Canadian Apartment Investment Report 2015

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

Save the Date

Quebec Apartment Investment Conference February 9, 2016 Palais des congrès de Montréal

06

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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Edmonton

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Alberta

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Halifax

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* Sales Representative This disclaimer shall apply to CBRE Limited, Real Estate Brokerage, and to all other divisions of the Corporation (“CBRE”). The information set out herein, including, without limitation, any projections, images, opinions, assumptions and estimates obtained from third parties (the “Information”) has not been verified by CBRE, and CBRE does not represent, warrant or guarantee the accuracy, correctness and completeness of the Information. CBRE does not accept or assume any responsibility or liability, direct or consequential, for the Information or the recipient’s reliance upon the Information. The recipient of the Information should take such steps as the recipient may deem necessary to verify the Information prior to placing any reliance upon the Information. The Information may change and any property described in the Information may be withdrawn from the market at any time without notice or obligation to the recipient from CBRE. CBRE and the CBRE logo are the service marks of CBRE Limited and/or its affiliated or related companies in other countries. All other marks displayed on this document are the property of their respective owners. All Rights Reserved.

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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

Editor & Designer

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©2015 Informa Exhibitions Inc. Disclaimer: The views, opinions, positions or strategies expressed by the authors and those providing comments are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of Informa Canada.

3

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.

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Robert Doumani Tom Halinski

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416.865.3060

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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 disciplined visionaries with over $4.5 billion of assets under management, we consider ourselves the premier, full service, real estate asset manager in Canada and strive to deliver maximum returns to our stakeholders. We refuse to accept the status quo, constantly challenging ourselves and our third party property managers to deliver superior operating results and drive innovation within our industry.

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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

速

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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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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

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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.

ON THE BOARDS TORONTO

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16

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

17

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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

September 30, 2015 Metro Toronto Convention Centre, North Building

October 2015 Ottawa Real Estate Forum

October 8, 2015 Ottawa Conference & Event Centre

Montréal Real Estate Strategy & Leasing Conference October 15, 2015 Palais des congrès de Montréal

Vancouver Real Estate Strategy & Leasing Conference

October 20, 2015 Vancouver Convention Centre East

Calgary Real Estate Forum

October 27, 2015 Calgary TELUS Convention Centre

December 2015 Global Property Market

December 1, 2015 Metro Toronto Convention Centre, South Building

Toronto Real Estate Forum

December 2 - 3, 2015 Metro Toronto Convention Centre, South Building

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February 9, 2016 Palais des congrès de Montréal

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September 7, 2016 Metro Toronto Convention Centre, North Building For details on these conferences and to register online visit www.realestateforums.com Sponsorship and advertising opportunities available.

Contact Frank Scalisi: frank.scalisi@informacanada.com 416-512-3815

Canadian Apartment Investment Report

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19

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