Crestpoint Real Estate Investments Ltd. and Hopewell Development have partnered to acquire a Winnipeg portfolio of four small-bay industrial buildings totalling 167,000 square feet for $24.5 million.

The Crestpoint Core Plus Real Estate Strategy has a 90 per cent stake in the portfolio while Calgary-headquartered Hopewell has acquired the remaining 10 per cent and is providing property management services.

Hopewell has developed more than 20 million square feet and has an additional 18 million square feet in active projects. The full-service development company has more than $1 billion in assets under management in Western Canada and oversees property management for over 16 million square feet of space.

“We've known Hopewell for quite a while,” Crestpoint executive vice-president and head of asset management Max Rosenfeld told RENX in an interview that also included executive VP and head of investments Scott Antoniak and client relations director Elizabeth Steele.
 
“That relationship has been a very good one for us and we were interested in them managing the property. They know the market well, and they liked the opportunity as well, and wanted to be a part of it from an equity perspective.”

The Winnipeg portfolio

The four Winnipeg buildings were built between the 1960s and earlier this decade and are fully leased to 13 tenants. All but one of the buildings are multi-tenanted and they feature a mix of dock-level and grade-level doors. 

The properties are located on just over nine acres of land in the northwestern Winnipeg industrial node and offer convenient access to major highways, Winnipeg Richardson International Airport and public transit.

The vendor has not been identified.

“We think we're buying good product that’s well-located with some upside on the rent since the tenants have been there for a while,” Rosenfeld said. “It's not a huge value-add. It's really stable, good product that we think we can capture some upside on and manage a little bit more purposefully.”

“We acquired this at well below what it would cost to replace it,” Antoniak added. “It would cost you in the high $100s a foot to build this and we're well inside that, so that's important when you think about leasing.”

This is Crestpoint’s third industrial acquisition in Winnipeg and brings its holdings there to approximately 500,000 square feet. Rosenfeld said Winnipeg is a steady, stable and predictable market that complements the Crestpoint Core Plus Real Estate Strategy from a portfolio management perspective.

“There's a dependable tenant base, especially for this smaller-bay product,” Antoniak said.

Crestpoint’s industrial strategy

The industrial asset class has cooled somewhat over the past couple of years after being red hot earlier this decade, but Crestpoint still likes it.

“It’s just underwritten differently today than it was 12 months ago,” Rosenfeld explained. “It's still, from a fundamentals perspective, a very good market with no sort of existential threats. 

“It's a market where you were seeing 10-plus per cent, and in some cases 30 per cent, rental rate growth. And it's now more of a flat rental rate growth market or an inflation rental rate growth market generally across the country. If you can adjust to that and still make sense of an investment, then we're still happy to participate in that.”

“The days of wild appreciation in rents and values are probably behind us, at least for a little while, but if we're underwriting to a stable, long-term hold with an asset we like, and with a depth of tenant opportunity, then we're comfortable in the industrial space across the country,” Antoniak said.

Other asset classes

Toronto-based Crestpoint is a commercial real estate and mortgage investment manager that’s part of Connor, Clark & Lunn Financial Group, a multi-boutique asset management firm whose affiliates collectively manage more than $139 billion in assets for individuals, advisors and institutional investors.

While Crestpoint is currently highest on the retail asset class — particularly grocery-anchored and necessity-based open-air shopping centres — it also likes multifamily and industrial.

“Office is obviously the one that's a little tougher to underwrite but, even there, it's still a fundamental part of the ecosystem,” Rosenfeld said. “We don't think there's anything broken there from a market perspective, it's just a little harder to find the right asset. 

“I don't know that we'll do anything there, but you never know. We're starting to look at it for the first time in a while.”

Rosenfeld said the pipeline for acquisition opportunities is starting to fill and he likes what he’s seeing from both core-plus and opportunistic strategy perspectives. He expects acquisition activity to pick up from 2024, which was generally slower for the entire industry.

“We’ll be active on both sides of the ledger,” Antoniak said. “We have a fairly robust pipeline of assets we're close to acquiring and also that we're evaluating. And on the disposition side, we’ll be active as well as we prune and improve and balance the portfolio, as any kind of prudent manager would.”

Crestpoint Opportunistic Real Estate Strategy

The Crestpoint Opportunistic Real Estate Strategy was established in the second quarter of last year. The company’s first closed-ended fund has the flexibility to invest across Canada in a variety of asset classes and capital structures, primarily value-add properties, development projects, debt instruments and public equities attached to underlying real estate.

The fund’s primary objective is generating capital appreciation over its eight-year term. It has a 15-plus per cent return target compared to the eight to 11 per cent return target for the Crestpoint Core Plus Real Estate Strategy.

“We've raised about a quarter-of-a-billion dollars in equity for that,” Rosenfeld said of the opportunistic fund. “We've done our first investment in a Vancouver residential development, where we're partnered with somebody and have a structured deal that we quite like.”