Commercial landlords invest in quality to keep older buildings competitive

A cluster of office towers along Jasper Avenue was the commercial heart of Edmonton for a quarter of a century. But things have changed recently as new office towers are sprouting around Rogers Place, a few blocks to the north.

When major tenants moved to the newer buildings offering more amenities, some older Class A buildings ended up nearly vacant. In the core, vacancy rates were over 13 per cent before the pandemic and they now stand at around 18 per cent, with older A class buildings as high as 21 per cent.

As available space increases, we’re going to see landlords getting much more competitive to offer compelling rate structures but also investing in their buildings and lobbies.”— Jon Ramscar, national managing director at CBRE

“We’re seeing a flight to quality, to new products that have state-of-the-art HVAC and mechanical systems, larger floor plates and offer lifestyle and amenity-rich environments and social hubs,” says Mark Hartum, principal with Avison Young in Edmonton. To stay competitive, landlords of older buildings are heavily investing in renovations that add collaborative space.

Flight to quality has gained momentum in cities across Canada in the wake of the pandemic, as tenants want amenities that attract workers accustomed to working from home back to the office, says Jon Ramscar, CBRE national managing director based in Toronto.

With vacancy rates at historic lows prepandemic, he says, landlords had less incentive to make investments in fully leased buildings.

“But as available space increases, we’re going to see landlords getting much more competitive to offer compelling rate structures but also investing in their buildings and lobbies,” he explains.

“Ventilation and touch-free surfaces are big asks because of the pandemic and most quality buildings have upgraded their filtration and air handling and made access points and fixtures in washrooms touch-free in the past two years,” he says.

But now features as simple as coffee houses and bike-storage facilities for those who commute by bike have become significant differentiators as potential tenants consider an office move.

State-of-the-art technology is essential as tech companies are the drivers of office demand seeking out new Class A buildings across North America, he adds. That’s also increasing demand for buildings to consider environmental, social and governance factors to achieve net zero, which will have a huge impact on future investments.

“The market was so tight for space before the pandemic that everyone could lease space no matter what space you had,” says Scott Watson, managing partner, acquisitions and leasing for Crown Realty Partners, whose portfolio includes 70 office buildings in Toronto and Ottawa. “But today when vacancies are in the high teens in many markets, it’s way more challenging,”

With supply outstripping demand, even normally competitive Toronto is seeing double-digit vacancy rates, he says. “The average tenant looks at four spaces before they commit to an office building. And when you look at the financial core of Toronto, there’s a lot more than four buildings competing. It’s tougher to stand out, so you have to offer unique amenities to be attractive.”

Prebuilding suites is a way to get ahead of the curve, Mr. Watson says, as tenants want fully move-in-ready space. Crown has been building suites on spec in its buildings with efficient layouts and new finishes and app-enabled conference centres.

“We want our office experience to feel fresh and inviting from the moment you enter our building doors to the time you sit down at your workspace,” he adds.

In the past, Crown’s prebuilt suites were seldom larger than 3,000 square feet. But “recently we’ve been increasing those sizes; we have one in construction right now that’s a 21,000-square-foot full floor at a cost of about $1.2-million, in the hopes of attracting a tenant and competing with new spaces that are out there.”

Reinvestment in buildings to keep them competitive will be essential even as the office market recovers, Mr. Hartum says. “The alternative is to compete on price alone, which is not ideal [because] if landlords don’t achieve enough economic rent, the result will be less capital available to reinvest in the building and its systems.

“Long term, this is not a good solution, and forces tenants to shop around and continue to empty out these older buildings. That isn’t healthy for the market as a whole.”

Edmonton landlords have been inventive and invested in rebuilds that are attracting new tenants to vacated buildings, he notes. An example is the 22-storey 103 Street Centre near Jasper, built in 1980. It saw most of its space vacated when Enbridge decided to consolidate its offices in a new building.

To bounce back, AIMCo/Epic Investment Services did a rebuild of 103 Street Centre aimed at the growing tech community in Edmonton. The lobby and second floor were connected by a “social staircase,” with bleacher-like seating for people to sit and have conversations or work on a laptop, along with a flexible presentation space for more than 100 people on the main floor.

Other additions include a conference centre, meeting rooms, tenant lounges, a games room and a kitchen and dining area. It’s been so attractive to new tech clients that the vacancy rate plummeted from 95 per cent to just 22 per cent, “which is still high, but it really has been a substantial turnaround,” Mr. Hartum says.

In another building known as First and Jasper, managed by GWL Realty Advisors, Avison Young has been engaged to handle project management of the main floor of the 20-storey building on Jasper Avenue which housed retail tenants that were struggling.

The space was rebuilt into tenant-focused amenities, including a lobby refresh, fitness and wellness centre, conference and meeting centre, parcel storage and concierge desk, Mr. Hartum says. The building is also pet friendly, which isn’t common in Edmonton, he adds.

The intent is to continue adding new tenants similar to the tech companies that recently joined the building, including Google DeepMind which is opening its first AI research labs outside of Britain.

Leasing interest picked up significantly across Canada as lockdowns have ended, “but we’re still on hold waiting for a lot of large organizations to commit to their longer-term office plans, whether it be renewing leases, reducing their space needs or even increasing their footprint to accommodate new amenities for the employees or business expansion,” Mr. Ramscar says.

Tenants who may have put space up for sublease during the pandemic are now holding on to it waiting to see how quickly workers return to the office.

“Leasing activity is expected to increase throughout the remainder of the year as occupiers make decisions on their office space,” Mr. Ramscar says, “and we fully anticipate a continued focus on the flight to quality.”

Source The Globe And Mail. Click here to read a full story

Berkshire, Fiera JV to Build GTA’s Heart Lake Business Park

Berkshire Axis Development and Fiera Real Estate have broken ground on the 750,000-square-foot Heart Lake Business Park in Brampton, just north of Toronto.

The project is site-plan approved, with building permits in hand for four buildings so far, and all of the major structural construction materials have been secured.

A five-building speculative industrial development will be built in phases and is being marketed by Cushman & Wakefield’s Fraser Plant, Michael Yull and Rory MacNeil. The brokers are targeting e-commerce, general distribution, light manufacturing, life sciences and pharmaceutical sectors for the first phase.

“They will all be 40-feet clear,” Plant, Cushman & Wakefield’s senior vice-president of operations, told RENX. “Usually buildings of that size are 32 to 36.”

Leased buildings to be delivered in phases

The first phase of construction is underway at 10 Newkirk Ct. with a 316,452-square-foot building and 15 Newkirk Ct. with a structure totalling 105,896 square feet. The larger building will have 16 trailer parking spots away from its docks.

“For the large building, if you’re in the market between now and the next 12 months for 300,000 square feet in the GTA West, you really don’t have any options,” Cushman & Wakefield executive vice-president Michael Yull told RENX.

“All of the other buildings have been leased or are about to be leased. We have the market captive from that sense, so we’re anticipating a lot of interest.”

The smaller building will feature double-sided shipping, which is rare for a structure of that size and should help drive interest.

“The ownership group would prefer to see single tenancies,” Plant said. “That could change, depending on who shows up and what the covenant is, but we’re gearing to leasing these buildings out to single tenants.”

The larger building is expected to be delivered at the end of March 2023, while the smaller one should follow two months later.

The other three structures to be built and leased at Heart Lake Business Park will be approximately 109,000, 105,000 and 87,000 square feet, respectively.

“Due to the aggressive nature of the ownership group as well as their confidence in this location – and ‘pedal to the metal’ is their motto here – I would think delivery of Phase 2 would probably be toward the end of 2023,” Plant said.

Heart Lake Industrial Condominiums

There will also be 61,000- and 46,000-square-foot industrial condominium buildings, with a combined 26 units that range from around 3,500 to 5,500 square feet, as part of Heart Lake Business Park. They’ll have 28-foot clear heights and truck-level loading.

Berkshire Axis has been delivering industrial condos for 10 years and vice-president Craig Wagner told RENX interest in these units really started to pick up about five years ago.

“We were very excited to be able to carve out part of the site to deliver to the condo market,” said Wagner. “It has been, and currently is, a very strong market.“

Wagner said the Heart Lake Industrial Condominiums units are about 70 per cent sold and are being released to the market one or two units at a time, with a goal of being sold out when they’re ready to be delivered at the end of this year.

Good location and existing infrastructure

Heart Lake Business Park is located along the Highway 410 corridor with relatively easy access to all major 400-series highways. It’s within a 20-minute drive of Toronto Pearson Airport and CN’s Brampton and Vaughan intermodal sites.

The building at 10 Newkirk Ct. offers signage and visibility opportunities directly on Highway 410.

“The project is closely tucked-in to dense residential, so it has access to a large population base,” said Yull.

Berkshire Axis and Fiera Real Estate acquired the site in July 2021 for $91 million. The vendor was subdivision developer Emery Investments, a privately owned, Toronto-based real estate development and property management company that’s been operating for more than 50 years.

All of the roads for the subdivision are in place and all of its blocks are serviced.

“Emery is a very experienced subdivision developer,” said Wagner. “Once we got into our due diligence, we realized their group had lined everything up very well and there was going to be speed-to-market and speed-to-delivery.”

Berkshire Axis and Fiera’s partnership

Heart Lake Business Park is the seventh project in which Berkshire Axis and Fiera Real Estate are partners.

“It’s not that we have an exclusive relationship with each other, but we certainly have a great deal of respect for each other and a great deal of respect for our working relationship,” said Wagner. “So when the opportunity came around, it was an easy choice to go to Fiera.”

Toronto-headquartered Fiera Real Estate is wholly owned by Fiera Capital Corporation, a multi-product investment management firm with more than $174.4 billion of assets under management as of March 31.

Fiera Real Estate is an investment management company with offices in North America and Europe and more than 80 employees. It globally managed more than $7.6 billion of commercial real estate through a range of investment funds and accounts as of March 31.

Toronto-based Berkshire Axis has more than 25 years of experience in delivering industrial and residential projects across the Greater Toronto Area (GTA). It has completed more than 30 industrial projects over the last 10 years.

“We buy existing multi-tenanted industrial buildings that we convert to condos, we do new-build industrial condos, and we also have the build-to-suit and build-to-lease program that we’re running with Fiera,” said Wagner.

“All three of those, if we can find the right sites in the right locations with the right timing, should set us up to deliver substantial value for our investors.”

Those investors include a small group of high-net-worth individuals and institutional partners, according to Wagner.

Other recent Berkshire Axis activity

Berkshire Axis has several other projects in the GTA.

It acquired a 70-acre site at 12505 Heart Lake Rd. in Caledon early this year and is looking to rezone it from agricultural to industrial.

“I’m not 100 per cent sure what we plan to deliver there just yet, but we’re very excited about that site,” said Wagner.

Berkshire Axis recently signed its final lease deal at its project at 11050 Woodbine Ave. in Markham, which has 330,000- and 300,000-square-foot industrial buildings with 36-foot clear heights and drive-in and truck-level loading.

They’re both now fully pre-leased and are due to be completed in Q4 2022.

Berkshire Axis should launch sales for its first industrial condo project in Aurora — at Addison Hall Business Park, which was also developed by Emery Investments — in the next 60 days.

The company bought an 8.5-acre, fully serviced lot and will deliver 130,000 square feet of space in three condo buildings. Two will have truck-level doors and one with smaller units will have drive-in doors.

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

The Core is Calling Companies Back As Downtown Toronto Reawakens

Cities have always attracted the best and brightest — that’s how they became centres of technology, finance, arts, and culture. When brilliant minds bump into each other, it’s a particle accelerator of innovation.

But something is lost if everyone is Zooming through the day, working from bedrooms and basements. The pandemic threatened the greatness of cities with a great exodus — but even amid this migration, many are eager to get back in.

“Our stance is that there’s just so much happening downtown that, you know, the city can’t die — urbanism can’t die,” says Riel Sammy, partner of creative strategy at Channel 13, a specialized agency with a focus on branding. 

“People moved away and went further out, basically saying that the city is dead. But the city is coming back to life, companies are going back to office, retail is coming back.”

Pre-pandemic, Channel 13 kept traditional in-office business hours in a space in Vaughan — and the area was a good fit at that time, Sammy says. They pivoted to remote work like many other industries, picking up staff in Vancouver and Europe, but the agency is now ready for a big move: they’re taking a WeWork space downtown at 240 Richmond.

It’s the right fit for Channel 13, Sammy says — as creatives, they trade in ideas and culture, strategy and vision. Toronto’s core, he says, is both the inspiration and audience for such an industry.

“I think you need to see what’s going on in order to be part of the conversation, right?” Sammy says. “You can’t work in a vacuum and produce something that resonates, and is of the time — or is timeless. You need a point of reference to what has happened and what is happening. And that’s really the idea — we’ll be in the core of what’s going on.”

‘More to be inspired by’

Some of us are lucky enough to call our coworkers a “work family” — these are the people we spend half our time with, through good times and bad. Slacking GIFs to a colleague is amusing, but doesn’t replace some of the great communal traditions of great teams; it doesn’t create memories.

“We just recently did this before we got our office full-time,” Sammy says. “We had a collaborative team brainstorm, we worked through a couple of projects, and then close to the end of the day, we were able to just walk down Queen and get into a great restaurant. And we all shared a meal at the end of the day — together.”

Although Channel 13 lives and breathes in the digital realm, he adds, there’s something to be said for these strolls through the city’s great neighbourhoods.

“There’s just more to be inspired by, there [are] more people, there [are] all walks of life — and restaurants and retail [are] inspiring to us,” Sammy says. “Just a wide variety of things that we pull inspiration from. In my school days, in university, that’s what I would do — after a class I’d take a walk and that would clear my head, it would help ideas flow. I don’t think it’s as inspiring to have to jump into a car and sit in traffic to drive somewhere for 15 minutes to grab a bite to eat.”

‘Wow, it feels almost like how it used to’

Returning to the core brings people back to the services and shops that relied on this daily influx of customers — reviving local economies and keeping street life interesting and bright. It supports small business; no one likes a string of empty storefronts in their neighbourhood. It keeps the “sights and sounds” alive.

But remote work also brought unprecedented flexibility, the ability to hire global talent, and more hours in the day without a commute, Sammy points out. Channel 13’s new downtown arrangement will be a hybrid model for its staff, recognizing the “ebb and flow” of solo work and collaboration. 

Sammy’s optimistic for 2022; he thinks as more companies make similar moves, there will be a resurgence of energy and creativity in the core. Even with a “soft” opening ahead of their formal June move-in date, there have been pleasant surprises from Channel 13 staff.

“Funny enough, recently, a whole bunch of us just showed up to the office without it really being planned,” Sammy says. “It was like, wow, it feels almost like how it used to.”

“And we have a team member, she lived in Barrie when the pandemic happened. She moved further north and she loves the country, she loves being in nature. We thought, ‘she’s never going to come to the office downtown.’ And she came yesterday; just like, ‘Hey, I want to collaborate. I have work that I want to get people’s opinions on. I want to talk about it.’ And it was just exciting that she was back with the team — she came, she showed up. And so it’s cool to see that.”

Source Storeys. Click here to read a full story

Developers Move Forward With Speculative Industrial Project in GTA as Vacancy Rate Dips Below 1%

Almost 50 kilometres northwest of Toronto, developers broke ground this month on the first phase of what is expected to be five industrial buildings on a speculative basis, meaning without any tenants signed on, but renting the space is not expected to be an issue.

Fiera Real Estate and Berkshire Axis Development are building the multiphase industrial development in the Heart Lake Business Park in Brampton, Ontario. They bought the 43.7-acre site last year.

The plans seem like a good bet with the latest data from Cushman & Wakefield showing the Greater Toronto Area had a 0.7% vacancy rate in the first quarter.

Fraser Plant and Michael Yull, executive vice presidents with Cushman & Wakefield, brought the deal to the buyers last year.

“The sites were already defined on what you could build,” said Yull, who wouldn’t disclose the price the buyers paid, in an interview with CoStar News. “It was a very shovel-ready acquisition, probably the most shovel-ready acquisition of a development site in the GTA last year.”

The first phase of construction has begun at 10 Newkirk Court for a 316,452-square-foot building and at 15 Newkirk Court for a 105,896-square-foot structure. The first phase is expected to be completed in the first quarter of 2023.

“GTA industrial vacancy is less than 1%, making the region the second tightest industrial market in the Americas. What’s more, Heart Lake Business Park’s modern design and construction makes it ideal for a number of uses and types of tenants,” Kathy Black, senior vice president of development with Fiera Real Estate, said in a statement.

Leslie Marlowe, president and managing partner of Berkshire Axis, said the project would be his company’s largest industrial development in the GTA. He called the project one of Brampton’s last significant greenfield sites in a key Toronto market with strong highway access.

“With regulatory hurdles cleared and construction materials secured, our ability to deliver on schedule separates us from other GTA speculative projects in a market that absorbed a record 14 million square feet last year and only shows signs of accelerated demand,” said Marlowe in a statement.

Yull said it took years to get the project through the regulatory levels of government by the previous owner, but the vendor always planned to sell once it received various approvals.

Marketing of the first phase just rolled out in the past two weeks, and Yull’s view is that with no larger buildings in GTA West being completed in the next 12 months, it should result in a lot of interest.

“The building is positioned very well from that standpoint,” he said.

There is 23.8 million square feet of industrial space expected to be completed across Canada in 2022, according to Cushman & Wakefield.

“If all this new supply does indeed arrive this year, this would be the highest annual total of new supply that has arrived across Canada since 1989,” said the real estate company in its first-quarter report.

Yull said there are headwinds, including conflicts in Europe and rising rates, that could cause some tenants to pause on commitments, but the market is so tight in the GTA that it could take years for supply to catch up.

“If there were zero demand over the next five years, it would take five years to get back to a 5% vacancy rate,” Yull said.

While some landlords are reluctant to prelease in the industrial market with rising rents, these developers are ready for offers from tenants with strong credit.

“We are open for business now, and we will deal with tenants as they come,” said Yull, noting lease rates in Brampton for industrial real estate are heading toward $18 per square foot with rent escalations of 3% to 3.5% annually typical in contracts.

The clients, in this case, are looking for a 10-year deal, even though Yull said some landlords want shorter-term rates to take advantage of the rising rental environment.

“The 10-year deal is what most institutional landlords want,” said Yull.

Source CoStar. Click here to read a full story

Automotive Properties Locking Down Debt To Deal With Rising Rates

Slowing automobile sales are not expected to affect Canada’s largest publicly traded automotive real estate investment trust, according to management.

DesRosiers Automotive Consultants Inc. has reported new light vehicle sales were down 12.7% in the first quarter of this year compared to a year earlier due to supply chain constraints. The decline comes after Statistics Canada had said new automobile sales were up 6.8% in 2021 versus 2020.

“The fundamentals of the automobile industry remain strong,” Milton Lamb, chief executive of the REIT, said on a conference call with analysts. “We believe the supply constraints will continue into the foreseeable but not have a significant impact on our tenant’s ability to pay rent.”

Jenny Ma, an analyst with BMO Capitals Markets, noted in a report that the REIT has a “front-loaded mortgage maturity profile” with 57.2% of mortgages maturing in 2022 and 2023.

“[The REIT] is thus exposed to near-term rising interest rates,” said Ma.

In April, Canada’s central bank increased its overnight lending rate by 50 basis points, and most of the country’s major economists have predicted the Bank of Canada will continue to raise rates in 2022.

Lamb said the REIT is monitoring debt markets and has mitigated risk.

“We have consistently completed longer swaps or mortgages to insulate our existing debt from future rate increases,” he said on the call.

On April 13, the REIT said it had extended the maturity of one of its existing credit facilities for a five-year term to June 2027 and increased the amount available under the nonrevolving component of the facility by $50 million for a total of $226.3 million.

Lamb said the REIT, which completed the acquisition of two Tesla service properties in Quebec and Ontario for $25.9 million and bought a parcel of land in Ontario for $650,000 during the first quarter, will continue to look for acquisitions even in the rising rate environment.

“We will pursue acquisitions on a strategic basis,” said the chief executive. “One reason we did not do as many deals as we normally do in 2021 was there was a bit of euphoria (in the investment market), and the cost of capital was very low.”

Lamb said capitalisation rates had not declined much in the automotive property sector, but interest rates could affect the purchases, even though the REIT’s current portfolio is insulated from rate hikes.

“Any time you see this much movement of interest rates, there tends to be a drag between the buy and sell. And that gap can go on for six to nine months until buyers and vendors meet the new reality of new interest rates,” said Lamb.

Source CoStar. Click here to read a full story

HAVEN, Windsor break ground at Aurora Mills biz park

HAVEN Developments and Windsor Private Capital have broken ground on Aurora Mills Business Park, which will offer more than 392,000 square feet of industrial condominium units for sale over seven buildings.

Aurora Mills Business Park is on 25 acres at the northeast corner of St John’s Sideroad and Leslie Street in Aurora, Ont., just north of Toronto. Its buildings offer 25-foot clear heights, 12-foot-by-10-foot drive-in doors, and modern, high-quality construction and design with environmental and sustainability features.

The first phase is underway, with a 90,000-square-foot building divided into 25 units. Unit sizes start at 3,582 square feet but can be combined to accommodate larger-buyer requirements.

“The project was always earmarked for retail and commercial,” HAVEN chief executive officer Paolo Abate told RENX. “With the advent of the pandemic, we shrunk some of the retail to maximize the amount of industrial.

“We decided on an industrial condo for exit purposes because the market was ripe and certainly getting better with what’s happening in the market in terms of higher sales prices. And we also know that individuals want to own their space.”

Aurora Mills Business Park details

While Aurora Mills Business Park was originally intended to have 95 units, the combination of multiple units will result in the final number being lower.

They should appeal to small- and medium-sized business owners and entrepreneurs — particularly in the trades, construction and manufacturing sectors — who want more cost certainty as rental rates for Greater Toronto Area (GTA) industrial real estate continue to rapidly escalate.

“We’ve designed them in such a way that they could be used for more commercial purposes,” said Abate. “There’s no reason why a lawyer with a sizeable staff wouldn’t want to locate there and work.”

There are 17 grocery stores and retail outlets, 92 restaurants and 21 banks within a five-kilometre radius of the site.

An off-ramp from nearby Highway 404 that would connect to St. John’s Sideroad is expected to be built at some point in the future, which would make access more convenient.

Site needed to be rezoned

The 50-acre site was acquired almost 10 years ago from a family that lived on it for $8.5 million. It was considered agricultural land until HAVEN had it rezoned.

“Our bench strength at HAVEN is taking projects through the planning process,” said Abate.

“So we revel at the opportunity to take this piece of land from agricultural to commercial/industrial to comply with the official and secondary plans of the area for what’s known as the Aurora 2C lands, which is basically everything east of Leslie.”

The northern part of the site is environmentally protected and has been given to local governments to oversee. Trails will be created on the land to connect to neighbouring trails in the area.

Cushman & Wakefield’s Mike Brown and Pete McGoey are marketing the property and the first phase of units is 80 per cent sold. A broker launch event will be held at Market Brewing Company in Newmarket from 2 to 5 p.m. on June 23.

The first block of units is expected to be delivered in late 2023.

HAVEN’s acquisition and development strategies

Toronto-based HAVEN selects GTA locations based on access to public transit and infrastructure.

It seeks properties that it can take through the zoning process to add value and prefers sites where it can develop at least 185,000 square feet of gross floor area for mid- or high-rise multiresidential projects.

HAVEN manages its developments from start to finish and invests along with its partners.

“We find it advantageous to mitigate risk as much as possible, not just from a financial perspective but from a development perspective as well,” Abate said of partnerships.

Toronto-based Windsor Private Capital launched in 1992 and provides structured credit, bridge financing and equity solutions to emerging and middle-market companies, entrepreneurs and high-net-worth individuals.

It has experience in real estate, financial services, technology, telecommunications, manufacturing and retail.

HAVEN and Windsor Private Capital started working together midway through the last decade and the relationship has evolved as they have partnered on a few projects, including Aurora Mills Business Park.

“I would call them a financial partner that does have development expertise and is there to be a great sounding board,” said Abate. “They have some decision-making ability along with us, but HAVEN is leading the development.

“Part of the reason that they have been such a great partner for us is they’re not just capital, they’re sophisticated capital with purpose and expertise.”

Other HAVEN developments

HAVEN has partnered with Canderel on an 11-storey, boutique luxury residential condo with retail on the ground level that recently started construction at 625 Sheppard Ave. E.

HAVEN recently completed two townhome developments, 4Hundred East Mall in Etobicoke and The Clarkson Urban Towns in Mississauga.

The 11-person company is also looking to develop a three-storey, 18,000-square-foot boutique luxury condo on two lots at 101 Heath St. W. in Toronto’s upscale Deer Park neighbourhood. Objections from neighbours have extended the approvals process, however.

“We believe that we’re not proposing anything audacious,” said Abate. “It’s no higher than the neighbouring house and there’s a condo building of three storeys right next door.”

HAVEN owns land around Weston and Black Creek Roads and the Mount Dennis area of Toronto. It acquired a property in Mount Dennis seven years ago and has since assembled more, with plans to build either a purpose-built rental apartment or condo on a site of more than four acres.

HAVEN is looking for more opportunities in Mount Dennis — where a new public transit hub will service the Eglinton Crosstown light rail transit line, Toronto Transit Commission buses, Union Pearson Express trains and GO Transit’s Kitchener line — as well as around Bayview Avenue and Sheppard Avenue East.

While Aurora Mills Business Park shows that HAVEN remains interested in non-residential developments, it has cooled on retail for the moment.

“I think there’s still some pain in that market,” said Abate. “I think it would be difficult for someone going out and trying to fill a 100,000-square-foot retail site in Aurora or anywhere in the GTA right now.”

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

Montez Buys Waterloo’s Factory Square Complex for $122.8M

Montez Corporation has acquired the 526,235-square-foot Factory Square office complex in Waterloo, Ont. for $122.8 million as part of its strategy to focus on technology hubs.

CanFirst Capital Management, on behalf of CanFirst Industrial Realty Fund V and CanFirst Industrial Realty Fund VI, sold the buildings at 440, 451 and 455 Phillip St.

The total site size is 34 acres and forms part of Waterloo’s Idea Quarter, a still-evolving district which is planned to offer 3.2 million square feet of space employing 16,500 tech workers and 20,000 co-op students.

Factory Square is 92 per cent occupied and Montez president and chief executive officer Manfred Lau told RENX his company has already signed a lease deal with a new tenant since acquiring the complex in mid-May.

Lau said current Factory Square tenants are involved with server warehousing, advanced lab and manufacturing processes, research and development, artificial intelligence, and managed detection and response, among other tech-related sectors.

Factory Square in major tech hub

There’s a light rail transit line stop adjacent to Factory Square, which is also close to the University of Waterloo, David Johnston Research + Technology Park, Wilfrid Laurier University and Highway 85.

“We really like this asset and it highlights our various investment themes,” said Lau. “The proximity to the University of Waterloo and Wilfrid Laurier University provides the opportunity for activation of the common space, talent recruitment and the continuation in support of various co-op programs.

“This is a really dynamic ecosystem that includes over 150 research centres, accelerators and incubators, with a growing commercialization of its technology, innovation and entrepreneurialism.”

Lau believes Factory Square, Idea Quarter and the surrounding area are becoming an increasingly important part of the economy locally, provincially and nationally.

Montez marks 20th anniversary

Montez is an integrated multi-asset real estate investment firm, developer and asset manager that invests in office, industrial, retail, multiresidential, hotel and mixed-use assets across Canada on behalf of institutional investors.

The Toronto-based company also invests alongside its clients.

This is Montez’s 20th year in business and it has more than 25 million square feet of assets under management across various funds and segregated accounts, valued at just over $7 billion. This includes about 10 million square feet of active development assets.

“Most of our developments and most of our investments try to latch on to some form of what we call infrastructure — such as a university, a major transit investment, a hospital and those types of things — because we see spinoff activity off of that,” said Lau.

Land holdings, development pipeline

Montez has an active development pipeline in various asset classes across multiple projects. It also owns urban land for future multiresidential developments and suburban land for future industrial developments. Some sites are going through the entitlement process.

Lau said Montez has annually averaged around $500 million to $600 million in combined acquisitions and dispositions over the past 10 years.

With Montez’s interest in tech-related spaces, it’s no surprise Toronto, Vancouver, Montreal, Ottawa and Waterloo are among its key markets.

As with many commercial real estate companies, Lau said Montez has become more active with industrial and multiresidential assets in the past couple of years.

Montez also has a small but growing interest in alternative real estate assets, including film studios and cold-storage facilities.

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

Nation’s Biggest Pension Fund Records a 10.2% Annual Gain on Real Estate

Canada’s largest pension plan said its real estate holdings climbed to $49 billion at the end of its fiscal year, 9% of the total $539 billion held by the Canada Pension Plan Investment Board.

The pension fund said the one-year return for real estate for the period ended March 31 was 10.2%, up from a 4.5% negative return a year earlier. The overall fund returned 6.8% in the fiscal year.

“Real estate investments had modest value-add contributions as they suffered from the impact of the pandemic lockdown measures on the retail and office sectors in fiscal 2022 and 2021,” the pension fund said in its annual report.

Overall, CPPIB saw a $42 billion increase in net assets made up of $34 billion in net income and $8 billion in net transfers from the Canada Pension Plan.

The five-year annualized return for the total fund was 10% but real estate lagged at 5%.

“We believe broad asset class labels such as ‘equities’ ‘real estate’ do not sufficiently capture the underlying factors that influence the risks and returns of investments. Accordingly, we analyze the fundamental and more independent return-risk factors that underlie each asset class and strategy,” the pension fund said in its annual report. “Armed with this understanding, we can more accurately achieve our preferred mix of global exposures designed to maximize returns at our targeted market risk level.”

The pension said real estate’s 5% return was affected by downward pressure on returns driven by lowered tenant demand in the office and retail sectors as pandemic-related isolation measures between fiscal 2020 and the first half of fiscal 2022 were implemented.

“However, real estate performance was positively impacted by increased demand for industrial assets, particularly in the Asia Pacific region,” said CPPIB.

Source CoStar. Click here to read a full story

RioCan Looks to Rising Rents as Interest Rates Climb

One of Canada’s oldest real estate investment trusts says today’s borrowing rates are beyond any internal forecast by executives, but RioCan believes rental increases will mitigate the damage from a rising interest rate environment.

“With the reopening of the nation, Canadians look forward to putting the pandemic well behind us. However, we’re now facing different challenges. We’re facing rising interest rates, global economic uncertainty based on more tensions, trade disruptions and unprecedented inflation,” Jonathan Gitlin, chief executive of RioCan, founded in 1993, said on a conference call with analysts last week.

The CEO said RioCan, which still gets the bulk of its income from retail despite a growing presence in the multifamily segment of the market, said the REIT’s tenant mix is evolving to include more essential retailers.

Dennis Blasutti, chief financial officer of the REIT, said RioCan had anticipated higher interest rates and locked in some debt while hedging some of its other debt.

“Our well-staggered debt ladder ensures that only a relatively small portion of our refinancing activities will take place at any given point in the economic cycle,” said the CFO on the call.

“As our tenant revenue grows, we expect to capture some of this in the form of rent increases. At the same time, rising replacement costs are supportive of the value of our well-positioned retail and mixed-use real estate as either revenues will increase to support the development or new supply will be constrained,” Blasutti said.

Jenny Ma, an analyst with BMO Capital Markets, asked how RioCan was dealing with the inflationary market when signing leases.

“Are there any changes that you’re making in terms of your ability to chargeback certain expenses or rent increases that are more closely tied to CPI or just anything that may have shifted because of what we’ve seen on the inflation front and how you write up your leases?” the analyst said on the call.

Gitlin said the company has always tried to get consumer price index provisions into its leases and noted all of RioCan’s leases are triple net, so the tenant takes the risk of rising expenses related to property including real estate taxes, building insurance, and maintenance.

Jeff Ross, senior vice president of leasing and tenant construction with RioCan, told analysts the market is seeing pre-pandemic conditions where there are multiple offers on the same units.

“We’re also seeing an influx of Americans starting to kick tires again. We’ve got a RECon conference coming up in a couple of weeks. We are solidly filled on both days with no Canadians by design. Very much we’re dealing with the American-based tenants that we have, but there’s a whole lot of new tenants from Europe as well,” said Ross, referring to the upcoming International Council of Shopping Centers event in Las Vegas.

Tal Woolley, an analyst with National Bank Financial, asked what type of tenants are “coming out of the woodwork” from America and Europe.

“The smaller fashion boutique guys are looking for more high street locations, but the guys that are really pushing in hard are the food and beverage guys. So there’s a lot of both fast-food and full-service sit-down restaurants. We’re seeing a lot of that. And certainly, on the entertainment side, we’re seeing a lot of those starting to press in,” said Ross, referring to a deal with Arcadia Earth, an immersive augmented reality exhibit that has locations in New York and Las Vegas and plans to open in RioCan’s site known as The Well in downtown Toronto.
Sourse CoStar. Click here to read a full story

Slate plans up to 12M sq. ft. of industrial on Hamilton Stelco land

Slate Asset Management has closed on the $518-million acquisition of approximately 800 acres of industrial development land and buildings from Stelco Inc. in Hamilton. The firm said it plans to develop up to 12 million square feet of new industrial on the lands, which is already zoned for a wide range of uses.

The industrial park could create up to 23,000 new jobs across the Greater Toronto and Hamilton area, and inject up to $3.8 billion into the economy according to an economic study conducted by Ernst & Young.

The sale closed this morning, although local media reports disclosed several months ago Slate would become the new owner.

The scope of Slate’s plans for the site, however, were not previously known.

“Having grown up in the area, (co-founding partner/brother) Brady (Welch) and I understand first-hand the history and significance this site has had in the Hamilton community and in broader Ontario for well over a century,” Blair Welch said in the announcement Wednesday morning.

“Our vision is to restore this site to its highest potential, reimagining it as a world-class industrial park that will continue to play a crucial role in the economy of the city and our province long into the next century.”

“One-of-a-kind” development opportunity

The site’s strategic location presents what Slate considers a “one-of-a-kind industrial development opportunity in North America.”

It is located adjacent to Hamilton’s waterfront and harbour on the Great Lakes and the St. Lawrence Seaway.

It also offers access to the U.S. land border, Ontario’s highway system, on-site rail connecting to Ontario’s greater Golden Horseshoe network and to the nearby Hamilton international airport, which is one of Canada’s key cargo hubs.

“This project represents a defining opportunity to reactivate a massively under-utilized parcel of land that has global industrial relevance,” Brady Welch said in the release.

“We are committed to working in close partnership with local institutions, government, and community groups to deliver a state-of-the-art industrial park that is modern and sustainably developed, attracting world-class tenants and restoring economic vitality to the area.”

Slate has agreed to a long-term sale-leaseback of 75 acres of land and two million square feet of buildings for 35 years to Stelco, a major North American steelmaker whose operations have long been synonymous with Hamilton.

The remaining 725 acres and any other remaining buildings will be prepared by Slate for development into “highly coveted, class-A industrial product.”

The development potential for the site will be a major boost for a region where industrial vacancy is running around (or below, depending on the district) one per cent. A Slate spokesperson told RENX this morning the firm is not releasing any timelines for development at this point.

Asking rents in the Toronto area have jumped 30 per cent year-over-year according to Colliers’ most recent Q1 2022 data.

The region saw 13.7 million square feet of absorption over the past year and an additional 10.3 million square feet is under development.

Site remediation and the environment

Slate also plans to invest into the environmental protection and remediation of the site. As part of that responsibility, it will “reactivate” the 3,400 metres of waterfront along Lake Ontario.

“By incorporating best practices around sustainable infrastructure, construction and social value across the lifetime of this project and its end use, we can redefine the legacy of this site and reintroduce it as a new standard-bearer for modern industry,” said Bozena Jankowska, global head of ESG at Slate, in the release.

“We look forward to collaborating with local and global organizations to raise the bar for this industrial redevelopment in every sense and demonstrate that we can drive economic growth while ensuring environmental and social sustainability.”

The Greater Toronto & Hamilton Area is located at the western end of Lake Ontario within the Golden Horseshoe, an industrialized region of nearly 10 million people surrounding the city of Toronto, which accounts for 20 per cent of Canada’s GDP.

The Golden Horseshoe also has strategic access to major U.S. markets, with a population of 130 million people within a 500-mile radius.

The region has two international airports (in Toronto and Hamilton) serving 200 destinations in 55 countries.

About Slate Asset Management

Slate Asset Management is a Toronto-based global alternative investment platform targeting real assets.

Slate’s platform has a range of real estate and infrastructure investment strategies, including opportunistic, value-add, core-plus, and debt investments.

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