The Official Blog of Richard Crenian

In efforts to spruce up its real estate portfolio, CAPREIT has said farewells to three Ottawa apartment sites in a $136 million deal

Canadian apartment REIT is continuing its efforts to remove aging ‘non-strategic’ assets from its real estate portfolio. Last week, it announced the sale of 50% non-managing interest in three condo properties in Ottawa, which consist of 1,150 units. For the apartments, CAPREIT would receive $136 million. According to the real estate company, the deal was set as the firm is shifting its focus and evaluating its existing portfolio.

Why is CAPREIT Upgrading Its Portfolio?

Curious to learn which sites were involved in the massive deal? According to news reports, the properties sold are the Wellington Towers at 1265 Wellington St, the Riverview Place Apartments at 180 Lees Ave, and the Alta Vista Towers at 1545 Alta Vista Dr. Reportedly, the properties built between 1969 and 1981 were requiring ongoing capital expenditure to improve their growth profiles. That is what prompted the company to sell them.

The company’s CEO, Mark Kenney, explains that the real estate firm is looking to turn its A-class portfolio into an A-plus. As per reports, the cap rate is in the mid-three per cent range. News sites have also noted that CAPREIT transferred $38.7 in existing mortgages to the new owner of the sites. 

Who the buyer is, however, isn’t publicly disclosed. Experts in the industry have revealed that all three properties CAPREIT had shared with Ottawa-based Paramount Properties, which is the responsible property manager.

The recent deal, however, isn’t surprising. CAPREIT has been publicly open about the intention of modernizing and upgrading its portfolio for more than a year. With their new strategy, the company would concentrate its efforts on selling more affordable, value-add properties. 

As the CEO noted, these types of sites usually get higher pricing compared to traditional core assets. In the current situation, the private market is more aggressive. This provides an opportunity for CAPREIT to buy back their shares with an impressive discount, invest in new construction rental, or even pay down debt.

How New-construction Assets Can Be Beneficial

So what does the future hold for CAPREIT? As Kenny notes, we shouldn’t expect their strategy to change any time soon. The company is expected to trim its portfolio even more. In the near future, CAPREIT plans to sell other non-core properties for the same reasons it sold the three Ottawa apartment sites. There are many risks involved with older properties, and, as the CEO explains, there’s also added pressure from government regulation.

Among the biggest current challenges are the rent controls in numerous Canadian provinces. Unfortunately, it makes keeping up with inflationary costs almost impossible. Building revenues aren’t enough to cover the expenses. By selling the more affordable value-add properties, CAPREIT is trying to de-risk the investment.

Of course, selling existing assets and buying back shares will allow CAPREIT to venture into new areas. With this strategy, the trust well can focus on new construction investments. The company’s CEO emphasizes that the new direction would allow CAPREIT to contribute to Canada’s housing crisis. 

New properties are a good thing for owners – they provide an opportunity for them to continue charging market rents. Investing in these kinds of properties means there’s less control to worry about in provinces like Ontario.

CAPREIT’s upcoming plans

When it comes to future plans, CAPREIT’s CEO revealed that the company isn’t planning to concentrate its efforts on developing its own projects. Instead, the firm will be looking into other investment options. Currently, CAPREIT’s main intention is to sell entitled land opportunities, not build on them. The company hopes to provide Canada with new rental accommodations.

About CAPREIT

The reason why CAPREIT’s plans matter is the fact it’s Canada’s largest publicly traded apartment REIT. It is estimated that the company owns around 65 000 residential apartment suites, townhomes and housing communities all around the country. What’s more, the real estate firm also has sites in the Netherlands.

End notes

Capreit’s decision to sell a stake in its three Ottawa apartment sites is one of the most impressive deals we’ve seen recently. This is yet another example that showcases that even though we are in a shifting market, it doesn’t mean all hope should be lost. 

Whenever the market is changing, new opportunities arise – you just have to be open to seeing them. We’re excited to follow CAPREIT’s journey. Hopefully, it will bring more life to the market and provide more rental accommodations, especially because real estate experts predict that multi-family rental properties will remain strong in 2023. 

Although home prices have declined in most areas of the country, rent prices are only expected to grow. The biggest increase will be seen in Vancouver and Toronto – Canada’s most expensive markets.

Richard Crenian

Founder & President, ReDev Properties

Richard Crenian is the Founder and President of ReDev Properties. Ltd, a private real estate asset management company with its head office in Toronto. ReDev Properties is engaged in the development, acquisition, ownership and management of retail and mixed-use income properties predominantly located in Western Canada and Ontario. To learn more about Richard please visit www.richardcrenian.ca

Hamilton is undergoing a long-awaited transformation, which will make Steeltown an alluring alternative to Toronto’s expensive market

The beginning of the year is an excellent time to start planning your investments. If you’re considering joining the real estate market, we’d like to introduce you to Hamilton – currently one of the safest investment opportunities in Canada. 

Offering more availability and affordability, Steeltown is home to numerous biotech, agricultural, financial, and automotive giants and is sure to grow its potential even more in the future. In this article, we’ll take you through Hamilton’s amazing offerings and explain why it’s the perfect place to buy a home or invest in commercial properties.

Convenient Location

Rising interest rates and construction costs have influenced the number of sales throughout Canada. Hamilton is no exception. Still, many experts believe that the city’s market will be better positioned to get through the tough times quicker and less painfully. Steeltown’s excellent location, of course, plays in its favour. 

The city is positioned at the westernmost edge of Lake Ontario, which means its residents are close to nature while still having all the benefits of city life. Since Hamilton is close to the US border, it attracts people doing business in the States.

Impressive development plans

According to the United Nations, Hamilton’s population is estimated to grow by 50 000 in the next five years. Consequently, the demand for housing and commercial real estate will increase too. To accommodate the newcomers, developers will have to offer new housing. Many plans are already in the making.

An impressive example is The Design District – the first of its kind in Hamilton. The new project will be strategically placed in the city’s main transportation hub. The 150 million redevelopment project plans to transform the West Harbour area into a wonderful pedestrian community. Hamilton is growing bigger and better by the day, still, it remains more affordable than Toronto.

Business At Its Heart

Hamilton is a city that’s all about business. Already now, it’s regarded as one of Canada’s most thriving tech hubs. Since it has the fastest growth rate (for mid-sized cities) for start-up companies, Steeltown is certain to gain even more traction in the future. Of course, the fact Hamilton has the highest average wages for tech workers in Canada is impressive too.

Growing Economy

Although Hamilton was long known as a manufacturing city, now it can pride itself on a well-diversified economy in a number of sectors. Entertainment, health care, education, and technology – these are just a few examples. With Hamilton’s fast growth, it’s no wonder its population is expected to increase over the next years.

Reducing Unemployment Rate

Recent reports show that the local economy is moving in a positive direction. Since January 2022, the unemployment rates have fallen. In the current market, the largest shares of job opportunities are provided in sales, business, and finance. Thanks to the lower unemployment rate, Hamilton’s residents should be better prepared for the high inflation.

Nature Enthusiasts’ Paradise

There’s another reason why Hamilton is becoming the ‘it’ place to invest. It is a paradise for nature enthusiasts. The city has more than 120 waterfalls and countless nature trails. In Steeltown, you’ll also find Hamilton Mountain, which is atop the Niagara Escarpment.

Is Now a Good Time to Invest in Hamilton’s Real Estate?

For the last few months, Canadian housing markets have gone through a steep downturn. This has largely been driven by the Bank of Canada’s spikes in interest rates. Some reports (TD Bank) suggest that in 2023 home prices will drop as much as 20-25%. But don’t let the numbers discourage you! 

Buyers who have the means can make use of the current state of the market and buy properties for a lower price. In fact, investing in real estate is a good way to beat inflation and boost your wealth in the long run. Housing is always in demand – regardless of the crisis. 

In 2023, it’s more important than ever to have a proper strategy. Despite the prices going down, they are still high, even for investors, so any decision you make should be well-thought.

End notes

Over the years, Hamilton has grown incredibly and is now considered one of the most alluring alternatives to Toronto. Whether you’re considering investing in commercial or residential real estate properties, it’s a place that’s becoming better by the day. Hamilton really does tick all the boxes for a good investment.

While experts believe the Bank of Canada will likely increase its rates even more, the future is looking bright for commercial property investors. This may not be a year for rolling the dice, but with low-risk strategies, you have nothing to worry about. To stay up to date with all the latest news in Canada’s real estate market, make sure to follow our blog.

Richard Crenian

Founder & President, ReDev Properties

Richard Crenian is the Founder and President of ReDev Properties. Ltd, a private real estate asset management company with its head office in Toronto. ReDev Properties is engaged in the development, acquisition, ownership and management of retail and mixed-use income properties predominantly located in Western Canada and Ontario. To learn more about Richard please visit www.richardcrenian.ca

The suburban construction pipeline continued to be carried forward, currently boasting more than half a million sq. ft. of office space under construction. 

Commercial real estate firm CBRE says for the second quarter in a row, the country’s suburban office vacancy level was lower than the rate seen for downtown regions.

The firm says the national suburban office vacancy rate was 16 per cent in its most recent quarter, while the national downtown office vacancy sat at 16.9 per cent.

During the second quarter, seven out of 10 Canadian markets recorded tightening suburban vacancy, most often in larger magnitudes than were seen downtown.

Positive Shift in Market Does Not Necessarily Mean a Recovery

The suburban GTA office market recorded roughly 457,000 sq. ft. of positive net absorption over the quarter. This marks the first instance since Q1 2020 that net absorption has been overall positive. These encouraging results were primarily driven by the Markham North & Richmond Hill submarket in the East, and the Airport Corporate Center submarket in the West, where 123,000 sq. ft. and 185,000 sq. ft. of positive net absorption were recorded, respectively.

As the flight-to-quality trend seen throughout various markets in previous quarters continues, 60.2% of the overall net absorption in the market was also accounted for by Class A space. While this quarter’s uptick in leasing activity is encouraging and might signal a start of recovery from the effects of the pandemic, current economic uncertainty amidst a looming recession is likely to deter occupiers’ confidence in the market for a little while longer.

Suburban Construction Activity

Development in the suburban office market is slowly gaining traction. The total space under construction in the market has more than doubled year-over-year, with 675,000 sq. ft. currently in progress. The East market leads construction activity, with an estimated 473,000 sq. ft. of Class A office space in the pipeline. Metrus, who is currently developing the largest of the four eastern sites, continues construction of The Crosstown Place at 844 Don Mills Road. The 265,000 sq. ft. office tower has approximately 55.0% of the original space still available, as the anchor tenant Celestica, had already pre-leased the top 3 floors. Construction at 60 Mobile Drive continues as well, with 76.0% of the 124,000 sq. ft. redevelopment already pre-leased to it’s anchor tenant OSSTF. 

Veering to the North market, G Group Developments is currently constructing the third largest office project across the suburban market and has already broken ground late last year. The 10-story mixed-use office tower is located at 5250 Yonge Street and is set to add an additional 119,000 sq. ft. of office space to the market, and another 80,000 sq. ft. of retail below. The West market is trailing slightly behind the North and East in terms of the size of projects under construction. However, it is the only suburban market to see new supply this year and is still expected to receive an additional 83,000 sq. ft. of new supply over the next two quarters.

SUMMARY

Despite uncertainty about future office demand — combined with a near-term economic slowdown, rising financing and construction costs, and labour shortages no developments have paused construction and landlords remain committed and optimistic.

Building a sustainable future is a collective responsibility. When it comes to Commercial Real Estate (CRE), it’s more urgent than ever to discover new ways to decrease climate risk and move towards a more environmentally-aware future. We are rapidly shifting our way of thinking from ‘bigger and better buildings’ to ‘sustainable and eco-friendly properties’, so it’s wise to get on board quickly!

The commercial real estate industry has completely embraced the potential of high-tech efforts to improve tenant occupancy and the overall resident experience. Whether it’s reading real-time energy data that is being used to monitor areas of wasted power or tracking occupancy rates on different floors, sustainable smart-tech buildings optimize energy distribution. When you have collected the data, you will be able to solve specific eco problems that may not have had a viable solution in the past.

How are sustainable solutions and the CRE sector interconnected?

In this day and age, building environmentally-conscious properties and investing in CRE go hand in hand. Commercial properties have a significant impact on carbon emissions and energy consumption. Whether you are a long-term CRE investor, a tenant in a large condominium building or leading a construction company, we are all responsible for taking care of our planet for future generations.

Investing in ways to reduce carbon emissions will be less of an option and more of a requirement. Greener practices will only bring advantages to us and our planet, and hopping on the sustainable (eco-friendly) train will undoubtedly build a better financial portfolio, as you will be reducing costs as well.