Toronto private investment firm High Art Capital has launched its GTA Rental and Affordable Housing Initiative, a fund expected to be capitalized with a minimum of $1.3 billion to acquire blocks of new, unsold condominiums across the Greater Toronto Area for conversion into long-term rental housing.

High Art Capital is led by managing partners Ryan Roebuck, Carey Kurtin and Matthew Kurtin along with principal Alexander Dellal. They describe themselves on the firm’s website as “experienced investment professionals with a track record across institutional investing, private equity, and platform building.”

The initiative is designed to deliver approximately 2,200 rental units in the near term, including approximately 550 affordable rentals intended to be protected in perpetuity through title-based protections and related agreements. The model is the first of its kind at this scale in the GTA, according to Roebuck, who wrote responses to questions emailed by RENX.

“It emerged in response to a very specific market condition in the GTA: a record level of newly completed, unsold condo inventory at the same time the region still faces a shortage of rental housing, especially affordable rental housing close to where people work,” Roebuck wrote. “We have seen serious interest because the underlying market conditions are real. There is a meaningful overhang of newly completed, unsold condo inventory in the GTA.

“That inventory is trapping liquidity and weighing on future starts, and this initiative offers a structured path to convert qualifying blocks into long-term rental housing.”

The initiative’s affordable component

Affordable rents are expected to be set at the lower of: either 25 per cent below local market rent; or 30 per cent of median gross household income across the GTA.

“The affordable units are intended to serve the GTA workforce, including essential workers and other full-time workers who may be priced out of market rents, but do not qualify for rent-geared-to-income or other subsidized programs,” Roebuck wrote.

“This is not a social housing conversion model. It is a professionally managed rental housing model with a workforce-affordable component, with day-to-day leasing and tenancy management handled by established operators.”

High Art Capital will engage an unnamed not-for-profit organization to allocate the affordable units to eligible applicants.

Building Ontario Fund is involved

The fund is anchored by a commitment from Building Ontario Fund (BOF) of up to $300 million in mezzanine debt financing and a nominal equity investment that closed on Feb. 13.

BOF is a board-governed Crown agency with a mandate to catalyze investment in revenue-generating infrastructure projects across Ontario. It’s backed by $8 billion in funding from the province and supports projects in six priority areas:

• affordable and student housing;
• long-term care;
• energy;
• transportation;
• critical minerals; and
• municipal and community infrastructure. 

“This project was made possible by BOF's participation, requiring no development charge, tax waivers, or direct subsidies to realize its affordability objectives,” BOF chief executive officer Michael Fedchyshyn said in a media release. “This type of innovative approach, a first of its kind at this scale, is exactly why BOF was created."

“Aside from BOF’s commitment, the broader capital stack is expected to include approximately $300 million of targeted private equity from private capital sources and approximately $733 million of targeted senior debt from Canadian banks, bringing the platform to a minimum expected capitalization of $1.3 billion,” Roebuck wrote.

Roebuck didn’t answer a question regarding targets for returns they’re seeking to generate for investors.

Open and competitive market process

High Art Capital will run an open and competitive market process to acquire eligible units. Eligible submissions must contain blocks of at least 10 vacant units in registered residential or mixed-use condo buildings completed on or after Jan. 1, 2023 and located in Toronto or the surrounding regions of Durham, Halton, Peel or York.

“We are not disclosing public pricing parameters or target discounts,” Roebuck wrote. “Units will be evaluated through the market call based on location, quality, unit mix and purchase price, with the objective of maximizing both value and affordability across the portfolio.”

The portal for submissions is open and further details are available through High Art Capital's website. 

“We have launched an open and competitive market call and are not naming specific properties or individual submissions at this stage,” Roebuck stated in his email. “The market call is focused on newly built residential condominium units, including stacked towns.”

The fund will be managed by High Art Capital and the landlord will be High Art Capital LP or a nominee of that entity.

High Art Capital intends to engage Del Condominium Rentals, part of the Tridel Group of Companies, and Menkes Condominium Rentals to manage leasing and tenancies as well as to work with the not-for-profit partner to support eligibility and allocation for the affordable units.