Oxford Properties Group says it made good business sense to recently buy two rental buildings in the Arbora development in Montreal, the largest residential project in Quebec with a solid wood structure.
Built with a cross-laminated timber (CLT) structure instead of steel or concrete, the Arbora project in the popular Griffintown neighbourhood south of downtown Montreal consists of three eight-storey buildings. Two of the buildings are for rental apartments and one for condos.
Oxford bought the two multi-residential buildings in the project, with 272 apartments, last fall for an undisclosed amount. The third contains 168 condos.
Arbora is located at 305 de la Montagne St. in the block bordered by William, Eleanor, de la Montagne and Ottawa Streets.
The aim of buying Arbora was “to grow at a rate that exceeds the inflation rate,” said Tyler Seaman, head of hotels and multi-residential, North America at Oxford Properties Group, at the recent Quebec Apartment Investment Conference. “Arbora fits this test.”
Arbora is in a “great location that’s getting even better, so check that box.” In addition, it’s in an area with “very strong transportation characteristics.”
One of the stations of the REM, the city’s new light-rail system now under construction, will be located in Griffintown.
Oxford’s Montreal properties
Oxford paid a market cap rate for Arbora 1 but after negotiating a pro forma deal was able to receive a bit of a discount in cap rate for Arbora 3, Seaman said. “When we looked at all of these things collectively, this is a good deal.”
In Montreal, Oxford also owns LaCité apartments in the McGill Ghetto at the foot of Mount Royal and Le Mille Neuf condo-style apartments at the corner of de Bleury Street and Viger Avenue in the downtown Quartier International district.
Arbora was designed by architectural firm Lemay and developed by LSR GesDev and Sotramont, which has developed much of the Bois-Franc residential neighbourhood in the Montreal borough of Saint-Laurent. CLT wood panels are made by cross laminating lumber with adhesives or fasteners. To manufacture the panels, three to seven layers of lumber or planks are stacked at right angles.
According to the Canadian Wood Council, CLT is well-suited to floors, walls and roofs used in mid-rise construction. Mid-rise buildings made of wood can be a less expensive construction option for builders.
The CLT panels at Arbora were made by Nordic Structures in Chibougamau, Que.
Two-bedroom units in Arbora rent for $1,840 and up, electricity not included. Units have exposed wood posts and beams and include stainless steel appliances, private balconies, en suite washer and dryer, air conditioning and nine-foot ceilings.
Amenities include a fitness room, bike storage, wine cellar, dog washing zone and electric car-charging stations. Street-level retailers in the development include a bakery, sushi shop and hair salon.
On its website, Oxford notes Arbora is certified LEED Platinum and is one of the first buildings in Quebec to be built with eco-friendly solid wood frame of CLT panels, “a proven technology known for its strength and performance in terms of energy-efficiency and acoustics.”
Pros, cons of sustainable apartments
While Oxford is a major proponent of the green building trend and sustainability, others at the Quebec Apartment Investment Conference were less enthusiastic about the merits of sustainably developed rental apartments.
William Jegher, a partner in transaction advisory services at Ernst & Young Corporate Finance, said sustainable development in rental buildings “destroys the business case. More often than not, margins are already so thin on development (that) layering on additional costs doesn’t work usually.”
Ramona Ursu, a partner and broker at Baron Realty in Toronto, was more direct: “Nobody cares” about sustainable development, she said. “The only tenants who care are office tenants who have an image to maintain. That’s it.”
Residential tenants will be in favour of sustainable development only until it costs more, said Laurence Vincent, co-president of Prével Group. The firm has developed 11,000 residential units in the last 15 years.
She added there are strategies for energy-efficiency which can be more profitable, more efficient and better for sustainable development than seeking LEED certification.
“When the end buyer sees the impact on his wallet, it becomes less sexy,” said Francis Charron, president of development firm Batimo and vice-president of EMD Construction. Charron said his firm chooses energy-efficient features in buildings only if they can provide a return on investment within five years.