“We’ve been considering expanding our investment strategy to include value-add projects for a couple of years,” said Greybrook chief executive officer Sasha Cucuz, “as we believe there’s a unique opportunity to generate great risk-adjusted returns for investors given the changing affordability dynamics in many North American markets and the corresponding need for more suitable rental alternatives.
“As such, we’ve had our eyes peeled for acquisition opportunities and, when this one came up, we were ready and took advantage of it.”
Marlin Spring CEO Ben Bakst said the opportunity to make the latest US$68-million purchase as part of the value-add program the two Toronto-based companies have undertaken arose through contacts made by Cleveland-raised Avi Jakobowitch, president of Marlin Spring US Realty, who has ties with American brokers and financing sources.
New Houston acquisitions
The two Canadian companies were interested in the Houston market because it’s the fourth-largest city in the United States and is an economic hub that has projected population and diversified job growth for years to come. However, as home values have increased and lending conditions have tightened since the credit crisis, home affordability has become more challenging.
This made the acquisition of Lakeview Apartments and Lakeview Estates particularly attractive. The adjacent properties, built between 1992 and 1999, collectively consist of 566 well-maintained, garden-style residential townhomes on 39 acres a short drive from downtown Houston.
They offer tenants two clubhouses, fitness centres and resort-style pools, as well as convenient access to surrounding educational institutions, retail hubs and Houston Northwest Medical Center.
“What really makes this asset stand apart for us, among the countless opportunities we process, are the home sizes,” said Bakst. “At over 1,100 square feet, and with direct access garages to each home, these units are true homes compared to apartments and are not replaceable at the price we paid.”
Greybrook, Marlin Spring value-add strategy
This is the eighth value-add multi-family property acquisition that’s allowed Greybrook and Marlin Spring to leverage their collective experience and expertise to increase value.
“We are looking for investments in North American cities where the supply of adequate rental housing is insufficient in meeting today’s demand for it, as driven by a number of factors,” said Cucuz. “We are looking to purchase assets, at values we deem to be appropriate, thereby giving our product a unique competitive advantage in the marketplace.
“Our plan is to improve net operating income by making capital investments in the improvement and positioning of that asset to appeal to a broader pool of prospective renters. “
Bakst said the value-add program typically includes upgrades such as contemporary kitchens, granite countertops, modern appliances and hardwood flooring.
“This ensures that current and future residents will live in a luxuriously appointed home without the costs associated with new construction. We’ve found the tenants appreciate this program and are very willing to pay an increased rent to live in these newly appointed homes.”
Cucuz said Greybrook and Marlin Spring are happy with the value-add purchases they’ve made so far in Ontario, Florida and Texas and are in the process of acquiring 11 more such properties in Quebec.
“We carefully assess each property, the city and economic state of the surrounding areas,” said Bakst. “Municipalities where we have large projects include Miami, Dallas and Toronto, all with positive immigration trends and strong economic opportunities.”
Waterfront II progress
Greybrook and Marlin Spring also acquired a prime parcel of land at 1978-2002 Lakeshore Blvd. W. in Toronto a year ago with plans to develop a two-tower, mixed-use, high-rise condominium that will include more than 540 residential units and 11,500 square feet of commercial space.
“We’re very excited about Waterfront II,” said Cucuz. “It’s a great location and will offer buyers a great product, and we think we’ll do very well with this development.
“We are currently working with the municipality and community stakeholders as part of the planning process.”
Greybrook and its affiliates have invested in more than 50 real estate projects in the Greater Toronto Area, Greater Golden Horseshoe region and select U.S. markets. Its portfolio is expected to result in the development of more than 32 million square feet of residential and commercial density with an estimated completion value of $14 billion.
Marlin Spring acquires, develops and strategically repositions and manages residential assets. It has acquired more than 20 residential projects with more than 7,000 units in various stages of development, construction and repositioning across Canada and the U.S.
Its portfolio totals more than five million square feet of residential density with an estimated completion value of more than $3 billion.