Former commercial real estate broker Erin Gibault established Headwater Projects in 2008 in order to “get into business on the landlord’s side.”

While the global recession might not have been the best time to launch a business, things have turned out well for the Vancouver-based property management firm, which now has over $500 million in assets under management and a portfolio of over 50 properties.

During the early days, Gibault said financing and liquidity were difficult to obtain for some more established competitors but, “We weren’t coming into the market with decades of preconceived biases or expectations.

"We were one of the very few companies that were looking to do some deals when everyone else had closed their books.”

The result was that there were some attractive opportunities on the market — specifically on the West Side of Vancouver.

“The commercial properties were largely family-owned local businesses. We saw a disconnect between the existing rents that these landlords were charging and what the market might bear," Gibault explained. "We could grow our portfolio by buying and then rehabilitating an asset, increasing cash flow, and managing and holding the asset for the long term.”

From Vancouver to Victoria

Headwater acquired high-street retail and apartments at a time when the Vancouver market was trading on true metrics and value around cap rates.

Geoff Dzikowski, Headwater’s director of acquisitions and asset management, points out that this is no longer the case.

“We took advantage of some great opportunities that no longer exist in the Vancouver market for a variety of reasons,” he explained. “A lot of the institutions came into the Vancouver market trying to imitate our success by using the same metrics.

"Those metrics no longer apply; they’re in it for capital appreciation and right now they’re getting negative returns.”

In 2016, Headwater applied that same discipline and buying methodology to the Victoria market which, as Gibault said, “was no longer just a retirement community. There’s strong economic growth on the south Island that presented many of the same opportunities that Vancouver did when we were starting.

"Our philosophy is to follow population and employment growth, which is now happening throughout Vancouver Island.”

Its properties span several commercial real estate sectors, from the commercial and retail Whistler Marketplace to the 182,000 square foot Gateway Park office property in Victoria, to the Empire Tower apartment complex at Davie and Broughton in Metro Vancouver and the mixed use The Centrum at Broadway and Bayswater. 

Geographically, it is invested in several Lower Mainland cities and communities, Whistler, the Victoria area and in the U.S. states of Georgia and Virginia.

New acquisitions in Nanaimo

Headwater’s recent dealbook includes a series of acquisitions almost 90 minutes north in the City of Nanaimo (population 100,000). Known as the Harbour City for its busy waterfront, Nanaimo is anchored by the Departure Bay ferry terminal and the Island Highway. 

“As a business, we’re focused on risk-adjusted returns. We looked at Nanaimo for several years before we made our first acquisition," Dzikowski said.

Headwater’s off-market acquisition of three purpose-built multiresidential properties in September 2021 was followed up by acquiring 78 units in three newly constructed Selby St. apartment buildings in June 2022. 

At the end of November Headwater closed on its largest Nanaimo acquisition so far, the Willow Grove Estates on Sixth St. The five-acre property includes three low-rise apartment buildings built in the mid 1980s and fully occupied at closing.

“Unlike a lot of our competitors, we’re not afraid to see the construction of new apartments aimed at attracting a more affluent demographic to the city," Dzikowski said. "There’s a big gap in rents between the new units and these older apartments that Headwater can leverage.

"We now have 360 units under management.”

Looking ahead to 2023

Looking forward to 2023, Gibault said “if this so-called recession ever happens, then we’ll all probably be poorer a year from now. Interest rates are high, the multifamily market in Vancouver is fully valued and it’s challenging to find bargains.

"I don’t think we’ll ever see a return to pre-COVID low-interest rates. We are talking to developers who face enormous pressure to build rental units, but they are being taxed heavily at every step of the way.

"We’re supposed to welcome over a half million immigrants (in 2023), but we have nowhere to house them and we’ve banned foreign ownership.

"There’s just a lot of uncertainty in the market right now."

However, Gibault remains optimistic Headwater's strategy will continue to pay dividends.

“Our disciplined, conservative strategy is based on achieving positive returns based on cash flow. We have a very stringent underwriting procedure when it comes to acquisitions; we’re really good at finding opportunities, triple-checking our numbers and doing our due diligence," he said.

"I’m a glass half-full kind of guy, but I work to ensure that we’re not just spending money because we have it. 'Buying well,' as I call it, is our best business attribute.”