CAPREIT (CAR.UN-T) has acquired the newly constructed Alto Towers apartments in London, Ont., for $130 million. The transaction is part of $216M in acquisitions and dispositions CAPREIT completed in Q1.

The 16- and 17-storey Alto Towers were constructed in 2019 and 2021 and comprise a total of 291 apartments. The larger-than-average units offer an average of 1,160 square feet of living space in multiple sizes and configurations.

The acquisition continues CAPREIT’s strategy to divest some of its older properties while acquiring newer purpose-built assets.

“We’re very pleased with the progress we’ve made on the execution of our strategy in the first quarter of 2024, including our initiatives surrounding the resolution of the Canadian housing supply and affordability crises,” Mark Kenney, the president and CEO of CAPREIT, said in Thursday morning’s announcement. “These transactions exemplify all facets of that strategy in action.” 

The Alto Towers had previously been operated by York Property Management.

The Alto Towers in London

The concrete, purpose-built apartment towers are stabilized and located in what CAPREIT refers to as a “sought-after community” in London. 

The $130 million purchase price is a “significant discount” to what it would cost to build the towers today, CAPREIT states. The REIT has also assumed existing below-market mortgages of $80.9 million, with a weighted average term to maturity of two years and a 2.3 per cent blended interest rate. 

The residual $49.1 million to acquire the properties was funded by cash sourced from recent CAPREIT dispositions.

“We were able to purchase these well-located concrete new build properties for only $385 per leasable square foot, representing a steep discount to replacement cost, with favourable in-place debt financing,” Julian Schonfeldt, CAPREIT’s chief investment officer, said in the announcement. “The mid-four per cent cap rate for these luxury towers exceeds the weighted average cap rate on our first-quarter dispositions, which were sold at a premium to their previously reported IFRS fair values.

“Additionally, in Q1, we’ve so far sold $58 million of equity in Irish Residential Properties REIT plc, reducing CAPREIT’s ownership from 18.7 per cent to 11.3 per cent. We’ve used the proceeds to accretively repurchase $27 million of CAPREIT units, at a discount to NAV, with the remainder of the proceeds used to repay debt..”

CAPREIT's recent divestments

Its four divestments during the quarter totalled $83.5 million, and most had been previously announced. CAPREIT also has an agreement to sell a land parcel.

The REIT closed this week on the $35-million sale of two rental properties in Langley, B.C., to New Vista Society, a local non-profit organization. New Vista Society is receiving funding from British Columbia’s Rental Protection Fund (BC RPF). The buildings were both constructed in 1978 and contain 108 residential suites in total..

“We are proud to have sold two properties to a non-profit organization that will be able to preserve the long-term affordability of those suites, which are situated in one of Canada’s least affordable markets,” Kenney said in the announcement. “We are very happy to have been able to work with the BC RPF on these important transactions.

“Simultaneously, we are supporting the supply of new housing for Canadians by investing in purpose-built rental apartments, such as the buildings we’ve just acquired in an attractive and growing region in southwestern Ontario. In turn, this is encouraging incremental residential development in key metropolitan areas throughout Canada.”

“Preservation of our existing housing stock is one of the most effective strategies to address the affordability crisis in British Columbia and across Canada,” said Katie Maslechko, CEO of the Rental Protection Fund, in the announcement. “It is a transformative model that is already delivering results and protecting renters, and this transaction between CAPREIT and New Vista Society is an excellent example with the potential to be replicated across Canada.

"With the support of the Rental Protection Fund, this acquisition will ensure these homes remain affordable in perpetuity, while growing the capacity of the Community Housing sector, and freeing up capital that can be redeployed into new supply.”

Earlier this month, CAPREIT also completed the disposition of a 240-suite property built in 1962 in Québec City, for $36.3 million. 

In January, it sold 32 residential suites built in 1969 in Victoria for $12.3 million.

The land parcel is a 0.3-acre parcel property in Halifax which is being transferred to a neighbouring developer for $2 million. As part of the transaction, CAPREIT has a right to acquire the neighbouring site once the apartment building is constructed.

About CAPREIT

CAPREIT is Canada’s largest publicly traded provider of rental housing. As at Dec. 31, 2023, CAPREIT owned approximately 64,300 residential apartment suites, townhomes and manufactured home community sites well-located across Canada and the Netherlands, with approximately $16.5 billion of investment properties in Canada and Europe.