Bouwinvest Real Estate Investors B.V. has entered the Canadian market through a programmatic partnership with Woodbourne that is taking a 25 per cent stake in First Capital REIT’s upcoming purpose-built rental development at Yonge Street and Roselawn Avenue in midtown Toronto.
Bouwinvest manages approximately $23.2 billion in assets within five Dutch property sector funds and three international real estate investment mandates in Europe, North America and the Asia-Pacific region on behalf of bpfBOUW, the Dutch construction industry’s pension fund.
Its North American investments had previously all been in residential, office, retail and logistics real estate in the United States, but it wanted to diversify into Canada.
Bouwinvest director of North American Investments Gijs Plantinga told RENX from the company’s Amsterdam headquarters that the investment manager likes Canada’s market fundamentals, economy, economic growth, real estate and stable financing and banking system.
“We've been looking at Canada for a while; however it had been a fairly closed market in the sense that the domestic players were pretty much the dominant players in the market.
"But in recent years we have seen domestic pension funds moving some of their investments out of the country and, as a result, some foreign companies started in Canada.
“The aim is to grow as an investor in real estate and add Canadian assets to our portfolio. We are interested in partnerships where we can apply our expertise and ambitions in sustainability and be at the forefront of Canadian net-zero investments as well.”
Bouwinvest in North America
Bouwinvest opened a New York City office headed by senior portfolio manager of North American investments Bert van den Hoek three years ago and, at least for the near term, that office will also oversee its Canadian activities.
The company similarly handles the Asia-Pacific market from a Sydney, Australia-based office.
“We have more of a regional template rather than solely relying on the headquarters in Amsterdam,” said van den Hoek, “and with the proximity of New York and Toronto, we feel we can cover the market pretty well.”
Bouwinvest’s primary U.S. investment focus has been in major urban regions, including New York City, Los Angeles, Washington, D.C., Seattle and Miami. It plans to concentrate its Canadian efforts in Toronto, Montreal and Vancouver.
Most of Bouwinvest’s American portfolio focuses on long-term investments that offer steady performance and have a low risk profile.
The company identified the purpose-built rental sector in Canada as a good fit since demand is outstripping supply and the market has solid fundamentals.
Partnership with Woodbourne
“As we were gravitating towards multires, we started meeting up with with potential partners in the industry and felt that Woodbourne was a very good fit in that they were able to show their track record of multiresidential developments in the past as well as their philosophy of matching our criteria in sustainability,” said van den Hoek.
Woodbourne is an institutional investor, operator and developer of apartments located predominantly in urban areas across Canada, with an emphasis on the Greater Toronto Area.
As part of its environmental, social and governance strategy, the company is targeting a 20 per cent overall reduction in energy use across its portfolio by 2031.
Plantinga said much of Canada’s existing apartment stock doesn’t achieve Bouwinvest’s sustainability standards and it is looking to develop new properties that do, which is also of interest to Woodbourne.
The partnership was formalized late last year and the first joint investment is the 25 per cent stake in First Capital’s Yonge and Roselawn development at 2440-2444 Yonge St.
First Capital owns, operates and develops grocery-anchored, open-air centres and is looking to unlock portfolio value through its municipal entitlements program.
First Capital’s Yonge and Roselawn development
First Capital owned a 37.5 per cent stake in the 2.1-acre Yonge and Roselawn site and purchased the remaining 62.5 per cent from Main and Main for approximately $71.9 million in 2018.
It had approximately 70,000 square feet of retail space and 122 parking stalls to provide holding income before the redevelopment. The three existing low-rise commercial buildings will soon be demolished.
First Capital secured zoning approval for the site and construction is expected to begin this year. Completion is projected for the spring of 2027.
The development will include two Hariri Pontarini Architects-designed, purpose-built rental residential towers of 21 and 27 storeys connected by a six-storey podium that will incorporate two heritage façades. It will have 548 suites in this ratio: 12 per cent studios; 50 per cent one-bedroom; 27 per cent two-bedroom; and 11 per cent three-bedroom.
The average suite size will be 685 square feet, with units ranging from 400 to 1,200 square feet.
The project will also include 65,500 square feet of retail space over two levels fronting Yonge Street. A single large tenant will be targeted for the second floor.
Pedestrian connections and a 13,000-square-foot community park that will be owned by the City of Toronto will also be part of the development.
“It's a really good example of an urban infill site with work, live and play,” said van den Hoek, who also likes that it will have easy access to public transit with the existing Eglinton subway station and a forthcoming Eglinton Crosstown light rail stop.
“Also, the fact that First Capital was the owner of the site and we got a very good insight into what they’re looking to develop.
"We were able to mix in our own philosophy of bringing in amenities and our sustainability criteria, but the site and the design that First Capital is putting forward, with a retail podium and a park in the back that is going to enhance the green surrounding the project, was very attractive to us.”
Figure3 is the interior designer. Amenities will include a lounge, a fitness studio, co-working space, a pet spa, urban farming plots, a large outdoor terrace with a swimming pool and areas for barbecuing and dining.
First Capital and Woodbourne will be jointly responsible for development management services.
Rhapsody Property Management Services, a sponsor affiliate of Woodbourne, will oversee the day-to-day residential management. First Capital will property manage the retail component.
High sustainability targets
Bouwinvest and Woodbourne are prioritizing a high degree of energy performance, targeting LEED Gold certification and operationally net-zero design in all of their projects.
The partners will target a four- or five-star rating under the Global Real Estate Sustainability Benchmark (GRESB) and will report to Carbon Risk Real Estate Monitor, which provides science-based decarbonization pathways aligned with Paris Agreement goals.
Specific design measures in the Yonge and Roselawn property include a geothermal system to provide space heating, air-source heat pumps for space cooling and a high-performance building envelope.
Bouwinvest’s North American strategy targets near carbon neutrality by 2045.
Future Bouwinvest investments in Canada
Bouwinvest and Woodbourne’s joint venture is focused on mid- or high-rise purpose-built rental apartments. They’re monitoring and doing due diligence on other projects and van den Hoek is hopeful of finding a follow-up before the end of the year.
The company is also looking to deploy capital with other Canadian partners in investment opportunities geared toward its sustainability goals.
Multiresidential and logistics properties are higher on the priority list than office and retail due to current market conditions, according to van den Hoek.
“Since we're not in the market ourselves, we’re really dependent on partners to be our local guides,” said Plantinga.
He expressed potential interest in the student and senior housing sectors and said Bouwinvest’s return profile aligns well with purpose-built rental projects and developments that will be held long-term.