Prestigious Properties’ $10.3 million sale of a 108-unit Abbotsford, B.C., multi-family property to Mainstreet Equity Corp. will allow both companies to pursue interests in specific markets.
For Mainstreet Equity, Abbotsford remains a primary focus where it already owns 14 rental properties, while Prestigious Properties will focus its attention on Alberta.
“This was a smooth close and allows us to accumulate in one of our core holding areas, namely Abbotsford, B.C., and to generate investor returns with operational efficiencies, super low mortgages and rental upside,” said Mainstreet president/CEO Bob Dhillon.
“We are also bullish on small- to medium-sized apartment buildings that can often be acquired for far below replacement costs and that provide lower risk with more upside than brand-new or much larger often overpriced assets.”
Dhillon says part of Abbotsford’s attraction is its potential ties to Vancouver as a sub-market, particularly with the Port Mann/Highway 1 Improvement Project (PMH1 Project), which widened the highway between Vancouver and Abbotsford’s neighbour Langley, effectively cutting the commute time in half.
The age of the property, residual land on the site with the potential for added density and a strong rent format with tenants paying their own utilities also added interest, according to Dhillon.
“Abbotsford is a border town with historical growth trends. The area has value for its lower overall operating costs.”
Dhillon said the lower operating costs are due to lower property taxes compared to markets such as Toronto and lower utility costs due to milder weather.
He says the region’s migration per capita is “‘almost as good as Alberta” and Abbotsford’s place as a university town, home to the University of the Fraser Valley (UFV) and several colleges, increases potential. Abbotsford’s connections to the growth of the liquid natural gas (LNG) industry also diversifies the potential.
Meanwhile, Prestigious has directed its core focus toward Alberta.
“We identified Alberta as a market with significant long-term upside potential long ago,” president Thomas Beyer said. “The economic fundamentals have played out well over a decade and a half, with 43,000 people moving to Alberta last year just from other provinces, not even counting international migrants.
“This surge in inter-provincial migration is the biggest in 23 years and bumped Alberta’s population up by almost three per cent, lowered vacancy rates to approximately one per cent in major cities and resulted in significantly higher rents with no end in sight.”
Looking to Edmonton, Calgary and Red Deer
Vice-president of acquisitions Mike Hammerlindl said Prestigious is “looking to acquire existing multi-family apartment buildings in Edmonton, Red Deer and Calgary throughout the third and fourth quarters of 2014.”
He said the company identifies target acquisition markets by looking for job growth, real gross domestic product (GDP) growth, political stability, planned infrastructure and capital projects, transportation projects and most importantly, sustainable above-average population growth.
“In addition, we are a value buyer and target markets where buildings can still be purchased below replacement cost,” Hammerlindl said.
Acknowledging that greening buildings often involve significant cost and may not make economic sense, Hammerlindl said Prestigious is continually looking for ways to improve operational efficiencies and reduce energy and water consumption in its properties.
“We make select investments into our properties if the economics are there and there is a short payback period on the invested capital,” Hammerlindl said. “We always re-invest into our properties to improve the buildings, enhancing tenants’ lives and communities.”
Prestigious acquired the property from Transglobe in 2009 for $8.5 million.
About Presigious Properties
Prestigious Properties is a Calgary-based company that owns a portfolio of revenue-generating rental properties and land holdings located in in Western Canada and the U.S.. It is comprised of approximately 900 units and 300 acres of development land that is valued at approximately $100 million.