Phantom building Toronto’s 8 Cumberland and JAC Condos.

Source Real Estate News Exchange. Click here to read a full story

After 7-year break, Silverberg builds Début condos in Barrie

Developer Gary Silverberg plans to build the Début condos, a two-tower development in downtown Barrie, Ont.

Gary Silverberg is selective about the projects he develops, so Début in Barrie is his first since Toronto’s ART Condos was completed in 2013.

“What I really enjoy doing is finding emerging neighbourhoods,” Silverberg told RENX. “This was the first one since ART Condos that really resonated to the degree that I wanted to go back to work.”

Début will have two 33-storey towers, making it Barrie’s tallest high-rise condo, with the first building having 272 units. There will be a mix of one-, two-, three- and four-bedroom units ranging in size from 444 to 1,600 square feet and in price from $365,000 to $1.3 million.

The base of the complex at the corner of Dunlop and Mary streets will feature curated shops and a pedestrian arcade serving as the gateway to the Lake Simcoe/Kempenfelt Bay waterfront, marina, Centennial Beach, farmers’ market and public transit.

Début’s second tower will likely have between 200 and 260 units. Silverberg said a “top international hotel chain” is working with him and was interested in the site, but the COVID-19 pandemic has affected its ability to make decisions on moving forward.

“If they take a portion of the building, there will be less units,” said Silverberg. “We’re just very happy with the amount of interest we have in a hotel-friendly concept.”

Sales for Début launched on Aug. 20 and Silverberg said the early reception has been very positive. Occupancy is being targeted for four years from now.

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Début condos design and location

Oleson Worland Architects, Scott Shields Architects and Johnson Chou are responsible for Début’s design, which will maximize views of the waterfront and feature flexible spaces that allow for multiple uses, such as an in-suite gym that changes to a guest room, den or office.

Début should appeal to a variety of buyers, including investors, first-timers and downsizers who will live there full-time, as well as those seeking a second residence.

They can all take advantage of the area’s boating, fishing, canoeing, biking, hiking. golf, ice-fishing, snowshoeing and skiing opportunities.

Barrie is located about a 45-minute drive north of Toronto. Début is to be constructed just a few minutes from both Highway 400 and a GO train station, which connect the city of just over 150,000 residents to the Greater Toronto Area.

Silverberg acquired the 1.25-acre site two years ago from a private owner for an undisclosed price. He took it through the rezoning process immediately, since there was “pretty derelict retail” on the property and he saw great potential in what it could become.

“I think we bought at the right time because of the recognition of the transformation of downtown Barrie into something special,” said Silverberg. He noted the arrival of power centres, Walmarts and Costcos “devastated downtowns and they changed the culture of retail.

“Now there’s a transformation” of those downtowns, he added.

Gary Silverberg’s background

The Début condo towers in downtown Barrie will feature a shared podium with ground-floor retail and commercial space. (Courtesy Barrie Waterfront Developments)

Début is being funded by Silverberg and what he called a small group of investors, as well as typical bank financing.

“We’re very well-heeled,” he said.

Silverberg is a visual artist who also has more than 40 years of real estate experience, which he outlined this way:

“I started off as an agent and did sales for housebuilders and was in the residential business for a couple of years before I went into commercial. I was the first outside tenant rep for retail and restaurants that I know of in Canada.

“We did tenant representation for Hard Rock Café, Shopsy’s, The Pickle Barrel, Lick’s Home Burgers & Ice Cream, and a bunch of names you’ve never heard before.

“When Toys “R” Us came to Canada, we put together a concept centre for them. I did farmers’ markets’ concepts and all sorts of stuff, and from there I got into development and have done everything from master-planned communities, high-rise condos, retail, industrial and office buildings.”

Toronto’s ART Condos — an 11-storey, 152-unit mid-rise at Dovercourt Road and Sudbury Street, just south of Queen Street West — was the first development Silverberg took the lead on via Triangle West Developments, a company he created.

He has similarly formed Barrie Waterfront Developments to build Début.

There are no other developments in Silverberg’s current future plans, as he expects to focus on Début until its completion.

“I’m not a mass production builder just trying to come up with another project because that’s my job. I come up with projects when I think a neighbourhood is on the verge and has pent-up opportunity and pent-up equity that hasn’t been recognized.

“It may take me 10 years to find another neighbourhood like this or Queen West.”

Brantford city council approves sale of Arrowdale golf course despite neighbourhood opposition.

Brantford city council has approved the sale of the Arrowdale golf course with the intention of using the money for affordable housing.

But it made the decision with a judicial review at its doorstep and with residents raising signs of protest outside of an empty city hall.

“It felt like it was just this big, echoing symbol of how the city council has been treating us,” said Elisabeth Chernichenko, who has lived in Brantford for most of her life and was out there protesting.

Elite M.D Developments offered $14 million for the near 32 acres of property that the city decided to sell in December.

Council voted eight to three to accept the amount — which was $1 million under the asking price — on Tuesday night.

Another 17 acres of property that were part of the course is being reserved for a community park.

Mayor Kevin Davis says he understands and respects those who disagree with the sale.

“I want people to understand that this, like all decisions of the council, was thoughtfully informed, and genuinely made in the best interest of the community as a whole,” he said in a media release.

Councilors have voted eight to three through each step of moving toward selling the lands.

Residents previously spoke to CBC News about their concern of losing the green space and a nine-hole course that is popular among seniors, new golfers, and in the winter, toboggoners.

Their concern about how council came to the decision was so strong that an application for judicial review, filed by Veronica Martisius and Ronald Heaslip, became part of the picture.

A letter to the mayor and councillors in early June called their decision-making process “misleading” and “rushed” and said it disregarded Indigenous rights.

Martisius confirmed that it’s been accepted by a Toronto Divisional Court, and the parties are in the process of fixing a hearing date.

In the streamed meeting, Richard Carpenter, who has been a councilor for Ward 4 where the course lies for 25 years, said the loss made it a “terribly sad day” for him.

He and other councilors acknowledged that there could have been better communication with residents, with Ward 5 councilor Brian Van Tilborg, who voted against the sale, giving council an ‘F.’ Councilors also said the issue has been dividing the community.

Chernichenko disagreed, saying people just want their voices heard. Martisius said the review is about transparency.

“Why we’re pursuing this judicial review is because we are concerned about the integrity and accountability of municipal decision-making in Brantford,” Martisius said.

A sticky moment during the meeting prompted the city solicitor to say that if it was inappropriate for council to pass a bylaw on the matter, they would’ve heard from her.

The group dubbed ‘Friends of Arrowdale’ dates back to when the course’s fate was debated, and saved, in 2016. But this came with a promise from the city not to sell and to invest in a clubhouse, which never panned out.

So when the city says it will use the funds toward affordable housing, Chernichenko said it’s hard to believe, especially when elections can mean new councilors put in place.

“We’re not willing to take them at their word anymore,” she said, adding that she can’t recall a time when people in Brantford have pushed back so hard.

While no one discounts a need for affordable housing, she said, she doesn’t believe there’s been substantial planning on where or when this housing will be built.

“There are places to develop, there are other options that the [city] can take to raise money for affordable housing, but the selling of Arrowdale —  and connecting that issue —  is a complete farce,” she said.

At the meeting, Ward 4 councilor Cheryl Antoski said everyone she’s spoken with agrees with needing affordable housing, but felt council didn’t look at other options enough.

She reminded council that the loss of the green space comes in a neighborhood that “doesn’t have a lot.”

Carpenter said he understood residents’ frustration, and even acknowledged his own, but maintained that “the money will go for affordable housing…that’s just the truth of the matter.”

“You’re feeling hurt, and you’re angry, I’m sure. But we gotta move forward and we must concentrate on bringing our community together,” he said.

Sale will fund 140 households, city says

In a media release, the city says the money will fund three buildings for 140 households. Another 80 to 90 over the next 10 years, it said, will be funded by annual property taxes paid by private development on the land.

Previously, the city said the sale would help fund 470 units of affordable housing, with government funding, non-profit partnerships, tax revenues, and “creative financial planning” contributing for the rest.

Its housing plan says there is an urgent need to develop 845 affordable units in the next 10 years, with a waiting list that is 1,700 households long. Mayor Davis says council will have to be innovative to address the issue.

These details were also reported in a video released by the city last week, following an in-camera special council meeting.

Martisius says this is how residents discovered the sale was going through, because the video came out before the public vote. Then the city agenda, with approval of the sale on the docket, was posted.

“Many people in the community were gobsmacked by this development,” Martisius said.

Davis followed with an almost seven-minute video on his Facebook page, where he spoke about the sale and how the decision was made with those struggling in mind.

“I think we’re all committed to doing the greatest good for the greatest number of people,” he said at the meeting.

Arrowdale, open since 1927, is set to close at the end of the season.

The company whose offer was selected already has development plans in Brantford, including a 10-storey condominium building in the south-west, residential properties off of Brickett St., and condos by the old train station on Main St.

Friends of Arrowdale will hold a protest this weekend again, with people socially distancing around the course. It’ll run while a golf tournament raises money alongside a Go Fund Me that helps with legal expenses incurred during their fight.

CAPREIT buys SW Ontario apartments, expects more deals.

The purchase of two Southwestern Ontario apartment properties for $50 million is likely just the first of a series of acquisitions in the coming months for Canadian Apartment Properties REIT (CAPREIT), its CEO says.

“There is a very robust volume of transactions in the marketplace right now,” Mark Kenney told RENX. “You will see very, very high deal flow in Q3 and Q4.”

CAPREIT (CAR-UN-T) announced Tuesday it has waived conditions and agreed to purchase a two-property portfolio in London and Sarnia. The two sites comprise 301 apartments and townhomes and occupancy is 98.3 per cent, with only five vacant suites in the portfolio.

Kenney said the properties closely fit the profile CAPREIT is currently seeking: “Well-maintained, with excellent value-add opportunity, in markets we are familiar with, where we are growing our presence.”

The Sarnia, London properties

The Sarnia acquisition comprises 1202 Pontiac Court (59 apartments); 1270 Pontiac Court (75 apartments plus one commercial tenant); and 1215–1273 Pontiac Court (60 townhomes). The structures are a 10-storey apartment building, a three-storey apartment building and the townhomes, totalling 194 residences.

The cluster is located in a low-density residential neighbourhood close to schools, parks, public transit and highways. Amenities include park-like landscaped grounds and a seasonal swimming pool.

The other acquisition is 492 Springbank Drive, a six-storey apartment building in Southwest London with 107 bachelor, one- and two-bedroom suites.

Located within a short walk of the Thames River, the property is close to a shopping mall, public gardens and other amenities, as well as local transport and major thoroughfares.

Closing is expected on or before Sept. 21.

Kenney was unable to name the vendor due to provisions in the sale agreement, but RENX has confirmed the properties were previously owned by Homestead Land Holdings Ltd.

Kingston-based Homestead also sold another portfolio of five Hamilton and London properties this week to InterRent in a transaction valued at $170.7 million (see InterRent to acquire Hamilton, London apartment portfolio).

CAPREIT says it will fund its acquisition via a combination of cash and cash equivalents, and will subsequently partially finance the buildings with new CMHC-insured mortgages.

CAPREIT sees “pent-up supply” of apartments

Kenney said the economic shutdown during the early stages of the pandemic in Canada caused a pause in the market. Now, the fallout could be accelerating transactions in the apartment sector.

“As the economy opens up, we’re all opening up in terms of opportunity. So, there is pent-up supply coming to market,” he explained.

“On top of that, I think there is real deep concern about where our government might be going with taxation, as well as changes to CMHC’s financing policy.

“While that doesn’t affect us – we have a portfolio – the smaller private ownership groups are just saying, ‘This is getting unsuitable.’ It suits the large aggregators, but not the smaller privates.”

With uncertainty on the horizon, Kenney said CAPREIT has slightly tweaked the types of properties it is seeking to acquire.

“Our conviction to value-add properties is heightened,” he said. “What I mean by that is when we are buying properties for 50 per cent of replacement costs, the rents are 50-per-cent-of-replacement-cost rents. So, buying properties in that sub-$2 market (per square foot) is very safe in a changing economy.

“Buying properties that are all at market rent clearly gives you market rent exposure, which could be negative in a volatile economy. We really like the sub-$2 market rent investment pieces.”

As a well-known value-add investor, such properties give CAPREIT plenty of flexibility. It can maintain the properties at status quo to keep rents lower, or improve the units and seek higher rents.

Busy 2020 already for CAPREIT

CAPREIT has already has an active year in several of its major Canadian markets.

A week ago it purchased The Sterling, a new, 88-unit apartment building in Halifax for $22.4 million. That added on to a major February deal in Halifax, when it closed on the acquisition of eight properties (1,503 apartments), doubling its holdings in the Nova Scotia capital with a $391-million investment.

In June, CAPREIT announced it was buying out the operating leases on eight Toronto apartment properties for $123 million.

It also purchased a newly constructed, 16-storey Montreal-area property in the municipality of Brossard for $43.5 million. The year-old building contains 112 apartments.

“We’re just excited that as each day goes by, we’re getting back to business,” Kenney concluded. “It’ll be a very active year for CAPREIT. We’re very optimistic that opportunities will come our way.”

About CAPREIT

CAPREIT is one of Canada’s largest real estate investment trusts. It owns approximately 56,700 suites and sites, including townhomes and manufactured housing, in Canada and indirectly through its investment in ERES, approximately 5,600 suites in the Netherlands.

CAPREIT manages approximately 60,800 of its owned suites in Canada and the Netherlands, and approximately 3,800 suites in Ireland.

Source Real Estate News Exchange. Click here to read a full story

Businesses were desperate for a rent-relief program. Governments rushed to deliver them one. What went wrong?

As early as mid-March, senior federal officials began communicating with businesses in the form of a 30-minute daily call, held at 11 a.m. ET. Initially on those calls, the government heard directly from eighty large businesses and associations, representing business owners across industries. Attendees have since grown into the thousands. One official in finance recalls hearing “just a chorus of businesses and restaurants that were raising the rent issue”; they spoke “very, very passionately,” says another. (The Logic has agreed not to name several of the government officials quoted in this story as they are not authorized to speak publicly.)Sinopoli was on those calls. He along with two others formed a group called Save Hospitality, a movement to save the hotel and food industry, which has seen the most severe job cuts. For this industry, Sinpoli says, paying rent was equivalent to “unfairly draining our bank account to put into landlords’.”

This group found allies in Michael Smith and Jon Shell, who founded Save Small Business, which in the early days of the pandemic released a petition making similar asks for rent relief; it had 20,000 signatories in a week. (It now has more than 38,000 members.) Together, the two groups learned how to speak with one voice, while pursuing a three-pronged approach: call everybody, try everything, make lots of noise.

“It was a period of throwing hand grenades,” says Shell, managing director and partner at Social Capital Partners. The group didn’t have any prior experience working with provincial or federal governments — a liability in one sense, but also an asset. “Because we didn’t care what our relationships were like with these people afterwards, we were willing to write 10,000 letters to a chief of staff.”

According to one federal official, the noise “just kept getting louder and louder,” eventually forcing Ottawa to do something. But what was that something? The political will to respond was quickly evident, but this was a jurisdictional no-man’s land: rent regulation falls under provincial jurisdiction. Beyond “shaming landlords and trying to get them to the table” to talk about it, Ottawa’s hands were tied.“It felt like there wasn’t enough creative thinking going into policy creation, and that if we didn’t come up with stuff on our own, maybe it wouldn’t happen,” Sinopoli says of the response. Smith and Shell agreed, and proposed a counter-solution to the government: a grant program for landlords that would cover their rent so tenants didn’t have to pay. “We didn’t think it was the best answer, but it was the best we could come up with,” Smith says.

As an example, they offered Australia, whose government announced a countrywide six-month hold on commercial evictions on March 29, and established a “mandatory code of conduct” for landlords and their small- and medium-sized enterprise tenants. Australian banks also offered mortgage payment deferrals to landlords on the condition they not evict their tenants.

Federal officials say the main problem in implementing this proposal was getting buy-in from provinces. For any rent-relief program to be effective, a complementary commercial eviction ban had to be in place, and that was at the discretion of provincial governments. One federal official says that, for the first month of the pandemic, then-finance Minister Bill Morneau was reportedly “continually pressing” premiers across the country in his weekly call. Small-business groups began their own efforts lobbying city and provincial officials for a ban. Many provinces did come through with slightly differing temporary commercial eviction bans — including Nova Scotia, New Brunswick, Manitoba, Saskatchewan, B.C., Ontario and Alberta — though they expire this summer, and extensions have not been announced. Quebec, P.E.I. and Newfoundland and Labrador did not impose a commercial eviction ban.

“We’re a conservative government. We usually prefer a hands-off approach,” Tanya Fir, Alberta’s economic development minister, told The Logic. “We wanted to find that right balance between introducing legislation we have to, but not introducing unnecessary legislation, and in this case, (a commercial eviction ban) was definitely warranted and necessary … because the CECRA program had gaps.”For one thing, CECRA was voluntary (landlords had to opt in) and had — according to many — very strict criteria: small businesses were eligible only if their revenue had dropped at least 70 per cent in April, May and June; had annual revenue of less than $20 million; and paid up to $50,000 in monthly gross rent. Fir says those requirements excluded many small businesses that were still hurting. Her government looked to what other provinces were doing and introduced “the best Alberta fit” — going further than CECRA in making rent relief accessible: Alberta’s eviction ban applied to commercial tenants who had lost more than 25 per cent decline in revenue; were forced to close due to public health orders; or qualified for rent relief, but their landlords had opted not to apply.

Ontario announced its ban in June, and has since implemented a retroactive ban on evictions to May 1 and through to August 31. Getting to that policy announcement was complicated. Small-business advocates with whom The Logic spoke found that some staffers and ministers chose a cautious, wait-and-see approach behind the scenes, even as Premier Doug Ford pleaded with and at times even threatened landlords in his daily press conferences. The Logic asked several Ontario officials for comment multiple times and was not granted an interview. Small Business Minister Prabmeet Sarkaria sent a statement saying he believes the province and the country’s “rapid response”—which he says were developed after he raised small-business concerns with his federal counterpart Mary Ng — “will prove to have been critical to the recovery of Main Street across our province.”

Michael Wiebe, a Vancouver city councillor and small-business owner who pushed B.C. to implement a commercial eviction ban, says the groups delivered rapid, strong data with “clean and simple asks” that helped elected officials “move mountains compared to what they would normally do in such short periods of time.”On paper, CECRA should have been a functional program that made an impact. The problem was that a significant party was missing from the room when it was being put together: landlords.

It is easy to think of the big, rich, corporate landlord when considering rent relief, but many who spoke to The Logic point out they are small mom-and-pop businesses themselves, who needed revenue to survive. Most suddenly felt the pressure mount, as the burden to provide relief to other small businesses seemed to rest entirely on them. The pandemic created a stand-off between them and small-business tenants, and some felt they were viewed as an obstacle in achieving rent relief.

Things did not get easier after the program was launched. CECRA is “brutally complicated and the criteria is constantly changing,” says Michael Brooks, the CEO of RealPAC, a national industry association that represents the real property sector. For any relief to be given, landlords have to file a massive pile of paperwork: signed attestations from tenants, a legally binding rent reduction agreement with each impacted tenant, a forgivable loan agreement and more. Some amendments to the original requirements, according to landlords, have been minor: the documentation required, for example. Others are more complicated, like how to apply if you own multiple properties.

InterRent to acquire Hamilton, London apartment portfolio

30-Storey Residential Tower Proposed at Dufferin and Eglinton.

As work on the Crosstown LRT enters its final stretch ahead of its scheduled 2022 opening, developers continue to propose significant intensification along Eglinton Avenue. Proposed to climb 30 storeys beside the Crosstown’s Fairbank Station, a residential tower conceived by KingSett Capital and Quadrangle aims to capitalize on one of the largest transit expansions in Toronto history.

The site at 1801-1807 Eglinton Avenue West lies east of Dufferin Street and west of Northcliffe Boulevard and currently has two three-storey buildings hosting ground-level retail with residences above and to the rear. The property’s oblique southern edge follows the diagonal path of Vaughan Road.

Current site conditions, image retrieved from Google Street View

KingSett’s vision for the site, outlined in a rezoning application submitted in July, would replace the existing mixed-use buildings with a 284-unit tower featuring 176 m² of retail space and a 279 m² community hub and business innovation centre. The 22,630 m² development would rise to a height of 105.25 metres and include 168 one-bedroom units, 88 two-bedroom units, and 28 three-bedroom units. 47 of the total number of units would be rental replacement units.

Looking southeast to 1801 Eglinton Avenue West, image via submission to the City of Toronto

Eglinton Avenue would be fronted by a four-storey podium, stepping down to a single-storey podium at the southern end of the property along Vaughan. The volume steps back five metres at the fifth floor to give rise to the tower, while the built form at the rear cantilevers over part of a proposed second floor outdoor amenity space.

Looking south to 1801 Eglinton Avenue West, image via submission to the City of Toronto

The development includes a planned conveyance of a 105.4 m² strip of land abutting Eglinton to the City to enable the road’s widening and to facilitate streetscape improvements. Two privately-owned publicly-accessible spaces are proposed at the southeast and southwest corners of the site, providing access to the community hub via Vaughan Road.

North and east elevations, 1801 Eglinton Avenue West, image via submission to the City of Toronto

Vehicular access to loading and parking would also be provided from Vaughan Road. A three-level underground garage would contain 53 parking spaces, and a total of 285 bicycle spaces are proposed on the P1 level.

South and west elevations, 1801 Eglinton Avenue West, image via submission to the City of Toronto

An application for Site Plan Approval will be submitted at a later date.

Site plan, image via submission to the City of Toronto

Source Urban Toronto. Click here to read a full story

Infill Development Proposed at Scarborough Apartment Community.

Starlight Investments is proposing to redevelop one of its rental properties with the addition of three apartment buildings and a group of stacked townhouses to 65 through 99 Silver Springs Boulevard in northern Scarborough.

65-99 Silver Springs Boulevard, image via submission to the City of Toronto

The 4.04-hectare site is located between Birchmount Road and Kennedy Road on the north side of Finch Avenue East. It currently consists of nine 1970s-era rental buildings comprised of two nine-storey apartment towers at 65 and 75-85 Silver Springs Boulevard, and seven two-storey walk-up apartment buildings. The buildings are separated by extensive green space and surface parking.

Context map, image via submission to the City of Toronto

In plans submitted to the City this past July, Starlight outlines its vision for the property. Zoning By-law Amendment and Draft Plan of Subdivision applications call for the demolition of the low-rise apartment blocks and the retention of the nine-storey buildings, the dedication of a new public street, and the construction of three IBI Group-designed rental buildings of 6, 16, and 22 storeys. The development also contemplates the addition of three blocks of stacked back-to-back townhouses.

Subject site, image via submission to the City of Toronto

A total of 604 new rental units are proposed, 56 of which would be three-bedroom rental replacement units. The four-storey back-to-back townhouses would be organized in three separate blocks and contain a total of 54 units. The six-storey apartment building is proposed to house 132 units. The 16 and 22-storey towers would hold a respective 192 and 226 units.

65-99 Silver Springs Boulevard, image via submission to the City of Toronto

Over half of the proposed new units—316—would be one-bedroom floor plans. The development would also introduce 177 two-bedrooms, 57-three-bedrooms, and 54-three bedroom townhouse units to the property. These units are in addition to the existing 115 one-bedroom, 213 two-bedroom, and 36 three-bedroom homes that will be maintained as rental tenure for at least 20 years.

The new public street would divide the site into two portions, with the 16- and 22-storey buildings located on the west side of the street alongside the retained buildings.

65-99 Silver Springs Boulevard, north and west elevations of Tower A, image via submission to the City of Toronto

The development would contain 1,151 m² of indoor amenity spaces and 1,358 m² of outdoor amenity spaces across the three new standalone buildings. A 466 m² indoor amenity area is proposed on the ground floor of the 22-storey building next to a 894 m² outdoor space. The 16-storey building splits its 414 m² of indoor amenities on the ground and fifth floors, where 380 m² of outdoor amenities are also planned. The six-storey building will contain a 271 m² indoor amenity area and a 324 m² outdoor space on the ground floor.

There are currently 614 parking spaces on the property. The proposal would remove 36 surface parking spaces and add another 290 underground spaces. A total of 56 short-term and 444 long-term bicycle spaces are contemplated.

65-99 Silver Springs Boulevard, south and east elevations of Tower A, image via submission to the City of Toronto

Starlight plans to construct the development over three phases. The first phase involves the demolition of the four low-rise apartment blocks at 87, 89, 91 and 93 Silver Springs Boulevard. The construction of the 16-storey building would be completed in this first phase. The second phase would introduce the new road and the 22-storey building to the property. The third and final phase necessitates the demolition of the three low-rise blocks at 95, 97 and 99 Silver Springs Boulevard and the construction of the townhouses and the six-storey apartment block.

Source Urban Toronto. Click here to read a full story

GTA commercial real estate market experiences pause in second quarter.

Q2 2020 statistics – GTA investment transactions.

GTA commercial real estate market experiences pause in second quarter

The second quarter saw the resulting impact from the rapid spread of COVID-19 and mandatory lockdowns that began in mid-March. Working from home became the new normal, streets were quiet during what would have been rush hour, and real estate sales hit the pause button. In the first half of 2020, total investment volume dropped to $7.9 billion, down by 22% compared to the first half of 2019. Total investment volume in Q2 2020 totalled $3.8 billion, down by 37% compared to Q2 2019, and was the first time that quarterly totals fell below the $4 billion mark since Q1 2016. Transaction volume also decreased in the first quarter of 2020 to 403 transactions, down by 29% in comparison to the same quarter last year.  Impacts from the pandemic were reflected in the market most significantly in the month of May – registering only 106 transactions and an investment total of $471 million, which was a drop of 68% from May 2019.

The most active investments were in the industrial sector at nearly $1.7 billion. Although the industrial sector outperformed the other asset classes, this was largely due to the sizeable industrial portfolio acquired by Ontario Power Generation (OPG). The GTA component of the OPG portfolio represented 78% of the total industrial investment recorded in the second quarter. Likewise, the apartment sector was strong in comparison to other improved asset classes, with a Q2 investment total of nearly $310 million, largely attributed to the Flagship Property Ventures to Timbercreek portfolio which represented 46% of the total apartment investment in the second quarter. The land sectors (residential land, ICI land and residential lots) continued to be prominent amidst market uncertainty for a combined total of $1.3 billion, accounting for 34% of total investment volume. The sector that saw the biggest decrease in investment in the first half of 2020 was the office sector, falling 68% compared to the same period last year. The office sector also declined by 83% in Q2 2020 compared to Q2 2019. According to Q2 2020 results from Altus Group’s Investment Trends Survey, Toronto is still one of the top markets preferred by investors both domestically and on a global basis. Still, Q2 2020 saw the industrial and multi-residential asset classes gain momentum in the Toronto market compared to the previous quarter. Cap rates have risen slightly across asset classes except for industrial, as investors respond to pandemic-induced changes and continue to assess new risks in the market.

Notable transactions:

Halton Hills Generating Station, Halton Hills – Industrial
Not your typical industrial property, this 683-megawatt natural gas powered generating station is the largest transaction by sale price closing in the first half of 2020. Acquired by the Ontario Power Generation (OPG) for just over $750 million, this infrastructure asset was part of a 3-property power plant portfolio that was sold by TC Energy to OPG. Along with the Portlands Energy transaction in the City of Toronto ($578 million for a 50% interest) and a property in Napanee, this 3-asset portfolio sold for approximately $2.87 billion.

Flagship Property Ventures to Timbercreek Portfolio, City of Toronto – Apartment
This 9-property multi-residential portfolio spread across the City of Toronto was acquired by Timbercreek Asset Management for approximately $143.4 million. With properties among the portfolio ranging from 16 units all the way to 108 units, the sale price of this acquisition by Timbercreek makes up approximately 46% of the total investments made in the multi-residential asset class this quarter.

230 & 240 Richmond Street West, Old Toronto – Office
The largest office transaction seen in the second quarter was the 50% interest sale of 230 & 240 Richmond Street West acquired by Sun Life for $39.4 million. This 119,442 square foot multi-tenant property was fully occupied by WeWork as well as Ontario College of Art & Design (OCAD), the vendor in this transaction. With this acquisition, Sun Life now co-owns this property together with Hullmark who acquired their 50% interest in this asset in May 2015 for $17.5 million.

5040-5060 Spectrum Way, Mississauga – Office
This 5-storey multi-tenant building was the second largest office transaction from this quarter. The property was sold by GWL Realty Advisors and acquired by foreign investors for $33.8 million. The 114,505 square foot office complex was fully occupied by eight tenants at the time of sale with a weighted average lease term of approximately six years. The property offers re-development potential on the excess lands as the site is comprised of nearly 10 acres.

365 Queen Street West, Old Toronto – Retail
This 4-storey mixed-use building located in the heart of the trendy Queen West neighbourhood was the largest retail property sold in the second quarter. The building was acquired by Ergo Properties for $25 million. Built in 2015, the building contains approximately 15,000 square feet of above grade space. The vendor in this transaction originally assembled the lands between 2010 and 2011 for a total consideration of $7.8M prior to constructing the current property. At the time of sale, the building was fully occupied by Canopy Growth.

63-91 Montclair Avenue, Old Toronto – Residential Land
This $52 million acquisition by Parallax was the largest residential land transaction seen this quarter. The 0.809-acre site is currently comprised of 14 single-family detached homes and is located in the Forest Hill neighbourhood. Prior to this transaction, the purchaser acquired an adjacent parcel in 2019 for $2 million. The completed assembly by Parallax totals just over $54 million for approximately 0.857 acres of land. A re-zoning application was submitted at the end of June by the purchaser who seeks to construct a 23-storey, 634-unit residential condominium development. The development would have a total gross floor area of approximately 420,000 square feet.

With ongoing changes in the market due to the global pandemic, investment expectations for the time being have been myopic, creating a disconnect between vendors and purchasers regarding pricing. As seen in previous quarters, investors are still confident in the multi-residential and industrial sectors, as these two asset classes have been affected less by the current market conditions. Overall, demand for quality GTA real estate assets remains strong amid all of the uncertainty. With restrictions gradually lifting, and the construction industry recommencing, the third quarter could witness some return to normalcy in the GTA market.

Source Altus Group. Click here to read a full story

Q2 2020 was RioCan’s ‘most unusual quarter’.

Ed Sonshine called it “the most unusual quarter” of his 26 years as CEO of RioCan REIT. Q2 2020 will go down as one of the toughest financially for the trust, but both Sonshine and president/COO Jonathan Gitlin focused on restoring future value and growth during Wednesday’s financial results call with analysts.

RioCan (REI-UN-T) reported a $350.8-million Q2 loss mainly due to a 3.1 per cent fair value writedown on its assets, which knocked $452 million off the value of its retail-based portfolio. Hardest hit was the enclosed shopping malls segment, which took a 10.1 per cent fair value writedown.

“Let me state the obvious and say that this pandemic has had a major impact on these quarterly results. We are far from happy with them,” said Gitlin. “That said, we fundamentally do not feel that these results are in any way indicative of our long-term performance and underlying value.”

Sonshine elaborated by offering rare guidance for RioCan’s financial outlook for the remainder of 2020. Funds from operations were 35 cents per diluted unit in Q2 ($110 million, down from $145 million in Q1), as same-property NOI declined 10.8 per cent.

“We are quite confident that for the year RioCan will achieve FFO in the neighbourhood of $1.60-plus,” Sonshine predicted. “This number, while perhaps higher than some analysts expect, is also not satisfactory and we will certainly strive to do better.”

Sonshine said RioCan has factored abatements, deferrals and bad debt contingencies into that figure.

“The reason we are giving this guidance at this time is not only to counter some of the fear and anxiety that is clearly out there, but also to reassure our investors of our continued commitment and ability to maintain our current level of distributions.”

Pandemic effects on RioCan

Gitlin said Q2 rent collections, including agreed-upon deferrals and anticipated proceeds from the Canada Emergency Commercial Rent Assistance (CECRA) program for smaller tenants, add up to 87 per cent of RioCan’s total rent roll. Only 73 per cent had actually been collected, however.

“Basically the whole company, including myself and Jonathan, have been turned into rent collectors,” Sonshine said. They and other RioCan staff have been holding one-on-one meetings with tenants, working down from the largest to the smallest.

About 14 per cent of RioCan’s tenants qualify for CECRA. For the quarter, RioCan accrued a $19.1 million provision for rent abatements and potential bad debts, a figure it expects to decline in subsequent quarters.

“There is a positive trend in our cash collection,” Gitlin continued. “Eighty-five per cent of July’s rent has been collected in cash as of July 28. We expect this upward trajectory to accelerate as more businesses resume operations and our collections and negotiations continue with our smaller tenants.”

RioCan also holds $29 million in deposits and $5.3 million in letters of credit from its tenants, which could offset potential bad debts.

Diversification and development

On the plus side, both Gitlin and Sonshine discussed RioCan’s diversification and development program, as well as avenues to improve and solidify future revenue streams. The trust is in the midst of a massive program to unlock value at many of its existing retail sites through residential and commercial densification.

While about 90.5 per cent of its rental revenues still come from retail, that percentage has already shifted as the first developments have been completed. Residential now accounts for 1.7 per cent of its revenues and office for 7.8 per cent.

Another 840 of its 2,700 apartment units under development will begin renting during the next 12 months.

Including its residential and mixed-use projects, RioCan plans to spend about $400 million this year on development.

The company is also adjusting its retail mix and seeking new streams of commercial revenue. Necessity- and service-based retailers comprise about 75 per cent of RioCan’s retail revenues, with the hard-hit fashion sector at eight per cent.

“I expect that number to drop even further in the future,”  Gitlin said, noting that confirmed closures, so far, comprise 0.5 per cent of RioCan’s GLA.

Transitioning its commercial/retail

The REIT is also pursuing potential new, or expanded, commercial sectors. Chief among these is incorporating e-commerce and/or micro-fulfillment centres within its properties as retailers shift to online sales.

Sonshine said this includes partnering with technology companies to offer e-commerce solutions within its facilities and working with existing retailers to shift the configurations of their space.

“There’s a number of opportunities that we are considering and we’ve been approached by a number of companies as well,” Sonshine said.

“These are largely existing retailers looking to set up logistics or hubs in our well-located shopping centres, or taking part of their existing stores and converting (them) into that type of micro-fulfillment centres.”

He said one thing retailers have learned during the pandemic is having ready access to online customers is critical.

“Logistics and getting stuff delivered, and getting stuff into people’s homes has been an enormous problem for everybody. Many of our retailers have reached out to us and said, ‘Look you’ve got these great shopping centres, can you help us?’

“We have the space and the locations to really make a difference on the logistical side of the commerce business. That’s going to be one of our many focuses over the next couple of years.”

Another possibility is an expanded role in providing space for health care providers via community care centres.

“As space requirements within hospitals become more constrained, there has been a very palpable push to move many of the non-critical services offsite and our locations serve as ideal sites to host such services,” Sonshine said.

$302M in divestments under negotiation

Although transaction activity has slowed, RioCan is working on deals involving $302 million worth of its assets. It hopes to close on these ($220 million worth of income-producing assets, $82 million in development properties) during the next two quarters, Sonshine said.

While not getting into specifics, Sonshine said the majority are for partial interests because “they are some of our better assets.”

He called the buyer profiles “very interesting.” Among the groups RioCan is negotiating with are two “foreign entities” as well as Canadian institutional investors.

“It’s pretty mixed group, and we are seeing a lot of interest.”

Some other stats from RioCan’s Q2 financials:

* committed occupancy was at 96.4, down slightly from 96.8 per cent in Q1;

* the trust has about $1 billion in liquidity;

* debt to total assets was at 44.4 per cent, above its target of 38-42 per cent due to the writedowns;

* and RioCan holds $8.7B in unencumbered assets.

About RioCan REIT

RioCan is one of Canada’s largest real estate investment trusts, owning, operating and managing a portfolio of 221 properties with an aggregate net leasable area of approximately 38.6 million square feet.

Comprised mainly of retail assets in Canada’s six largest metro areas, the portfolio also includes office, residential rental and 15 development properties.

Source Real Estate News Exchange. Click here to read a full story