Concert Properties' management will diversify the CREC Commercial Fund LP by adding multiresidential rental properties to its mix of industrial and office assets, and has renamed it Concert Income Properties LP to reflect the shift.
The fund was created in 2016 with a billion-dollar portfolio. It has since grown to 77 assets with nearly 12 million square feet of leasable area valued at more than $2.7 billion and leased to more than 500 commercial tenants.
Seventy per cent of the value is comprised of industrial properties with the remainder being office.
Forty-seven per cent of the properties owned by Concert Income Properties are in Ontario, 37 per cent are in British Columbia, 12 per cent are in Alberta and four per cent are in Quebec.
The industrial and office properties have a combined 97 per cent occupancy, but the fund’s pension plan and institutional investors have been interested in broadening the mandate to include high-rise, purpose-built rental apartments.
“In the long run, we think that makes sense,” Concert Properties chief investment officer and Concert Income Properties managing director Andrew Tong told RENX.
Fund is affiliated with Concert Properties
Concert Income Properties is affiliated with Vancouver-headquartered Concert Properties, a diversified Canadian real estate corporation launched in 1989 and wholly owned by union and management pension plans representing more than 200,000 Canadians.
Concert Properties’ overall portfolio includes condominiums, seniors' active aging communities, industrial, commercial and residential rental properties, and public infrastructure projects across Canada.
The creation of Concert Income Properties was sponsored by Concert Real Estate Corporation and Concert Properties retains a majority interest in the fund. It's supported by Canadian pension funds and institutional investors and managed by Concert Realty Services Ltd., a wholly owned subsidiary of Concert Properties.
“Our multifamily rental program will come under the wing of the fund,” said Tong. “The idea is this will be the long-term ownership platform for our multifamily rental moving forward.”
No acquisitions to announce yet
It’s very early days for the diversification strategy and no multifamily acquisitions have been announced, but Tong anticipates at least one apartment building to be purchased within the next 18 months.
Acquisitions could also include mixed-use buildings, combining purpose-built rental housing with office or retail space, according to Tong.
Apartments have remained resilient through the pandemic in the fund’s multifamily target markets of Vancouver and Toronto and Tong said it will be open to acquiring both market-priced and affordable housing rental apartments.
“We can do development, but also we have the other entity, Concert Real Estate Corporation, that could build a master-planned community where there may be a condo and a multifamily rental building,” said Tong. “It’s possible that the fund can be involved with development and we can potentially have the opportunity to purchase the completed rental building, once it’s leased up, from the development side of the company.”
It hasn’t yet been determined what ratio multifamily will eventually comprise in the overall Concert Income Properties portfolio. Tong said those decisions will depend on such factors as available locations, returns and risk profiles.
Open-ended fund with cash to deploy
Concert Income Properties is open-ended and has 30 per cent leverage, which could be increased if required.
“We have a fair amount of cash reserves to deploy and can take advantage of opportunities, which we think is advantageous right now in the market,” said Tong. “Because of our current cash-flow position, we probably need to deploy more of that before we go out for more capital raising.”
Concert Income Properties declared a distribution for investors on Sept. 30 at a time when other real estate funds were discussing halting the payments.
There are no plans for any portfolio dispositions at this point. Tong said the Concert Income Properties is in growth mode and well-positioned to make deals in all three of its preferred asset classes.
He noted the company has almost always grown during downturns in the economy during the 28 years he’s been with Concert Properties, as he said vendors want to do business with companies they can trust.
“We're prepared to buy something at a certain price. It may not be the highest price, but it's going to be a very fair price and we're going to treat somebody fairly," he said.
“That has worked well in a down market where we're seeing fewer players at the table and that's why right now we're very active on multiple potential opportunities.”