Crown Realty Partners has acquired three office properties and KingSett Capital has purchased three industrial properties in the Greater Toronto Area (GTA) from what broker Colliers International called the Huntley portfolio.
Bruce N. Huntley Contracting Limited, 2528443 Ontario Inc., Roanne Holdings Limited and 489454 Ontario Limited sold the portfolio, which comprises a total of 11 buildings on the site properties. The assets went on to the market in the fall of 2020.
“We had interest from private investors looking for one asset to large institutions making full portfolio offers,” Colliers associate vice-president Jared Cowley told RENX. “We were looking for the net highest proceeds.”
While Cowley said all of the properties have historically been well-stabilized, there was some tenant turnover and leasing activity through the portfolio’s marketing phase and prior to the two transactions closing.
Crown’s office acquisitions
Toronto-based Crown’s three acquisitions through its Crown Realty IV Limited Partnership value-add fund cost $30.15 million and covered a combined 10.63 acres. They break down this way:
– 56,993 square feet at 7181 Woodbine Ave. in Markham;
– 96,275 square feet in twin two-storey buildings at 30 and 60 Centurian Dr. in Markham;
– and 67,160 square feet at a fully leased five-storey building with a two-storey parking structure at 1 Valleybrook Dr. in North York.
“They were all built, owned and managed by the same family since construction,” Crown leasing and acquisitions partner Scott Watson told RENX, adding they were built between the mid-1960s and mid-1980s. “They’re in markets we’ve invested in before.
“We’ve owned and managed and invested in and out of 1.5 million square feet in Markham over the past five years and we’ve been in North York in the Don Mills and Lawrence area.”
The buildings have access to major highways, public transit, residential areas and complementary business and service amenities. They offer tenants affordable space with branding opportunities and flexibility for future growth.
The properties are collectively 93 per cent leased to 74 tenants from a range of industries, including financial services, real estate and engineering.
“They’re low-rise buildings where you don’t have heavy use of elevators, which is a good key feature we see coming out of the pandemic that we think tenants will be attracted to,” said Watson. “They’re in suburban locations and not overly busy properties.
“Those are all key things that we took into consideration when we looked at this. They’re at a very attractive gross rent. For anyone that’s watching their budget, we think these will be pretty appealing to fill up the last little bit of vacancy we’ve got and maintain tenants.”
There are a mix of tenant sizes and lease terms, as well as below-market rents Crown expects to be able to raise upon renewals and for new tenants after making capital upgrades. In-place rents are $11.41 per square foot compared to average market rents of $12.92 per square foot.
Crown will invest in the buildings’ lobbies, corridors, washrooms and elevators to ensure continued tenant satisfaction at affordable pricing.
“They’re in good shape,” said Watson. “They did a good job, but they need some modernization.”
Crown will also build four model suites in vacant spaces at the Woodbine and Centurian properties so they’re move-in ready.
KingSett’s industrial acquisitions
Watson said Crown also reviewed the three industrial properties in the Huntley portfolio, but couldn’t match the valuations placed on them by companies with bigger industrial property ownership.
That suited KingSett, which picked up 386,199 square feet occupied by three dozen tenants at:
– 181, 201 and 221 Whitehall Dr. in Markham;
– 31-33 Melford Dr. and 420 Tapscott Rd. in Scarborough;
– and 225 Industrial Parkway S. in Aurora.
The purchase price was undisclosed and KingSett, as is its corporate policy, declined to comment on the acquisition.
In-place rents for KingSett’s three new industrial properties are $7.04 per square foot compared to average market rents of $9.46 per square foot.
Industrial real estate has outperformed other asset classes and been a safe haven in the pandemic-affected economy, which is why the three Huntley portfolio properties attracted a lot of attention.
“It’s a great transaction given all of the current and present challenges in the market,” said Cowley. “It was a great opportunity for investors to acquire an established portfolio with significant upside potential in the GTA market.”
About Crown and KingSett
Crown, founded in 2001, is an integrated commercial real estate investment and management firm focused on value-add opportunities across Canada. It has more than $2 billion of assets under management.
Crown’s partners always co-invest in its value-add funds. The company launched its fifth value-add fund, Crown Realty V Limited Partnership, this year.
The fund completed its initial equity raise with $140 million worth of commitments from institutional and family offices. It’s targeting $300 million and will be open for additional equity commitments through the end of 2021.
Fredericton-based Vestcor acquired a minority interest in Crown on behalf of a number of its long-term investment clients earlier this month. Vestcor is an investment manager and pension and employee benefits administrator that had approximately $19.4 billion in assets under management at the end of 2020.
Toronto-based KingSett, founded in 2002, has raised $12.3 billion of equity for its growth, income, urban, mortgage and affordable housing strategies. It has $15.8 billion of office, retail, residential, industrial and hotel assets under management.