New Apartment New Apartment Construction in Canada

New Apartment
Construction in Canada:
What You Need To Know
Presented by:
Derek Lobo
CEO, DALA Group of Companies
New A
N
Apartment
t
t
C t ti
Construction
i occurring
is
i
across Canada!
C
d !
British Columbia
The Rise, Vancouver
Yaletown 939, Vancouver
Alberta
501 Bothwell Drive,
Drive Edmonton
4245 139th Avenue NW,
NW Edmonton
Alberta
14503 Miller Blvd NW, Edmonton
2808 22 Avenue, Edmonton
Alberta
6220 134 Ave NW
NW, Edmonton
Ontario
7303, 7305, 7307 Campeau Drive, Ottawa
Ontario
1610 Bath Road, Kingston
144 Barrett Place, Kingston
Ontario
64 Bramalea Rd, Brampton
105 Harrison Garden, North York
Ontario
925 Bay St, Toronto
Jazz, Toronto
Minto Roehampton, Toronto
Ontario
100 & 200 Eagle Street, Cambridge
Ontario
Sugarcreek Village, London
Montreal, Que.
345 de la Gauchetiere
1009 de Bleury
Montreal, Que.
180 Keystone
y
Crescent,, Leduc
•$32,800,000
$280,341/unit
117 units
•$33,000,000
$241,000/unit
137 units
•$26,450,000
$222,270/unit
119 units
•$20,250,000
$191,038/unit
106 units
•$58,000,000
$190,000/unit
306 units
Four Questions You Need to
Answer:
1 Should
1.
Sh ld you b
build?
ild?
2 What should you build?
2.
3. How much can yyou charge?
g ((rents))
4. What is the depth-of-market?
Should You
Build?
u d?
Advantages of Multi-Family
Investment
• “Investors are looking at good risk reward ratios,
above that of bonds that are less risky than the stock
market.”
k ”
• “Multi-familyy represents
p
an excellent defensive p
play,
y
especially for institutional managers, calculating
future beneficiary payouts.”
• “Multi-family is no longer considered a quirky asset
class. Apartments have gained respectability,
apartments
t
t are going
i mainstream.”
i t
”
Supply is still the key to success of
investing in apartments.
apartments
Industry icon Preston Butcher, of Legacy
Partners, made the following
f
i statement:
“When apartments fail, 25% of it is due
to recession
recession, and 75% of it is due to overover
building.”
Apartments
p
are ((1)) attractive and ((2)) should
withstand a downturn in the economy because of
the following characteristics:
1. Construction activity can be halted quickly.
2 Short
2.
Short-Term
Term leases (seldom exceeding 1 year) allow multi-family
multi family
owners to react quickly to changes in market conditions.
3. No one tenant occupies a dis-proportionate amount of space.
4. The outlay for capital expenditures is predictable.
5 Everybody needs a place to live.
5.
live
6. Renting offers flexibility.
7. When
h the
h economy is
i strong, a more rapid
id household
h
h ld formation
f
i
offsets an increase in home ownership activity.
What Should
You
ou Build?
u d?
A+ Class:
Concrete Construction
Photo: Smithliving
A+ Class:
High Density Stick-Built
A+ Class:
Garden Apartments
How Much
H
M h
Can You
Ch g ?
Charge?
Rental Analysis
ADDRESS SQ.FT.
RENT
SQ. FT.
AGE
LOC.
DRYER
AMEN
SIZE
AMEN
Rental 1
800
$
1,500
$
1.85
$
160
$
-
$
60
$
75
$
(50) $ 100
Rental 2
1050
$
1,700
$
1.62
$
210
$
-
$
60
$
50
$
(200) $ 100
Rental 3
805
$
1,800
$
2.24
$
161
$
-
$
60
$
50
$
(50) $
Rental 4
605
$
1,495
$
2.47
$
121
$
50
$
60
$
50
$
Rental 5
655
$
1,300
$
1.98
$
131
$
50
$
60
$
50
Rental 6
600
$
1,200
$
2.00
$
120
$
50
$
60
$
Condo 1
750
$
2,200
$
2.93
$
75
$
(25) $
60
Condo 2
600
$
1,995
$
3.33
$
60
$
(50) $
Condo 3
750
$
1,630
$
2.17
$
75
$
Condo 4
730
$
1 845
1,845
$
2 53
2.53
$
73
Condo 5
837
$
2,050
$
2.19
$
Condo 6
750
$
2,300
$
3.07
Condo 7
852
$
1,595
$
Rental 7
850
$
1,550
Condo 8
600
$
Rental 8
650
Rental 9
UTIL.
RENT
(88) $ 2.20
$ 1,757
$ (116) $ 1.72
$ 1,804
50
$
(89) $ 2.46
$ 1,982
-
$ 100
$
(67) $ 2.99
$ 1,809
$
-
$ 100
$
(72) $ 2.47
$ 1,819
50
$
-
$ 100
$
(66) $ 2.52
$ 1,514
$
50
$
(25) $
50
$
(83) $ 3.07
$ 2,302
30
$
25
$
-
$
50
$
(66) $ 3.41
$ 2,044
(50) $
60
$
25
$
(25) $
50
$
(83) $ 2.24
$ 1,662
$
(50) $
20
$
50
$
(25) $
50
$
(80) $ 2.58
2 58
$ 1,883
1 883
94
$
-
$
20
$
25
$
(75) $
50
$ (103) $ 2.20
$ 2,061
$
75
$
-
$
20
$
25
$
(25) $
50
$
(83) $ 3.15
$ 2,362
2.45
$
65
$
50
$
20
$
25
$
-
50
$
(72) $ 2.66
$ 1,733
$
1.82
$
170
$
50
$
60
$
75
$
(50) $ 100
$
(94) $ 2.19
$ 1,661
1,300
$
2.50
$
60
$
-
$
25
$
-
$
50
$
(66) $ 2.62
$ 1,589
$
1,350
$
2.09
$
130
$
(50) $
60
$
50
$
-
$ 100
$
(72) $ 2.43
$ 1,578
700
$
1,200
$
1.71
$
140
$
50
$
60
$
75
$
(25) $ 100
$
(77) $ 2.18
$ 1,523
Average
734
$
1,650
$
2.29
$
113
$
4
$
45
$
46
$
(32) $
$
(81)
CLIENT
600
$
1,437
,
$
2.40
$
-
$
-
$
-
$
-
$
-
$ -
$
-
$ 2.40
$ 1,437
,
CLIENT
655
$
1,581
$
2.41
$
-
$
-
$
-
$
-
$
-
$ -
$
-
$ 2.41
$ 1,581
CONDO ON 721
$
1,889
$
2.64
$
72
$
(16) $
31
$
(22) $
50
$
(80) $ 2.74
$ 1,954
746
$
1,458
$
1.98
$
149
$
$ 58.00
$
(42) $
94
$
(82) $ 2.35
$ 1,716
RENTAL O
$
22
$
-
29
60.00
$
$
74
$
SQ.FT.
Testing
T
ti Optimum
O ti
Rent
R t Levels
L l &
Absorption
p
Rates:
“If You Build It They Will Come”
• Effective Signage to Generate Inquiries to our
Call Center.
• Preliminary
i i
Advertising
A
i i to Gauge
G
“Rental
“
Demand” and “Rent Ceilings”.
• Questionnaires to Competitive Property
Tenants.
• Q
Quantityy Absorption
p
Rates.
• Begin Building the Priority Waiting List.
Absorption Studies
Absorption Studies (Cont.)
Absorption Studies (Cont.)
Testing Higher Rents:
• Ready To Rent Apartments
• Mystery Shop On-Site Staff
• Closing Ratio Of 20% to 30%
Telephone/Visits/Renters:
p
Phone Calls
100
Appointments Booked
60
Vi it
Visit
Rentals (Leases)
50
10-15
What iis the
Wh
h
Depth-ofM k ?
Market?
Apartment Demand and Rent
Growth are a Function of:
1. Job Growth
2. Population Growth (Internal and External Migration)
3. Income
4. Housing
g Prices
5. Vacancy Rates
6 Apartment Construction
6.
7. Diversified Economy
8. Political Stability
Barriers To Entry:
1 24 hour cities are supply-constrained
1.
supply constrained.
2. The advantage of supply-constraint even supercedes
th coveted
the
t d jjob
b growth
th th
thatt apartment
t
td
developers
l
look for.
3. Investments in Barrier-To -Entry markets hold value
better in declining markets, and increase more in
strong economic times.
Unique Neighbourhoods:
1 Prized neighbourhoods draw the executive pool,
1.
pool
and keep cities vibrant.
2 IInvesting
2.
ti iin multi-family
lti f il communities
iti in
i these
th
neighbourhoods will yield good returns.
3. Chicago’s Lakeshore Drive and San Francisco’s
Knob Hill cannot be duplicated. Neither can Yorkville,
Bloor West Village and the Beaches in Toronto.
Thank You
S l Deo
Solo
D Gl
Gloria
i