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CAPREIT acquires Ottawa apartment for $61M

IMAGE: The exterior of the Eagle Pointe apartment building in Ottawa
The Eagle Pointe apartment building in Ottawa. (Courtesy CAPREIT)

Canadian Apartment Properties Real Estate Investment Trust (CAPREIT) has expanded its portfolio in the nation's capital with the $61-million acquisition of Eagle Pointe apartments in suburban Ottawa.

“This beautiful new asset is well-built and well-located in a thriving neighbourhood that has strong fundamentals, perfectly in line with our asset re-positioning strategy,” Mark Kenney, CAPREIT’s president and CEO, said in a statement on the acquisition.

“In addition to improving the quality of our portfolio, we are assuming a below-market, long-duration mortgage that adds incremental value and liquidity available to continue securing strategic returns.”

The building at 800 Eagleson Rd. contains 143 residential suites that are approximately 95 per cent occupied. It is located in close proximity to another newly built property CAPREIT purchased in 2022.

Toronto-based CAPREIT (CAR-UN-T) is Canada’s largest publicly traded provider of rental housing.

As of the end of 2022, CAPREIT owned or had interests in approximately 67,000 apartments, townhomes and manufactured homes in Canada and the Netherlands, with approximately $17 billion of investment properties in Canada and Europe.

CAPREIT’s acquisition

The Eagle Pointe acquisition was funded via $16 million in cash, $42 million from the assumption of an existing mortgage and $3 million from a vendor take-back loan.

Repayment of the five-year interest-free loan may be waived, subject to certain conditions. The mortgage carries a contractual interest of 3.25 per cent per annum for its remaining 10-year term to maturity.

“Following our successful disposition of three older, value-add assets in Ottawa last month, we paid down higher interest debt and are now re-allocating capital back into Ottawa through this new-build property that has both a strong growth profile and low capital expenditure needs,” Julian Schonfeldt, CAPREIT’s chief investment officer, said in the announcement.

“We sold at a capitalization rate in the mid-three per cent range and are re-investing at a capitalization rate that is in excess of four per cent, at a price that is below replacement cost, creating value for our unitholders.”

In the statement, the property is described as “amenity-rich.”

CAPREIT’s recent moves

As of the end of January, CAPREIT sold its non-managing 50 per cent interest in three apartment properties in Ottawa, comprising 1,150 units, for $136.25 million. They had previously been held for many years in a joint venture with Ottawa-based Paramount Properties.

Those properties are the Alta Vista Towers at 1545 Alta Vista Dr., the Wellington Towers at 1265 Wellington St. and the Riverview Place Apartments at 180 Lees Ave.

The sale was part of CAPREIT’s plan to modernize its portfolio.

“We’re trying to turn an A-class portfolio into an A-plus,” CAPREIT president and CEO Mark Kenney said in an interview with RENX at the time.

In June 2022, it acquired a new luxury property with 36 apartment suites and 76 townhomes in the West Ottawa community of Kanata for $43.7 million via an advance purchase arrangement.

“The strategy is clear. We are selling more affordable, value-add properties and deploying that capital into share buyback as our shares are significantly below NAV (net asset value), and we are selling above NAV, so it’s a choppy time in the environment,” Kenney explained in the interview.

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