1629 Haro St. in Vancouver’s West End is one of two apartment buildings purchased by Starlight Investments. (Courtesy CBRE)

Toronto-based Starlight Investments has purchased two Vancouver-area rental apartment buildings as it continues to scale up its West Coast holdings.

The deal, brokered by CBRE, was worth $43.5 million and saw Starlight buy a 40-unit concrete building at 1629 Haro St. in Vancouver’s West End. That deal was the first concrete apartment building sale in the City of Vancouver during 2019, according to brokers CBRE.

The second component of the transaction is a 113-unit wood-framed low-rise building at 720 Queens Ave. in the Vancouver suburb of New Westminster.

Lance Coulson, an executive vice-president with CBRE, represented the seller — a local family which had owned the properties for years.

Concrete high-rise rental apartment buildings are a rarity in Vancouver where most apartments are low-rise wood structures, Coulson said.

“They don’t come up that often,” Coulson said. “The company is getting scale in Vancouver with these acquisitions, as well as operational and management efficiencies. There’s a lot of value in what they’re accumulating right now.”

Apartment market slowed in 2019

Vancouver’s rental apartment building market has slowed remarkably this year compared to 2018. Last year, total apartment transactions for the region totaled $1.4 billion, according to CBRE. This year, accounted-for deals so far total just under $736 million.

Coulson said the 2019 totals could end up between $900 million and $950 million.

The slowdown is mostly due to provincial and municipal government turnover in 2018, coupled with a wide range of new or proposed government policies designed to increase protections for tenants and make it tougher for owners to evict residents for renovations or redevelopments.

Investors have been trying to get a handle on the changes – and the potential consequences.

“There was a wait-and-see attitude,” Coulson said.

Some of that sentiment remains in the market, especially for smaller, private investors looking at aging product with lower rents, he said.

However, activity has started to normalize over the past 60-90 days.

Starlight likes Vancouver demographics

Starlight Investments has also purchased this 113-unit, wood-framed low-rise at 720 Queens Ave. in the Vancouver suburb of New Westminster. (Courtesy CBRE)

Starlight confirmed in an email to RENX that the Vancouver area remains one of its target markets.

“Starlight has been very active in the Greater Vancouver Area over the past 24 months, having purchased approximately 1,000 units in a number of strategic areas including in the downtown, West End, North Vancouver, Burnaby and New Westminster,” said Lauren Kenney, a spokesperson for Starlight.

She said Starlight likes Vancouver’s compelling demographics and economic fundamentals, including a supply-and-demand imbalance for rental homes. (The city’s official rental vacancy is barely above zero.)

Starlight has $5.6 billion assets under management in its Canadian multifamily portfolio, according to its website. In Canada, Starlight owns 400 properties with 23,000 units in five provinces.

This deal brings its British Columbia apartment portfolio to seven buildings.

Right-priced properties are selling

Compared to the recent peak in pricing, the market now has a little more product for sale, Coulson said.

“The properties that are priced accordingly with the market that we’re in right now are moving.”

He said sellers trying to achieve prices they might have attracted 12 to 18 months ago, however, are not having much luck. However, there are large-scale investors and institutions, such as Starlight, that are hungry for assets.

“The average apartment building in Greater Vancouver is about 20 to 25 units,” he said. “So, to come here to buy one building or two buildings at 20 units doesn’t make a lot of sense for them.

“They really need to get in there and get something preferably 75 units up, and that’s been a challenge.”

Slowly but surely, new purpose-built rental buildings are starting to complete and that could contribute to more activity in the market.

“I actually have sold two of them this year to an institution,” he said. “They can come in now and buy buildings that are 90 or over 100 units, so they’re getting the scale and the buildings are new, cutting down on the capital expenditures.

“That’s a new way they can get into the market.”