Edmonton-based Yorkton Equity Group Inc. (YEG-X) is focused on accretive acquisitions of multi-family rental properties in strategic markets across Canada, with a focus in British Columbia (Penticton, Kelowna, Metro Victoria and Fort St. John) and Edmonton.
In just over two years it has acquired eight properties and built an asset value of about $100 million.
Ben Lui, president and CEO of Yorkton, said the company is broadening its investment strategy from mid-market rental properties to include luxury rental properties that are tailored to more affluent renters.
“We look forward to continuing our accretive acquisitions to diversify our portfolio with additional high-quality properties of a similar size," he told RENX, "and believe that our experience and ability together with access to favourable mortgage financing will position us well to continue the rapid growth of Yorkton’s portfolio."
Yorkton acquires The Dwell in Edmonton
Its latest acquisition, for $41.736 million, is the two-building, 188-unit luxury multiresidential complex known as The Dwell on about 3.31 acres of land in the Schonsee neighborhood of Edmonton.
The property was built in 2022, so Lui said it is expected to have low operating costs for a considerable time. It has already achieved 100 per cent occupancy, with a projected total annual revenue of approximately $3.4 million based on the current rent roll.
It is expected to yield a capitalization rate of approximately five per cent on an annual NOI of about $2.1 million, with the potential to grow in the coming years.
The acquisition is a reflection of the growth of the company, which Lui said was initially incorporated in 1989.
Yorkton’s chairman is Bill Smith, who is a former professional football player with the CFL's then-Edmonton Eskimos and a former three-term mayor of the City of Edmonton.
“We started out with small investments, investing in small properties. Then we started more multifamily investments," he noted.
"After 30 years of real estate investment, we started a development project in early 2000, about 20 years ago, building houses and then multifamily, but at the same time we have been investing in rental properties and also some land for long-term development."
In 2020, the company went public, and is now traded on the TSX Venture exchange.
“We set up a new entity Yorkton Equity Group Inc., and that company is mainly involved in rental. No development. We might consider something . . . since that group incorporated, we started buying properties," Liu continued.
"In the last couple of years, we were quite happily looking for rental properties in B.C. and then starting last year, because of the inflation, we figured that operating costs . . . were going up so we stopped buying property in B.C. because of rent control.
"We came back to Alberta to buy real estate property.”
Substantial revenue growth in 2022
In late November, the company reported its financial results for the nine months ended Sept. 30, 2022.
The company said its third-quarter financial results showed substantial revenue growth from $579,667 in the first nine months of 2021 to $2,256,380 in the first nine months of 2022.
Total assets have grown from $14.2 million at inception of becoming a public company to $58.1 million at Sept. 30, 2022.
Lui said the portfolio today is worth about $100 million and the company will continue to acquire more property with an increase in assets of $50 million to $100 million per year, depending on the economy.
“We continue to look across Canada for acquisition opportunities; however our current focus has now turned to Alberta which has no rent controls, no provincial sales tax, a relatively low cost of living and reasonable cost of housing, thereby giving landlords the maximum flexibility in setting rent to reflect business metrics and market conditions," Lui noted.
"We believe that strong population in-migration to Alberta will continue due to abundant job opportunities and the low cost of living, especially in the current inflationary environment,” said the company.
Yorkton plans to continue with future property acquisitions leveraging its lender relationships and Canada Mortgage and Housing Corporation lending programs to obtain favourable mortgage terms.
The company expects overall demand for residential rental units in Canada will remain strong due to the current high mortgage interest rates and strict mortgage qualification requirements – both of which are driving many Canadians away from home ownership into the rental property market.
Also, the Canadian government plans to admit approximately 1,450,000 new immigrants to Canada, the vast majority of whom are expected to rent before contemplating home ownership.
This is favourable to Yorkton’s multiresidential rental property business model.
“We love residential rental because we have been owning and managing residential rental income property for over three decades. We do know the metrics, the economic metrics and we are strong in property management,” Lui said.
“We feel that residential accommodation is low-risk because it is a basic necessity and figuring in the net migration of people moving into Alberta, really the major cities of Calgary and Edmonton, that’s why we’ve been enjoying a very low vacancy rate because of the inflationary environment.
"We’ll be able to raise the rent and for those higher-end tenants they will have no problem with the rent increase.”