Edmonton-based Nearctic Property Group has launched Nearctic Industrial Real Estate Investment Trust (NI REIT) to invest in multi-tenant industrial properties across Canada with hopes to expand its seed portfolio into a $1 billion entity over time.

Nearctic Property Group was founded by chairman and chief executive officer David Kent in 1979 to undertake joint ventures in new ground-up developments, repositioning existing properties and building an income-producing property portfolio. 

It has since opportunistically acquired, repositioned, managed and developed new residential, retail and multi-tenant industrial properties, and now owns and manages more than one million square feet in assets.

Kent accomplished this largely through his own capital as well as some from high-net-worth individuals and a few limited partnerships.

The decision to start a REIT

Kent made the decision to enjoy more time with his family and pursue leisurely activities, which meant closing the chapter on actively managing his real estate business and taking a board role in a company that would carry on and become a multi-generational operation. 

The best way to do this, it was decided, was to launch a separate private REIT while still maintaining Nearctic Property Group to source existing and new multi-tenant industrial assets that will be sold to the REIT after being repositioned, developed and stabilized.

“Although we considered building on our success in multiresidential, we identified a compelling opportunity to develop a portfolio of new format, flex, multi-tenant industrial assets to fill a flight-to-quality demand for industrial businesses in the range of 2,500 to 20,000 square feet in cities right across the country,” Nearctic Property Group president and COO Sean McCullough told RENX.

“We are differentiated from other industrial REITs in that we are pursuing very specific attributes and qualities in these properties.

"We have a laser focus on that type of product, so it's that segment that we're going to work in and that's what differentiates us from larger building, single-tenant developers and owners.”

NI REIT has no plans to do ground-up development on its own at this point, according to McCullough, as it will be focused on purchasing newly built and stabilized properties from Nearctic Property Group and other developers.

Nearctic Property Group itself sold two older B-class industrial assets this year and has seven other similar multi-tenant industrial properties which it will either sell or redevelop depending on individual analyses of each one.

McCullough told RENX one property is valued at around $30 million while the other six are in the $2 million to $4.5 million dollar range.

McCullough said an offer has been made for one of the industrial properties as well as for a retail property Nearctic Property Group would consider selling.

NI REIT’s initial portfolio

NI REIT is launching with three properties totalling 298,073 square feet with a gross value of $63 million. Two of the properties – Vantage Business Park and Commerce West Business Park - have been acquired from Nearctic Property Group.

While funding for the initial acquisitions came from Kent and a small number of existing and new investors, McCullough believes there are pension funds, family offices and high-net-worth individuals that will be interested in NI REIT’s value proposition.

It will be making presentations to attract more new investors directly and will also work with investment dealers to source additional private capital.

Vantage Business Park has two buildings totalling 68,728 square feet on a 3.63-acre property at 14520 116 Ave. NW in Edmonton. It was built in 2014, is valued at $13.5 million and is 99 per cent leased. 

Commerce West Business Park is a fully leased 110,222-square-foot property at 15304 111 Ave. NW in Edmonton that was built within the last 10 years and is valued at $22.8 million.

McCullough said they both have bays ranging from 2,100 to 20,000 square feet and are well-located on main traffic arteries that offer connections to Edmonton’s downtown core and nearby consumers.

The third acquisition is a 119,123-square-foot, class-B, single-tenant property located on just under six acres at 270 Hunter Rd. in Grimsby, Ont., that’s valued at $26.4 million.

It was built in the 1980s and has a 24-foot clear height, two rows of parking and a loading apron.

It will be redeveloped and converted to a class-A, multi-tenant industrial building with a new exterior, signs, loading doors, mechanical and electrical systems, landscaping and charging stations, as well as additional glass to allow more natural light inside.

“The time frame to turn that from a B-class, single-tenant, vacant building into an A-class, multi-tenant, successfully stabilized building is very short,” McCullough said.

Goal is to acquire $1 billion in assets

NI REIT has set a target of acquiring $1 billion in assets in 10 years and McCullough would like to fill the pipeline with five more properties by the end of the year. 

“We really haven't been able to spend a great deal of time on acquisitions, so in the next 90 days we'll really focus on getting those properties that we intend to purchase next year in(to) the pipeline,” he said. 

NI REIT is working on a number of opportunities to acquire existing assets and for Nearctic Property Group to develop new buildings that will be sold to the REIT on stabilization in Winnipeg, Edmonton, Calgary, Burlington and Hamilton.

“We welcome the opportunity to build new relationships with prospective sellers, investors, investment dealers, developers, brokers, lenders, real estate professionals and suppliers that could help us grow,” McCullough said.

NI REIT’s executive team and board

NI REIT’s executive team is comprised of McCullough as CEO, Craig Shein as vice-president of asset management and Leeann Lim as chief financial officer (CFO).

McCullough will maintain his role as president and COO of Nearctic Property Group, while Shein and Lim will also keep their respective positions as VP of asset management and CFO with the company.

NI REIT’s board is comprised of: Kent; McCullough; Knightsbridge Development Corporation founder, president and CEO Will Smith; TREYL Communications Inc. president and CEO Janet Riopel; and Ken Hughes, who previously founded Alpine Insurance, was Alberta Energy Minister and Minister of Municipal Affairs from 2012 to 2014, was a member of parliament, was the founding chair of Alberta Health Services, and was a member of the board of Radicle.

Hughes currently serves as chair of Providence Therapeutics.

At this point, there’s no plan for NI REIT to become publicly traded.

“We are fortunate to have a highly competent, diverse and supportive board of trustees to govern and provide insight and vision to the REIT,” McCullough said.

“Our goal is for growth and: to execute on the opportunity to build an A-class, multi-tenant, multi-geographic, industrial and warehouse portfolio; to be peer-leading; and above all else, to provide durable, targeted returns to our investors.”