The participants were:
Bryce Alston, director, Alston Properties: Alston is a vertically integrated real estate company primarily focused on purpose-built apartments. Under Bryce Alston, it has been expanding operations in Winnipeg since 2014. The company has 10 existing properties and four under development in Winnipeg, as well as seven properties in Calgary and one in Victoria.
Michael Hungerford, principal and partner, Hungerford Properties: Vancouver-based Hungerford is a vertically integrated company which invests across Canada in most real estate asset classes, with industrial and multi-family being the two largest. Michael Hungerford was educated in Canada, but lived in China and California before returning to Vancouver and the 40-year-old family business in 2003.
Laurence Vincent, co-president, Groupe Prével: Vincent was promoted to co-president of Prével with Jonathan Sigler this year after the retirement of her father, Jacques Vincent, who founded the company 40 years ago. The fully integrated firm, which is focused on residential development and master-planned communities, has built 11,000 units. Prével was in the seniors residence business for 12 years, but recently sold its portfolio to exit the sector.
Daniel Winberg, principal, The Rockport Group: Toronto-based Rockport was founded by Burt Winberg in 1957. His grandson Daniel is a principal of the fully integrated real estate services provider, which has been headed by Jack Winberg for 35 years. The company is principally focused on seniors housing, purpose-built rental apartments, and mid-rise residential and commercial condominiums. Daniel worked at RioCan, Scotiabank and Healthcare of Ontario Pension Plan before joining the family company.
Jennifer Balcerak, vice-president, leasing, QuadReal Property Group: Balcerak was the only executive on the panel from a non-family-owned real estate entity. Before joining QuadReal in 2017, she spent a decade with GWL Realty Advisors in several leasing executive positions, and also worked at CBRE. British Columbia Investment Management Corporation-owned QuadReal has a $24.5-billion office, industrial, retail and residential portfolio in 23 cities in 17 countries.
Advantages of family-owned private companies
Hungerford oversees its own leasing, sales, marketing, construction and property management to help control its returns. This alignment has also enabled the firm to make creative deals and be innovative in its approach to development.
“We have a willingness to take a marketing risk and try new things that haven’t been done before,” said Hungerford. “I think it’s tougher for an institution to do that. We’re able to push forward with those kinds of ideas to create value.”
Hungerford believes there’s a lot of inefficiency in the public market and being private allows companies to be nimble. However, he emphasized the importance of partners who can provide capital and/or operational expertise.
Prével becomes involved with mixed-use developments when it benefits its condos and purpose-built rental apartments.
“We can partner with commercial and office groups, which is a big advantage since there are so many assets that are coming back on the market right now, because old strip malls and other assets need to be redeveloped,” said Vincent.
“At Rockport, we compete by not competing,” said Winberg. “We don’t tend to do any cookie-cutter sites and we think very much outside the box.
“For many years we’ve done mid-rise condos, and there hasn’t been a ton of competition in that space because the high-rise people have been making way more money than us.”
While Rockport is involved with two retirement living communities, it doesn’t operate them because it realizes it’s not a company strength.
“We know what we know and we know what we don’t,” said Winberg. “We partner with best-in-class operators and do it early, so we know whether a site works for a retirement community, multi-family or storage because we talk to our partners.”
“Being private affords you some flexibility,” said Alston.
Balcerak countered that all institutionally owned companies aren’t the same. She said QuadReal is “nimble, flexible and transparent.” Her company has an enterprise and innovation department and a vice-president of smart buildings.
QuadReal has also created a program which invites MIT Center for Real Estate graduates to incorporate some of their ideas into company strategy.
Hungerford expressed admiration for what QuadReal is doing in Vancouver, and said the two firms have partnered on a couple of projects. One of them is a mixed-use development in a core location featuring small-scale industrial space at grade with micro-unit residences and office space on top.
Young executives talk technology
“QuadReal is embracing proptech (property technology) with open arms, but at the same time with a critical eye,” said Balcerak, who noted the company has a team which investigates proptech companies and products with the goal of leveraging them to enhance people’s experiences and improve operational efficiencies.
“We’re focused on what those high-value front- and back-of-house applications are, and that will drive our technology selections,” said Balcerak. “We want to make sure that we’re investing in flexible and adaptable platforms and we’re not spending a ton of money on infrastructure that can’t be adapted in the future.”
Winberg said companies like Rockport can’t be as involved with proptech as institutional and large public companies are because they lack the capital. However, they embrace it where they can because they know they have to.
Hungerford has a technology committee and measures how much it spends in the space because there can be risks in adopting and managing technological changes. It’s primarily focused on operating efficiencies and improving customer and tenant experiences.
“Proptech and Winnipeg don’t necessarily go hand in hand,” acknowledged Alston, who said his firm examines what’s happening with other companies in other markets to find measures which can make operations more efficient.
Rental apartments in Winnipeg
Alston said there was a limited supply of new rental apartments in Winnipeg until five years ago, but a lot of development has taken place more recently.
“Winnipeg has seen revitalization in the last decade, particularly in the downtown core. We’ve seen an influx of investment into our marketplace as investors look for better risk-adjusted returns. On a comparative basis, Winnipeg hasn’t seen the cap rate compression that you see in the primary markets,” he said.
“We’ve got a diversified, strong and resilient economy. We also have fairly strong underlying fundamentals across all sectors of commercial real estate. There are lots of opportunities in our marketplace, not necessarily for institutional-quality assets or institutional investors, but for mid-market and smaller companies like ourselves.”
Alston said his firm has earned good returns by acquiring older Winnipeg buildings, then improving and repositioning them as a demand for “lifestyle-oriented live, work, play rental accommodations” has emerged.
Balcerak said work-and-play strategies have also made their way into the office sector. Landlords are being asked to create communities and provide amenities and experiences for tenants which in the past were typically limited to residences.
Optimism and concerns in Toronto
The Ontario provincial government’s recent decision to lift rent controls on new apartment units occupied for the first time, retroactive to Nov. 15, was good news for Rockport since it has two new rental apartments coming to market in Toronto early in 2019.
Winberg said rent controls “disincentivized” the building of new purpose-built rentals and did little to curtail increasing rents.
However, Winberg remains concerned about rising land and construction prices in Toronto.
“Construction companies are making a lot more money building repeating floors,” he said. “We love the mid-rise space and we have to beg, plea and borrow for trades to come and build mid-rise that’s typically for end users, which is what the government wants housing for.”
Montreal’s evolving market
Prével’s Vincent said the dynamics of the Montreal market are changing.
“The Montreal market has changed a lot in the last few years, and the rest of Canada is looking at Montreal, which hasn’t happened a lot in the past,” said Vincent.
While Vincent said Montreal is years behind Toronto in terms of pricing, the momentum in the rapidly changing market over the last few years has caused concern it could quickly narrow that gap and land will become less affordable.
There are also uncertainties about the potential introduction of a 15 per cent foreign buyers tax and increased development fees for condos and apartments, all of which could slow the current strong demand in the next few years.