See-More is a six-storey facility with 491 beds in 141 fully furnished units, including studios, three-, four- and five-bedroom suites, which provides a variety of configurations for tenants. It opened in September and is 100 per cent leased for the 2022/23 academic year.
See-More also features a yoga and wellness studio, a games room, on-site laundry facilities, social rooms, common study areas and an underground parking garage.
It is located adjacent to Dalhousie University, which has more than 20,000 students — 62 per cent of whom are from outside Nova Scotia.
“It's a fast-growing university with a very strong reputation and a growing enrolment of both domestic and international students every year, and a large and thriving campus, in a city that is supply-constrained for all housing, not just student housing,” Alignvest managing partner Sanjil Shah told RENX.
Shah liked the location’s ease of access to the Dalhousie campus for students and the fact it has no displacement risk.
“We don't want to buy a nice new building and then find out two years later that there's going to be a shiny new tower built between us and the campus,” he said. “And in this building in particular, that risk is zero because we're as close to campus as you could get.”
First property in Atlantic Canada
With this acquisition, Alignvest owns more than 5,200 student housing beds. See-More is its first property in Atlantic Canada.
“To enter a new region, we need to come in at some scale to make it operationally efficient,” said Shah. “We want to be north of 300 beds to enter any market and ideally between 400 and 500 beds.
"It allows us to set up operations, have a team in place and then have a beachhead to expand.”
Toronto-headquartered Alignvest launched in June 2018 and has since acquired Ontario student housing properties in Waterloo, Ottawa, Hamilton and Oshawa.
The real estate investment trust sees growth opportunities in Atlantic Canada, both in and outside of Halifax, as Shah said the University of Prince Edward Island in Charlottetown, Memorial University in St. John’s, Cape Breton University in Sydney, St. Francis Xavier University in Antigonish, Acadia University in Wolfville and Mount Allison University in Sackville all have student housing shortages.
Alignvest is working on seven to 10 acquisitions at any given time, according to Shah. However, he said the REIT won’t pay any more than what it thinks a property is worth and is seeking fair pricing that can generate a strong return for investors.
Development is coming
Alignvest has also been building its development capabilities through a subsidiary launched in early 2021 called Campus Assets Inc. that’s headed by Patrick Miksa.
Although new development and strategic alliances with higher education institutions are its core focus, Campus Assets also considers redevelopment, repositioning and partnerships with land owners in close proximity to campuses as part of its mandate.
Shah said Alignvest and Campus Assets are evaluating three or four potential development sites.
“The development process is more rigorous and time-consuming and the bar is much higher,” he noted.
“By the time you find the site, evaluate it, figure out if it's feasible and then go through the zoning process, it takes a lot of time and effort and discipline.”
Alignvest acquired the 72-bed 1Ten on Whyte property near the University of Alberta in Edmonton in August 2020 with the intention of redeveloping it.
Miksa has taken it through the rezoning process and approval is in place to build a facility with up to 600 beds, though no timeline has been announced.
Alignvest is interested in expanding its portfolio across the Prairies and British Columbia, either through acquisitions or development, as Shah said they all have universities and colleges in need of more student housing.
The goal is for Alignvest to become a coast-to-coast owner and for its Canadian Student Living operating company to play the same role as an operator.
No equity capital or debt capital challenges
Rising interest rates are impacting Alignvest’s debt financing, which means it needs to be even more disciplined in its underwriting, but Shah said the REIT has never had challenges funding acquisitions from either equity or debt capital perspectives.
Before See-More, Alignvest’s last acquisition was the 528-bed THEO at 305 Rideau St. in Ottawa in July 2021.
Shah attributed the gap between purchases to taking time to focus on operations of the existing portfolio by maximizing efficiencies, making upgrades and minor renovations, and improving staff and security.
“We can't just keep acquiring for the sake of acquiring; we were looking to generate a return,” said Shah. “And part of our return is driven by the operational excellence that we can impact on all these properties.”
With rising inflation prompting increasing rents, Shah said the value proposition for students needs to be commensurate and Alignvest will continue to try to create better offerings and services for them.
Alignvest has achieved an annualized 10.4 per cent rate of return since inception, which Shah is pleased with considering the challenges of university shutdowns during the height of the COVID-19 pandemic in 2020 and 2021 and the rising interest rate environment of 2022.
Alignvest’s investors include ultra-high-net-worth individuals, family offices, portfolio managers, and wealth management and investment advisors.
Increased interest in student housing
Shah said the rent-controlled student housing sector benefits from an annual turnover rate of close to 50 per cent, which allows it to raise rents in line with market values on a consistent basis.
While this has prompted both domestic and international companies to become increasingly interested in the asset class in Canada, Shah is confident Alignvest can maintain a leadership role.
“We benefit from having a substantial first-mover advantage and from having a strong presence in Canada already, as well as by having very strong relationships with the universities and colleges across the country,” he said.
“So it will take some time and effort for some of these other groups to replicate our scale and offering.”