Continued expansion into Ontario and Newfoundland & Labrador, a partnership with a hot condo company out of Toronto, and an overall tighter focus on operations: Halifax’s Killam Properties is on a roll.
During the third quarter of 2013, Killam maintained a strong buying streak, completing $42 million worth of acquisitions. Killam’s main purchase was a new Toronto building with 179 rental units and 21, 242 feet of retail space.
Dale Noseworthy, Killam’s vice-president of investor relations and corporate planning, said the company has roughly 14 per cent of Atlantic Canada’s rental market share.
“In order to continue to grow, we see Ontario as having the most apartments across Canada, and strong immigration,” she said.
“We think long-term it’s a good market to be in.”
Acquisitions in Atlantic Canada
Closer to home, Killam bought a 50 per cent interest in a development site on Barrington Street in downtown Halifax. The $1.8 million purchase secured Killam a partnership in the development of the six-storey, 143-unit building in which half of the units will be condominiums and the other half rental.
Known as the Southport Lofts, the development is the latest entrant in Halifax’s quickly growing downtown condo market. Killam’s partner is Toronto development firm Urban Capital, which is venturing into Nova Scotia for the first time.
Construction of the project is expected to begin in the second half of 2014. Urban Capital will sell 73 of the units and Killam will own and manage the 70 residential apartment units.
Including the Q3 acquisitions, Killam has bought $106.1 million worth of properties: $99.2 million in apartment acquisitions and $6.9 million in land approved for three future apartment developments.
Sale to CAPREIT
To help fund future growth, Killam is divesting itself of a manufactured home community portfolio in New Brunswick, totalling 2,308 sites for a sale price of $69 million.
Killam has sold the portfolio to Canadian Apartment Real Estate Investment Trust (CAPREIT), which in early November announced it was purchasing approximately 2,000 manufactured homes in Northern New Brunswick, Fredericton and Saint John.
Killam invested $44.3 million to acquire and enhance the New Brunswick portfolio over the last decade. Noseworthy said the manufactured homes have since become a smaller part of the company’s overall portfolio. At one point, they represented 25 per cent of Killam’s portfolio, but with the firm’s concentration on apartments, it was closer to 18 per cent.
“It was an opportunity to realize the value creation we’ve had there and we expect to use the funds to acquire additional apartments,” Noseworthy said.
Upbeat about St. John’s, N.L.
The company also announced it’s starting its second development in the booming, St. John’s, N.L., market. Killam is developing a 101-unit building adjacent to its recently completed Bennett House (shown in image). The new building will cost approximately $21.2 million and is expected to be completed in Q3 2014.
Bennett House is a luxury apartment building in the Pleasantville neighbourhood of St. John’s overlooking Quidi Vidi Lake. The building’s amenities include a 16-seat theatre, a library, lounge space and underground parking. The building contains 71 units.
According to Noseworthy, Killam is upbeat about the Newfoundland & Labrador market. “It’s got the most strength of any of the Atlantic Canadian markets, so I think it’s very reasonable to expect we’ll continue to develop there.”
She said apartment growth over the last four years has been particularly strong. At the same time, the average apartment in St. John’s is cheaper than in Halifax, while house prices for a single-family home in the Newfoundland & Labrador capital have surpassed those of Halifax. “Rental has increased substantially there, certainly leading Atlantic Canada.”
In its Q3 report, the company noted that it faced higher than usual vacancy pressure over the last two years because of the surge in new multi-family rental construction in Charlottetown, Moncton and Halifax.
As a result, Killam increased its number of leasing agents, beefed up its marketing and increased incentives at specific properties. The actions paid off for the company as it announced it ended the quarter with 97.1 per cent occupancy, up from 94 per cent at the end of the second quarter.
Killam owns and operates 12,528 apartments in five provinces.