After 26 years of acquiring, developing, owning and operating retail, office, industrial and multifamily residential properties in Canada, Fundy Capital Management has launched its first fund. 

The Mobile Home Communities and Apartment Fund is targeting properties across Atlantic Canada with stable cash flow, long-term affordability and meaningful value-add or redevelopment potential.

“Atlantic Canada is the rock that hasn't really been overturned yet,” vice-president of real estate investments and partnerships Alex Love told RENX. “Halifax has, in a way, but there's so much untapped value — especially in Newfoundland and New Brunswick.”

Fundy Capital has deep relationships and an extensive deal flow in the region and believes it can acquire institutional-quality assets at a discount to replacement cost, unlock value through local operational expertise, and preserve long-term housing affordability while delivering strong risk-adjusted returns to investors.

The new fund’s structure

The closed-ended fund is structured to deliver a six to seven per cent annual cash dividend and a targeted internal rate of return of 14 to 17 per cent.

“The best risk-adjusted return right now in Canada is mobile home parks and affordable apartments,” Love said. “We see that as the biggest opportunity, but also the best gross-adjusted yield, and that's where we're spending all of our time and capital.”

The fund has an initial term of 10 years, including two optional renewal periods of two to three years each, which provides flexibility for asset stabilization, value creation and optimal exit timing. The minimum investment, with some exceptions, is $1 million.

The target asset allocation is 75 per cent mobile home communities and 25 per cent affordable apartments in supply-constrained markets with below-market rents, strong rental demand, minimal new construction and government-supported tenancy programs.

All acquisitions will be financed at a minimum 60 per cent loan-to-value ratio and will be stress-tested at an interest rate of 6.25 per cent to ensure strong debt service coverage.

Fund is targeting $100 million

Fundy Capital is looking to raise $100 million with the fund and Love said it’s just under half-way toward reaching that goal. Support has been strong and institutional investors are showing interest.

“We're cash flow and yield-based investors,” Love explained. “The only way to make real capital and real wealth in real estate is having a long-term focus. But because real estate is illiquid, we offer a six per cent dividend annually and pay it quarterly.”

There are two properties under contract for the fund and Love expects both deals to close in the fourth quarter of this year.

The fund’s exit strategies include:

• a portfolio sale to a large strategic buyer capable of paying a premium for scale;
• a recapitalization with a major institutional investor to buy out limited partners;
• or executing an initial public offering and selling a large portion of the fund to provide liquidity to investors.

Mobile home communities are an attractive alternative

Part of the plan for the fund is to add new residences to mobile home communities wherever it’s feasible and either rent them or offer lease-to-own deals to tenants.

Fundy Capital claims access to more than 7,000 residential lots that are available for off-market acquisition from both institutional and private owners.

“With a lot of immigrants and first-time families that live in apartment buildings, their goal is to own a home,” Love said. “That's their goal in life, and we want to provide that.”

Love emphasized mobile home communities today aren’t those “rough around the edges” places like the Sunnyvale Trailer Park depicted in the Trailer Park Boys television show -- which was produced in Atlantic Canada.

“They can be clean and beautiful and nice and new and modern,” Love said. “It's really attracting that young demographic, to give them the ability to own their home and have the flexibility of not owning the land, which sometimes could be the barrier of the home surpassing their budget.” 

Fundy Capital’s origins and existing portfolio

President and chief executive officer Barry Gidney founded Fundy Capital in 1999 as a way to invest his own capital into real estate and, through the years, individuals and family offices have come on board to invest in properties across Atlantic Canada. 

Fundy Capital invests alongside its outside investors in every deal, ensuring alignment and demonstrating its confidence in each opportunity.

The company has offices in Toronto and Halifax and now has 73 properties valued at $300 million. This encompasses 41 industrial and 10 office buildings totalling 800,000 square feet of space, 689 multifamily units and 366 retirement home beds and units.

“We really want to grow and try to be at that $1 billion or $2 billion mark in the coming years,” Love said. “In order to do that, you need to scale quickly and acquire larger.”

While the fund is the current priority and focus, Fundy Capital remains confident in the strength and long-term value of its value-add industrial and commercial portfolio.

Fundy Capital’s development pipeline includes more than 1,000 residential units planned across a combination of owned land and targeted off-market opportunities.