2019 GTA Apartments - Year of the Portfolio Sale
The Apartment Group
We have been selling apartment buildings since the early 1990's and dollar value of sales for apartments in 2019 hit an all time high at just under $2.8BB up from $1.8BB the year before. The bulk of this activity was fueled by many larger portfolio owners who for many reasons decided to sell all or some of their buildings in their portfolios. Reasons could have been based on design (ie. older families getting out of the business and exiting at the strong prices) or by strategy (ie. some selling to redeploy capital in other areas or into their existing stock).
What ever the reasons there was a premium on scale and whatever came on the market and was properly marketed sold quickly and for record breaking prices. Many buyers were entering the market and on a personal note our team on a regular basis are meeting with groups ready to deploy a lot of equity in this market but need scale and that is hard to find.
"Prices in 2019 increased by 10% on average in the GTA"
In 2019, according to data collected by the Apartment Group from various sources there were over 108 apartment transactions completed in the GTA and over 9,565 suites sold. These levels are much higher than the previous year were there were only 7,050 suites sold and only 66 deals being transacted. In fact, volumes this high have not been recorded in this market since 2013.
There is a serious lack of product on the market and the majority of deals occurring in 2019 were either direct deals or those with Buyer Agents involved finding product for their stable of Buyers. While it is a Buyer's market and Sellers feel they reign supreme we have seen many deals done in 2019 where in our opinion Sellers left money on the table. In a fast changing market values are changing constantly and dealing with one offer at a time could be disastrous.
What we have been finding out is that there is less and less focus on cap rates today. While still important, what is more important is tenant profile and building turn over. Apartment rents have gone through the roof and those buyer today and hedging on rents going even higher. However, to generate the lift and ROI they need turn over. This trend will continue into the foreseeable future. There has been more focus ow and B- and C+ locations where turnover is happening and rents can be pushed.
$850MM - $305,000 per suite - 2.75% cap rate - 27 buildings - 6,270 suites - Buyer Starlight
$230MM - $262,000 per suite - 3.5% cap rate - 3 buildings - 868 suites - Buyer Starlight and Q-Residential
$220MM - $221,000 per suite - 7 buildings - 625 suites and some townhouses - Buyer Q-Residential
$176MM - $282,000 per suite - 3.75% cap rate - 12 buildings - 625 suites and some townhouses - Buyer Starlight
$136MM - $311,800 per suite - 3 buildings - 433 suites - Buyer Starlight and Homestead
Retail Sales UP in January 2020?
Retail sales rose for the third consecutive month, up 0.4% to $52.0 billion in January. While the impacts of the coronavirus on the retail trade sector will be more noticeable in subsequent months, respondent comments for February note that business activities have been impacted.
The increase was primarily attributable to higher sales at motor vehicle and parts dealers and gasoline stations, both of which were down in December. The other nine sub-sectors, which comprise the core retail sector, collectively declined 0.3%. Sales were up in 4 of the 11 sub-sectors, representing 48% of retail trade. After removing the effects of price changes, retail sales in volume terms decreased 0.3%.
The largest contributor to the monthly gain came from the motor vehicle and parts dealers sub-sector (+1.8%). Higher sales were reported in all four store types within the sub-sector. Sales at new car dealers rose 1.5% in January to $11.3 billion, the second-highest level of sales on record.
Sales at gasoline stations were up 1.5%. In volume terms, sales at gasoline stations rose 1.2%. After outpacing total retail sales in the fourth quarter of 2019 and growing in three of the last four months, core retail sales fell 0.3% in January. Sales at building material and garden equipment and supplies dealers decreased 1.6% in January, following a 4.1% increase in December.
Ontario (-0.8%) saw its largest monthly decline in retail sales since October 2019. The decrease in January was led by new car dealers.
Rental Market Outlook GTA March 2020
Canadian Apartment Magazine - Erin Ruddy.
With March winding to a close and out-of-work Canadians unable to make rent payments, the world is suddenly a very different place. On the investment side, not much is happening given the uncertainty of how deep and long this recession could go on. Apartment sales like everything else have stalled.
According to Altus Group, major forecasters in Canada are starting to sharply reduce their outlooks for the economy, with the consensus changing day to day, but generally being that we’re headed for a technical recession, with some recovery in late fall but essentially no growth in real GDP for the year.
In Altus Group’s latest housing report, analysts are forecasting that Canada’s economy will advance by 1.8% this year and accelerate modestly into 2021. And while last year’s job growth will likely not be repeated, best estimates indicate above average growth of 230,000 net new jobs this year and 190,000 for next.
Rentals.ca and Bullpen Research & Consulting recently released their monthly rental report, looking at rental statistics across Canada. According to the latest data, the national average rental rate dropped 3 per cent month over month and 3.4 per cent year over year in February. Toronto had the highest average monthly asking rent ($2,322) for rental apartments, with Vancouver close behind ($2,155), while Saskatoon had the lowest ($985).
Tenants adhering to social distancing and self-isolation practices are required to remain at home for the foreseeable future, indicating we won’t be seeing the usual shift between tenancies that the spring months typically bring.
Additionally, immigration will temporarily grind to a halt while the borders remain closed throughout the state of emergency. Some young adults living at home, or who’d been planning a move for a job or school are now stuck, not knowing when school will resume and when, or if, their employment will start.
“We are going to see a drop-off of walk-in showings for apartments across Canada during the Covid-19 pandemic,” said Matt Danison, CEO of Rentals.ca. “Landlords and property managers will need to embrace virtual leasing as much as possible to keep their staff and potential renters safe during this difficult time.”
RECENT APARTMENT SALES
1500 Eglinton Avenue West – York – SOLD $6,000,000 / $176,000 per suite / 4.1% Cap Rate
This is a property located along the Eglinton Strip west of Marlee Avenue and comprises 34 apartment suites in a building dating from the 1950's. The building contained a mixture of bachelors and one and two bedrooms and was heated via gas fired radiant system. There was some on site surface parking and common laundry facilities. Reportedly the property had some environmental issues. The property was fully exposed and marketed and was sold to a private investor.
223 Woodbine Avenue - Toronto – SOLD $19,900,000 / $414,000 per suite / 3.1% Cap Rate
This is a mid rise walk up rental apartment building located in the Beach sitting on 0.6 acres of land. It is a masonary building with flat roof and lots of onside parking at the rear. There are a total of 48 suites and over 60% had been renovated over the past five years to a high level. Average rents here were over $1,400 per month. This sale was a direct deal and the property was not fully marketed. The asset was purchased by Equiton.
1015 Orchard Road – Mississauga – SOLD $18,150,000 / $318,420 per suite / 3.25% Cap Rate
This property is located in a prime residential neighbourhood in the Mississauga. The asset comprises of a 57 suite rental apartment building circa 1975 with elevator and 20 surface parking spaces. The 7 storey building has a brick exterior, flat roof and double windows. Hydro is bulk metered and the site is over 0.8 acres. The property was owned by a long term hold private investor who decided to sell direct to InterRent Reit.
1070 St. Clair Avenue West – Toronto – SOLD $11,330,000 / 3.4% Cap Rate
This asset is located on the northeast corner of St. Clair Avenue West and Lauder Avenue which is just east of Dufferin Street. The property is a mixed use building with retail uses on the main floor and 21 apartments on the upper floors. The building has a brick exterior, flat roof, double windows and no balconies. There is some but limited on site parking. The improvements were in great condition at the time of sale and had been fully renovated and updated in the past 5 years. This property was fully marketed and purchased by a private investor. This site has future development potential with as of right density today at 5 x FSI.
THE APARTMENT GROUP
Together the team has completed over 1,000 transactions and has sold over $5 billion in apartments and development land. Put us to work for you and see the results. NO ONE has sold more buildings then our group. Experience, knowledge and professionalism will insure you get the right deal or the highest price if you are selling.
The Apartment Group is a dedicated team of professionals specializing in the sale of multi-residential investment properties. With over 40 years of combined experience, the team brings together their strengths including strong negotiation and sales skills along with highly technical market analysis and appraisal methods.
We are a boutique Brokerage but have the capabilities of the larger houses without the overhead. We have: an internal database of over 10,500 active apartment and land Buyers; a list of all apartment building owners in the Greater Toronto Area; our web site gets over 50,000 hits a month; we highlight properties for sale through our newsletter which reaches 10,000 investors monthly.
President & Owner,
LORENZO DIGIANFELICE, AACI
Broker of Record, Owner