaction Details in the GTA, GCA and GVA & GTA New Homes Statistics
Top Transaction Report by Market 08-11
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Quebec Apartment Investment Conference February 9, 2016 Palais des congrès de Montréal
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Britton Smith: What Legends are Made Of 12
Demographics to Drive Apartment Demand 16
Canadian Apartment Investment Conference September 7, 2016 Metro Toronto Convention Centre
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CONTENTS 03 Why We’re All Here: To Move With the Times 04 U.S. Opportunity Abound 06 What’s Next for Canada?
08
REALNET® Top 10 YTD* Apartment Transaction Details in the GTA, GCA and GVA & GTA New Homes Statistics
12 Britton Smith: What Legends are Made Of 14 The Rule Is: Give the People What They Want, So are You Ready for the Change? 16 Demographics to Drive Apartment Demand
Why We’re All Here: to Move with the Times
Roberto Geremia, President Boardwalk REIT
Rob Kumer, Partner, Investments KingSett Capital
A lot is happening in the apartment market today and it affects Canadians in different ways, depending on geography. Whether you’re in the thick of Alberta’s volatility, Toronto’s demographic shifts or Vancouver’s aggressive price wars, it’s important to keep up with these developments. Multifamily in Canada is enjoying higher prices than 18 months ago. The 10 year bond is again toying with all-time lows and, as a result, demand for yield is substantially increasing. We have observed that while pricing seems thin, investors, owners and landlords are buying. There seems to be no shortage of money flooding the industry. But where are those opportunities? For example, is it still possible to make money buying a 40 year old apartment building, or is it better to buy new? As you make your way through this conference listening, mingling and learning, know that it’s an opportunity to be on the pulse of it all. This event promises to enlighten. Keep your ears and eyes open for answers to the latest burning questions: Where is the debt market headed? What services do new buildings offer today? What do the latest suite designs look like? What residents (boomers, millennials, new Canadians) want to live where?
Listen to the industry veterans who have owned apartment buildings for nearly half a century, and discover what they are thinking and doing today. Are they selling their old buildings and, if so, where are they investing the money? Also pay attention to the other key players — developers, for instance, who have built multi-residential properties in recent years. They are here to share what they’ve learned. Amid rising property taxes, decreasing wages and other inescapable factors, many of us need to concentrate our efforts on operating costs and controls — which are controllable — to drive bottom line and growth. In the next couple of years, the need for more effective and efficient operations will pose a challenge. Being a good operator will be key to success, and we expect the operating environment to get tougher. Everybody’s stock is trading at a substantially discounted asset value, an indication that many of us tend to be yield players rather than value-add players. Once a building is built, it tends to stay put; yet the economics, politics and demographics surrounding a property continue to shift and keep us all hopping. Stick around and learn how your industry peers are dealing with the latest round of changes. ¡ Michelle Morra-Carlisle
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U.S. Opportunity Abound Wary of repeating the credit crisis of 2008, many Americans are forgoing homeownership in favour of rental apartments, which is driving the country’s multifamily market into the best growth it has experienced in decades. “The homeownership rate, as of June 2016, is 63.4 per cent in the U.S., and that is the lowest level since 1967,” explains Starlight US president Evan Hirsh. “So, what you are seeing is
Evan Kirsh, President, Starlight US
really a fundamental change in the way Americans look at housing.” Ten to 15 years ago, the American dream was to own a home, he adds. Now, given all the issues that people had in the credit crisis in 2008, the multifamily sector has become a more attractive alternative — it is more affordable, maintenance-free, has high-quality accommodations and are built close to where people work, he says. Compared to Canada, higher cap rates and recent significant reduction in the unemployment rate has made the U.S. an appeal place to invest, he adds. “Usually, with strong job growth it means people looking for apartments. So, the demand has really outstripped supply in the last couple of years,” adds Hirsh. As with any multifamily marketplace, the drivers are population and job growth, as well as rent legislation, he says. “We try and buy in places where we think people want to live, so our focus has really been in 12 cities in the southern U.S. — the Sun Belt.”
The Experienced Lawyers You Can Count On Aird & Berlis LLP is actively engaged in all aspects of the rental housing industry. We can advise on everything from acquisitions, dispositions and financing to redevelopment, tax and regulatory matters. Rely on A&B to provide cost-effective and practical solutions to your multi-residential property issues. Robert Doumani Tom Halinski
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rdoumani@airdberlis.com
thalinski@airdberlis.com
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416.865.3060
416.865.7767
One of Starlight’s main focus areas has been in Raleigh-Durham County, an area in North Carolina that is ripe with blossoming growth due, in part, to the Research Triangle — an eightcounty region anchored by numerous universities, technology and finance sectors, and with a population of about two million. Graduates, therefore, come out of school earning decent incomes and typically turn to rental suites near work, making Starlight’s properties in the area “very successful.” Hirsh predicts rental growth will continue to increase, but will likely taper off as unemployment and supply rates level off. Homeownership, on the other hand, will continue to plummet, which will fuel the apartment-rental industry. ¡ Karen Petkau
airdberlis.com
4
Canadian Apartment Investment Report / September 2015
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As someone whose job is to analyze economic developments and their implications for North American markets — and who for 20 years has provided insight to bank officers, private sector advising clients, industry leaders, corporate boards, trade associations and governments on economic and financial issues — he offers a unique perspective for Canadians. Amid uncertainty about the dollar, the interest rate,
32.0 31.5
Toronto %
31.0 30.5 30.0 29.5 29.0 28.5 28.0
6
09 10 11 12 13 14
70
By Age
%
60 50
2009 2014
40 30 20
65+
55-64
Asked about Canada’s manufacturing 10 sector, Tal believes it will take time for it to recover the 20 percent capacity 0 lost in 2009-2010. Also, much of what we manufacture is exported to the U.S., where a stronger dollar has reduced demand for Canadian products — 150826FRPOlandlordAD_Layout 1 2015-08-26 11:56 AM Page 1 hence the slowdown in our supply chain opportunities and shipments. What’s needed, he suggests, is patience. “All this means is that we just need a little bit more time. I suggest that you will see the benefit of the dollar moving in 2016.” 45-54
Benjamin Tal wonders why the Canadian press is so concerned with whether or not the nation experienced a recession earlier this year. The Deputy Chief Economist, CIBC World Markets Inc. told us that “… it’s really not a recession in the pure sense of the term.”
In the energy market he predicts continued volatility for the next six months, a negative for a nation that remains an energy superpower. As a consequence, he says, the dollar will go down.
¡ Michelle Morra-Carlise
35-44
A world market expert contemplates the big picture.
Tal doubts that the Bank of Canada needs to cut interest rates, and he doubts that the industry needs lower rates. If the rate were cut further, he says, the net impact would be on the dollar. “I don’t think it would lead to a significant increase in credit generation or the housing market because the interest rate is very low to begin with,” he says. “My sense is that if it will trigger somewhere, it will trigger the subprime market where there is increasing sensitivity to interest rates — exactly what we don’t want to achieve.”
at the peak of home ownership,” he says. “The affordability crisis will lead to increased rental activity, and I do believe that purpose built is the next thing coming in the housing market. To what extent it competes or complements the condo market will determine the trajectory of those two markets in the next decade.”
25-34
Benjamin Tal, Deputy Chief Economist, CIBC World Markets Inc.
industry and the housing market, he shares his views…
18-25
What’s next for Canada?
Helping Rental Housing Providers and Industry Suppliers Across the Province
Regarding Canada’s housing market, Tal says we are “definitely overshooting” but cautions against predicting a very sudden collapse. “There is no question in my mind that when interest rates start rising, this market will be tested,” he says. “It will happen in many ways, probably starting with the condo market.” He expects the rental market will substitute home ownership. “I think at 70% we are basically
Contact a FRPO Representative Today 416-385-1100 or visit www.frpo.org
Canadian Apartment Investment Report / September 2015
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Rank
Municipality
Address
# of Units
$/Unit
Purchaser
1
York
255 Glenlake Ave.
750
$232,388
Canada Pension Plan Investment Board
2
Toronto
2100 Bloor St. W.
3
Toronto
50 Spadina Rd.
$85,000,000
257
$330,739
Chartwell REIT
M Burnett, CBRE Ltd.
$59,000,000
229
$257,642
Starlight Apartments
D Scenna, Incompro Realty
4
Mississauga
5
Toronto
2770 Aquitaine Av.
$52,300,000
180
$290,556
Homestead Land Holdings Ltd.
D Montressor, CBRE Ltd.
111 Carlton St.
$50,540,000
680
$74,324
KH Residence Inc.
6
B Stone, D Borotsik,CBRE Ltd.
North York
2175 Avenue Rd.
$47,000,000
260
$180,769
Starlight Apartments
7
Toronto
111 Lawton Blvd.
$46,000,000
152
$302,632
Akelius Fastigheter AB
D Montressor, CBRE Ltd.
8
North York
25 Fisherville Rd.
$42,775,000
214
$199,766
Starlight Apartments
A Paul, Stonebank Apartment Experts
9
Burlington
472 Brock Av.
$39,850,000
115
$346,522
Homestead Land Holdings Ltd.
10
Toronto
103 Avenue Rd.
$36,200,000
125
$289,600
Hollyburn Properties
2007
Total Price $104,574,797* *60%
2008
2009
2010
2011
Broker(s)
2012
B Hanna, Paracom Realty
2013
2014
2015
70,000
60,000
Units Under Construction/ Completed
Units Under Construction Yearly Completions
50,000
50,076
40,000
30,000
25,571
20,000
16,668
16,259
15,407
14,218
13,496
13,047
11,259
10,575
10,000
8
October
December
June
August
April
January February March April May June July August September October November December February
October
December
June
August
April
October
December January February March April May June July August September October November December February
June
August
April
October
December January February March April May June July August September October November December February
June
August
April
January February March April May June July August September October November December February
October
December
June
August
April
February
0
Canadian Apartment Investment Report / September 2015
900,000 Product Type Apartment Detached Semi Detached Townhouse
Avg. $
800,000
700,000
600,000
500,000
400,000 2011
2012
2013
2014
2015
35,000
30,000
24,683
Remaining Inventory
25,000
20,133 20,000
15,000
10,000
Product Type
5,000
4,550
High Rise Low Rise
0 2006
2008
2010
2012
2014
2016
9
Rank
Municipality
Address
Total Price
# of Units
$/Unit
Purchaser
1
Airdrie
100 Chinook Winds Pl. S.W.
$64,285,000
300
$214,283
Airdrie Place Ltd.
2
Calgary
100 Quarry Villas S.E.
$50,000,000
144
$347,222
Minto (The Laurier) Inc.
3
Airdrie
20 Kingsland Cl. S.E.
$41,000,000
192
$213,542
Skyline Apartment REIT
4
Calgary
4340 73rd St. N.W.
$5,350,000
27
$198,148
Ability Society of Alberta
5
Calgary
1815 16A St. S.W.
$3,710,000
24
$154,583
1493489 Alberta Ltd.
6
Calgary
2126 4th Av. N.W.
$2,000,000
12
$166,667
Korz Equity Corporation
M Fleming, Michael Fleming Realty Corporation
7
Calgary
4608 17th Av. N.W.
$1,730,000
6
$288,333
Ehmann and Sons Holdings Ltd.
R Le Bousquain, CIR Realty; S Throndson, Re/Max
8
Calgary
3511 15A St. S.W.
$1,600,000
6
$266,667
The Manor at Bankview Inc.
9
Calgary
3711 15th St. S.W.
$1,550,000
6
$258,333
The Manor at Bankview Inc.
10
Banff
410 Marten St.
$1,550,000
7
$221,429
1442781 Alberta Ltd.
Rank
Municipality
Address
Total Price $101,857,500*
# of Units
$/Unit
Purchaser
621
$328,043
Concert Properties Ltd.
Broker(s)
M Fleming, Michael Fleming Realty Corporation
K Faryna, P Shakotko Cascade Realty Services
Broker(s)
1
Vancouver
7051 Ash Cr.
2
Surrey
10700 150th St.
$33,650,000
331
$101,662
Mainstreet Equity Corp.
3
Langley
5100 203rd St.
$14,900,000
90
$165,556
Kelson Group
4
Vancouver
2121 Alma St.
$14,495,000
43
$337,093
E M V Holdings Corp.
5
Richmond
8251 Cook Rd.
$11,700,000
45
$260,000
1037724 B.C. Ltd.
B Goold, J Blair, Re/Max Bill Goold
6
Vancouver
1550 West 10th Ave.
$11,500,000
33
$348,485
1550 West 10th Holdings Ltd.
P Joubert, Marcus & Millichap Real Estate Investment Services; D Yau, K Cheng, Coldwell Banker Westburn
7
North Vancouver
140 West 17th St.
$11,300,000
45
$251,111
Prospero International Realty Inc.
M Goodman, D Goodman, HQ Real Estate Services
8
Vancouver
2225 Acadia Rd.
$10,700,000
18
$594,444
1028493 B.C. Ltd.
9
Coquitlam
1134 King Albert Ave.
$9,350,000
66
$141,667
Leader Victory Investment Co. Ltd.
L Chow, Amex Sunrich
10
Vancouver
1860 Nelson St.
$9,085,000
24
$378,542
Urban Pacific Holdings Ltd.
R Greer, C Wieser, A Payne, Avison Young
10
*50%
Canadian Apartment Investment Report / September 2015
11
Britton Smith: What Legends Are Made Of
Brit Smith, Founder, Homestead Land Holdings Limited “Leadership is partly inherited and partly trained and partly out of experience. I think I was lucky in all three aspects,” says the founder of Homestead Land Holdings Ltd. Smith came from a long line of bold go-getters. Both his parents left small towns in Manitoba to embark on a new life in Toronto: his father attended Trinity College and his mother, the Toronto Conservatory of Music. Upon graduation, his parents moved to Kingston, Ont., where his father practiced law, and they began a family. Smith was born in 1920, as the only son among three daughters. “I intended to be a professional soldier, so I graduated from the Royal Military College of Canada in 1940, and went overseas.” RMC trained Smith in leadership and tactical experience in commanding a troop in battle, which served him well in business, he says. “Leadership was very high on our agenda, and inspiring people to do things that were really beyond their means is the name of the game in combat,” he says. Stationed 12
‘’On one of my holidays from Law school, I bought a lot and designed a little eightplex, which a friend of mine built for me’’ - Britt Smith in England and France from 1940, until he returned home with severe wounds in November 1944, Smith won the Military Cross for bravery on the battlefield. “My father said, ‘well, if you are too badly wounded to stay in the army, why don’t you come and join me in the law practice.’ So, I went to Osgoode Hall Law School and when I graduated, I practiced in Kingston,” he adds. While he had a great job offer at a firm in Toronto, he favored living in Kingston, where his outdoors lifestyle peppered with hunting partridge and duck, sailing, playing tennis and riding horses were essential parts of his life. Smith’s career in real estate development began while attending Osgoode and living with wife Sally in a tiny basement apartment in Toronto. “We thought it was laid out very poorly, so I used to draw sketches (on what I thought it should look like) and then on one of my holidays from law school, I bought a lot and designed a little eightplex residential apartment, which a friend of mine built for me,” explains Smith. Upon graduation, the he began practicing law in Kingston, while being the property manager of the eight-unit apartment building. “It was a hobby I had: I kept building apartment complexes of everincreasing size, and kept that up for the next 65 years,” he says. Smith formed Homestead in 1954 after becoming a City of Kingston alderman. Today, the company has more than 25,000 apartments across Ontario. Smith, who still doesn’t identify himself as being a developer, says the secret to his success can easily be attributed to Homestead’s many employees. “The company was always lucky in getting the right people to work for it, so we had wonderful success with our staff — we have some of the best people in the industry, if I do say so,” he proudly says, which allowed him to continue practicing law and enjoying Ontario’s great outdoors.
Real estate development continues to be the best investment anyone can make, Smith says. “It is a very lucrative form of investment; the return is good and the risks are small and, in those days, the competition was very thin. Unfortunately, everybody is in it now.” This increased competition into the multiresidential marketplace will continue to rise, he predicts, while cap rates will decline even further. “We have now reached the point where new construction is cheaper than buying what is already on the market,” he says. “So as long as you can acquire the right site, because location is terribly important, than you are better off to build then you are to buy.” To make it, new developers need specialized knowledge of the construction industry, in addition to making bold moves.“ I can think, now, of things that were offered to me that I could have bought and didn’t,” he says. “So, if I was going to do it all over again, I would be a little bolder; gamble a little more.” When asked if he had words of wisdom for young developers trying to make their mark in the business, he is quick to say: “Get a good architect, a good structural engineer, a good designer, look for welllocated building sites and cultivate your banks — spread your money around so you have many people to whom you are indebted…..and start as big as you can.” If fortune favours the bold, then it’s no wonder Britton Smith has a treasure chest of accomplishments. ¡ Karen Petkau
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Canadian Apartment Investment Report / September 2015
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STUDENT HOUSING PROJECT 1 Columbia Street West | Waterloo, Ontario Rendering (left) to building development as of May 2015 (right).
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www.centurionapartmentreit.com
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The Rule is: Give The People What They Want, So Are You Ready For The Change?
Ross Moore, Canada Research, Director, CBRE Limited Call it a glacial change, but the multifamily real estate market is changing the homeownership environment and developers need to bring their A game if they are going to weather the flip-flop, says CBRE Canada director of research Ross Moore. In a market where numbers rarely fluctuate, the multifamily sector has undergone a drastic shift, says Moore, as potential new-home buyers are turning to apartmentstyle dwellings in favour of single-family because of their affordability and close proximity to workplaces. “We are looking at $2.2 billion in apartment trades (so far) this year, which is about 26 per cent over the same period over a year ago,” he says. “So, I think it is quite reasonable for us to end the year north of $4.0 billion in apartment trades. “Our rule of thumb is once you get over $3.0-$3.5 billion, that is a very active year.” This heightened activity will result in record years for
14
“This is the exact opposite of what it was in the early 2000s, where 130,000 single-family starts and multi-family was down 75 to 78,000.” - Ross Moore Director of research, CBRE Canada many cities across the country, especially in Vancouver, Toronto and Edmonton. While Calgary’s market won’t break any numbers, it will be good, nonetheless, adds Moore, particularly when you compare it to office and retail. “The demand for retail space and office space might be off, but people still need somewhere to live.” Trophy trades — more than $100 million changes hands — are on the rise, he says, and new construction is expected to be in the $20.0 to $40.0 million range, resulting in “a very active multifamily marketplace.” “If you look at the four major markets — Vancouver, Calgary, Montreal and Toronto — immigration numbers are relatively high and they are a key support for the apartment market,” says Moore. Recordhigh home prices are also causing many to turn to renting rather than owning, he adds. While number of 20- to 34-year-olds into the rental marketplace will continue to increase in the next five to 15 years, the surprisingly growing demographic is the empty-nesters, which will change the way condos and rental units are developed and upgraded, since retirees want more space and higher quality features. This aging demographic will grow by 50 per cent in the next 10 to 15 years, so developers need to be ready for the shift, he says. And where will these renters live? Downtown, of course. In the past five years, the Toronto suburban population has grown by seven per cent, compared to its urban population’s 22.1 per cent increase, says Moore. This trend, while not so dramatic, is being mirrored in Vancouver — 6.6 per cent hike in burbs compared to an 11.6 per cent hike in the core — and Montreal — 5.5 per cent rise in burbs compared to 11.6 per cent rise downtown. “Even in
Calgary, we are seeing the shift,” says Moore. “Most people think of Calgary as a suburban city, but while the suburbs have grown by 15.2 per cent but in downtown, it has grown by 17.7 per cent.” All this growth in demand for rental properties has caused a flip-flop in the multifamily vs. single-family dwelling numbers: 110,000 multi-dwelling starts so far this year compared to 82,000 to 83,000 single-family. “This is the exact opposite of what it was in the early 2000s, where 130,000 single-family starts and multi-family was down 75 to 78,000,” says Moore. Coming up with the supply for this new growth is hampered by the fact that 75 per cent of all apartments in Canada are at least 35 years old, he adds. Operating expenses on some of these older buildings are pushing 45 per cent, he says, so owners have to make the tough choice to either keep putting good money into aging, depreciating buildings, invest in improvements or sell and start from scratch. “We are at a point where the (new construction) ratio is one third single-dwelling to two-thirds multipledwelling,” says Moore, especially in new condo development. “What is interesting is, for every one of the major cities in Canada, we’ve actually seen construction up on a year-over-year basis,” he says. “Yes, we are building more, but we are starting from such a low base, it would be an exaggeration to say we have a development boom underway.” Investors into the multifamily marketplace used to be dominated by private investors, families and high wealth individuals. Now, however, Real Estate Investment Trusts and pension funds are carving out a piece of the rental pie, which was relatively unheard of 20 years ago in Canada. This growing diverse buyer pool has caused pricing to become “very, very aggressive,” and with relatively easy financing, this may be THE sector to put your investment coins. ¡ Karen Petkau
Canadian Apartment Investment Report / September 2015
WE TAKE THE HASSLE OUT OF LAUNDRY ROOMS. Unfortunately not the sorting, separating or folding though.
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Demographics to drive apartment demand “By 2025, Canada’s aging Boomer cohort is projected to grow by 2.4 million — 57 per cent of the country’s projected 4.2 million population growth,” McCormack reported.
Tom McCormack, President, Strategic Projections Inc.
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Residential real estate investors take note: Preference for apartment accommodation is highest among the bookend generations: 20-to-34-yearolds and those 75 and older. “We will need more apartments during the coming decade,” Strategic Projections’ president suggested. “However, retirees tend to stay in their properties as long as they can from a financial and health perspective. So we will still need more single and detached properties than high-rise apartments.” “By 2025, Canada’s aging Boomer cohort is projected to grow by 2.4 million — 57 per cent of the country’s projected 4.2 million population growth,” McCormack reported. The senior surge will therefore far more than offset a 317,000 drop at the other end of the adult age spectrum, the 20-to-24-year-olds. While that’s good news for owners of existing properties, the type of apartment structure most in demand will likely shift, since senior renters like high-rise apartment towers more than their younger counterparts. “There will be strong growth prospects for apartments of five or more storeys,” he predicted. With most Boomers likely to call it quits by 2031, their impending retirement heralds a shortage of working-age adults just over the horizon. The only way to fill the gap is immigration, McCormack observed. “We won’t have enough Canadian youth to fill all the jobs on market during the coming decade,” he warned. He expects international and internal migration to take up the slack, with migrants adding nearly 350,000 people a year to Canada’s population by 2025, up from just over 200,000 today. In contrast, he expects the natural increase in the population to drop from about 125,000 a year today to about 75,000 in 2025.
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Currently, about 31 per cent of Canadian householders rent, rather than own. Quebec and British Columbia have the highest proportion of apartment dwellers, and Quebecers’
Canadian Apartment Investment Report / September 2015
Canada’s Population by Age and Gender in 2015 and 2025 90+
85-89
Females
Males
80-84 75-79 70-74
2025
2015
65-69 60-64 55-59 50-54 45-49 40-44 35-39 30-34 25-29
20-24 15-19 10-14 05-09 00-04 -1,500,000
-1,000,000
-500,000
0
500,000
1,000,000
1,500,000
preference for renting has long stood in contrast to the rest of Canada, where home ownership is the norm. In terms of age, McCormack’s research shows that those under-35 are by far the most likely to rent. From 35 onward, the rate of home ownership increases steadily until retirement, then gradually eases off again toward the Canadian mean. Though the rental rate never returns to the levels of the 25-to-35 level, according to his figures the sheer size of the Boomer cohort is nonetheless poised to drive rental demand during the next ten years. The country’s largest cities — Montreal (134,000), Toronto (547,000) and Vancouver (129,000) — already have a substantial stock of high-rise apartment properties. In contrast, the two largest cities in Canada’s hithertoburgeoning oil-patch have a small fraction of those figures, with Calgary (29,000) slightly ahead of Edmonton (26,000) in that respect. The remainder of Western Canada, combined, has a total of 66,000 apartments of five or more stories — more than half of them (36,000) in Winnipeg — and Atlantic Canada has just 22,000 such properties, McCormack said. ¡ Robert Frank
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Canadian Apartment Investment Report / September 2015
Information To build on Canada’s Leading Annual Real Estate Conferences Take Advantage of Our Upcoming Events September 2015 RealLeasing
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Deal Profile: the concierge Deal snapshot:
First National acted as concierge for a deal that generated ample funds to help the seller address financial issues and earned the buyer $150,000 annually with zero cash in.
Client objective:
A First National client owned a building, but he was overleveraged. Concerned for his business and financial viability, the client was under pressure to sell the building for more than it was worth to save the rest of his portfolio. However, there was a high degree of vacancy in the building, and construction/refurbishment that had begun could not be completed.
The solution approach:
Seeing an opportunity to find the less-apparent value inherent in the deal, the First National team pursued a deep analysis on the property. The numbers told an interesting story. At the time of sale, the building was worth $5 million, yet after refurbishment, the team estimated its worth at $8 million.
Structuring the solution:
Another long-standing First National client saw the value of the deal and decided to move forward with the purchase. The plan was to renovate the building and wait for 12 months to fill the vacancy. Once the building was full, the buyer client would refinance the building with a long-term mortgage based on what the building was worth after the improvements. The buyer client ended up with a scenario where he was making $150,000 per year on the property with zero cash in.
Formula for success:
Lateral thinking enabled the First National team to “concierge� this deal, surfacing an opportunity to bring the seller and buyer together in an inventive way. The buyer would not have known about this deal had the First National team not brought it to him. And the seller had been trying to find a buyer for some time, with little luck. The other lenders that he approached were limited in their value mindset, only focusing on what the building was worth at the time of its sale.
The key idea:
Foresight played a critical role in getting this deal done right. By looking beyond what existed and seeing the potential future value, the First National team was able to help one client salvage his financial health, while another increased his net worth significantly. Once the opportunity was apparent, the First National team applied its strengths to see it through – consulting, prioritizing the relationship and delivering no matter what.
To learn more about how you can partner with First National on your commercial real estate opportunities, please contact us at 1.800.465.0039.
firstnational.ca Ontario Mortgage Brokerage License No. 10514