Vancouver real estate investor Wendy Cheung has purchased a 263-unit apartment property in southeast Calgary from Canadian Apartment Properties REIT (CAPREIT) for just under $54 million.
And Cheung has plans to grow and increase her exposure to multifamily assets in Calgary and Edmonton.
“The reason why this deal appealed to me was there were a lot of factors . . . my thinking of having something that is more scaleable, more units at one location. That is something that I was looking for,” she told RENX. “I also liked that it is in the centre of Calgary which is a good city to be in given the location to the future LRT.
". . . As well as it comes with a lot of land. So we have about nine-plus acres . . . a massive piece of land over the 263 units, a lot of acres. I think the land itself has a good value for perhaps down the road, maybe more density, maybe more rezoning, possibly.
"That’s sort of a bonus piece for me.”
Cheung "new player" in Calgary multifamily market
Nadeem Keshavjee, president of GreenBirch Capital, which helped facilitate financing for Cheung, said the Cedar Ridge Apartments at 135 Lynnview Road S.E. sold for $53,880,000 or $204,867 per door.
“She has a number of real estate and commercial real estate holdings, but this is a notable transaction for her and she is actively looking for more,” he said. “She’s a new player in the (multifamily) market . . .
"The financing that they were able to achieve was through CMHC’s MLI (Canada Mortgage and Housing Corporation) Select program. The buyer got 95 per cent leverage and a 50-year amortization, so really attractive financing.
"There was also an element of affordable housing here. They designated 60 per cent of the units in the building to be affordable, meaning there’s a limit of how much they can raise those rents for the next 10 years.
"And there’s also an energy efficient component to it as well with a commitment to improving the energy efficiency of that project by 15 per cent.”
Cheung said the most attractive part of the deal was the MLI Select financing program.
“That was the biggest reason that the numbers worked because we were able to capture a good financing component to it and then equity outlay was affordable," she explained. "Also because the building has good income and cash flow, which has runway where the rents are creeping up.”
Cheung said she has been investing in real estate for several years. Over that time, she bought single-family homes initially and land in Surrey and Langley, B.C., long before the cities developed to the current degree.
Owns Peak Performance Investment, Alture Properties
That led her to investing in commercial real estate such as retail, warehouses, multifamily and mobile home parks.
“Back in 2008, I started my first company which is called Peak Performance Investment. Peak Performance Investment is more of a company where we buy cash-flowing real estate in B.C. and Alberta and we bought some in Fort St. John, Dawson Creek.
"We bought some in Surrey, the lower Mainland as well as Calgary, Edmonton, St. Albert, Chestermere, Strathmore.
"All which we buy are income-producing. We built the portfolio from scratch to what I would say about $20-ish million back in 2008 to 2010, and we still accumulated to 2013 then we kind of slowed down,” she said.
“But since then in 2010, I started another company called Alture Properties. That one is a bit different because we did conversions, we had some development, we built some condos in Calgary and some properties in Strathmore and Chestermere.
"We have more of a construction as well as land bank, rezoning. So it’s a little more different than the cash-flow model we had previously.”
Cheung said the Calgary apartment market remains quite tight and rents have increased substantially in recent years.
“I’ve been in Calgary for a long time. I’ve seen some cycles myself and I’ve been impacted. Currently it seems to be an upswing and sought after," she said. "I’m not really 100 per cent sure where it’s going. . . . Rents have improved probably because of inflation or other factors . . . economy.
"So because of that I think there’s a lot more interest in Calgary especially as it becomes more affordable comparatively to the Vancouver market or the Toronto market.
"We can still make the numbers work. And there’s migration, still job growth, still infrastructure improvements.”
CAPREIT acquisitions and divestments
The transaction was one of a series CAPREIT has made in recent weeks as it continues to reposition its portfolio to focus on newer assets. The REIT has made six non-core dispositions in Canada – aside from the Calgary property – for a total of $121.4 million.
Among the dispositions are three properties in Charlottetown, comprising 132 units, for $14.2 million. It also sold two Montréal properties, totalling 253 apartments, for $45.1 million.
“We continue to act on our strategic repositioning program, and we’re excited to see these latest transactions further modernize our portfolio and strengthen its operational metrics,” Mark Kenney, CAPREIT's president and chief executive officer, said in the announcement.
“In this new era of operating in the Canadian real estate market, we’re strategically refreshing our capital, our assets, and our geographical allocation to move toward a new CAPREIT 2.0. Ultimately, we’re trading quantity for quality in order to generate enhanced, sustainable returns for our Unitholders.”
CAPREIT also acquired a newly constructed rental property for $51 million. The 92-apartment asset is in Langley, B.C., and was constructed in 2022.
CAPREIT has executed on a total of $406 million in dispositions in Canada so far in 2023.
“We’ve reinvested a cumulative $213 million into new build rental properties located in targeted Canadian markets, which have strong fundamentals that support the improved risk-return profile of our portfolio in the long-term," Julian Schonfeldt, CAPREIT's chief investment officer, noted in the announcement. "We’ve also reinvested $101 million in our NCIB program year-to-date, at unit prices that represent a significant discount to IFRS NAV.”