CAPREIT (CAR-UN-T) has expanded its rental apartment portfolio in the Greater Toronto Area with the acquisition of a four-building portfolio in Oshawa for $103.7 million, the trust announced Wednesday evening.
The four buildings, located in a small cluster in the northern part of Oshawa (in the eastern portion of the GTA), contain a total of 484 apartments. They are located at 1266 Pentland St., 140 and 191 Nonquon Rd., and 1221 Simcoe St N.
CAPREIT reports the portfolio was 98.4 per cent occupied at closing.
“Our asset allocation strategy includes targeting the purchase of quality mid-tier apartment properties located in suburban markets close to major Canadian cities,” said Mark Kenney, president and CEO of CAPREIT, in the announcement.
“These Oshawa properties are an excellent fit and our proven ability to accretively invest in the properties, combined with our successful property management programs, will generate increased value for our unitholders over the long term.”
CAPREIT now holds a portfolio of about 16,000 rental apartments in the GTA.
Included in the suite mix for this acquisition are 294 two-bedroom and 11 three-bedroom apartments, meeting the need for families. The average suite size across the portfolio is approximately 800 square feet.
The purchase price represents a per-unit cost of $214,256.
The properties include swimming pools, children’s playgrounds, laundry facilities and parking. All are situated close to a large conservation area, parks, a major shopping mall and other amenities. They are all easily accessed by numerous transportation links.
Continued confidence in Toronto multires market
In an exchange of emails with RENX, Kenney said CAPREIT continues to have strong faith in the GTA rental market despite a year of challenges due to the pandemic.
“We continue to have great conviction to the GTA market; especially in the affordable to mid-tier rental price market and the suburb areas where most of CAPREIT’s exposure/portfolio resides,” Kenney wrote. “We also see tremendous strength in our suburban portfolio where space/size of units will continue to be a demand driver.”
He also believes there is significant pent-up demand which will come to the market as the fallout from the pandemic eases.
“While we continue to achieve rental increase on turnover of leases to new tenants in the GTA, we would say market rents have been generally pretty flat,” Kenney wrote, “but we expect them to return to higher growth beginning summer or early fall. Occupancy (has) also stayed fairly constant.
“We continue to have strong conviction that apartment demand is flat due to an unknown number of under-30-year-olds that have chosen to ride out the pandemic at home. Statistics for this do not exist, but we believe that Canada has experienced never-before-seen levels of household consolidation.
“We see this as a pandemic effect, not a trend, and fully expect that vaccine rollout will drive this age cohort back to independent living.”
Operating lease buyout
CAPREIT has also continued the buyout of operating leases, completing the early buyout of such a lease for a 65-suite apartment property at 1004 Lawrence Ave. E. in Toronto. The trust paid approximately $4.2 million for Lawrence Apartments, a 19 per cent discount to the purchase price for the buyout set out in the property’s operating lease.
During 2020, CAPREIT bought out 10 other operating leases. The trust also continues to evaluate prepaying the buyouts on its remaining two operating leases which have contractual buyout periods commencing between 2024 and 2028.
CAPREIT has been steadily expanding its portfolio across Canada, acquiring 2,847 apartments valued at $690 million during 2020. Some of the highlights included:
– In November, it acquired two residential properties in Ottawa, a 50-suite apartment building and 330 townhomes at Surrey Place and Hunter’s Point, for $95.5 million;
– In August, it bought 194 apartments and townhomes surrounding Pontiac Court in Sarnia and a 107-unit middies at 492 Springbank Rd. in London for $50 million.
– Also in August, it acquired The Sterling, a new, 88-unit apartment building in Halifax for $22.4 million. That piggybacked on a major February purchase in Halifax, when CAPREIT bought eight properties comprising 1,503 apartments for $391 million.
CAPREIT is Canada’s largest publicly traded provider of rental housing.
The Toronto-based trust currently owns or has interests in approximately 68,100 residential apartment suites, townhomes and manufactured housing community sites well-located across Canada, in the Netherlands and in Ireland.