CEO Mark Kenney said the capital will “likely be an active market” for CAPREIT as it continues to pursue its strategy of buying into new construction projects.
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Canada’s largest publicly traded real estate investment trust has sold its stake in three aging Ottawa rental apartment complexes for more than $136 million as it shifts its focus to newer properties. Canadian Apartment Properties REIT (CAPREIT) announced last week it divested its 50 per cent ownership share of Alta Vista Towers at 1545 Alta Vista Dr., Riverview Place Apartments at 180 Lees Ave. and Wellington Towers at 1265 Wellington St. for $136.25 million. As part of the deal, CAPREIT also transferred outstanding mortgage balances worth a total of $38.7 million to the buyer. The company said the cap rate was in the mid-three per cent range. The three buildings, which were constructed between 1969 and 1981, contain a total of 1,150 residential suites. In a news release last week, the company said the buildings require “ongoing capital expenditure to support their current growth profiles.” CAPREIT did not identify the buyer. The buildings are managed by Ottawa-based Paramount Properties, and the Real Estate News Exchange reported last week that CAPREIT owned the properties in a joint venture with the local firm. Paramount did not immediately reply to requests for comment on Monday. CAPREIT president and chief executive Mark Kenney told OBJ the sale was part of the company’s ongoing effort to jettison older assets in favour of investing in more modern properties in the “mid-affordable” range. Kenney said the firm has no immediate plans to sell any other local properties, describing last week’s transaction as a “unique situation” because CAPREIT co-owned the buildings in a joint venture. “We’re focusing exclusively on new rental construction,” he said, adding the REIT remains bullish on the Ottawa market and hopes to announce several projects in the region “if all goes to plan.” Kenney said the capital will “likely be an active market” for CAPREIT as it continues to pursue its modernization strategy. According to the Canada Mortgage and Housing Corporation’s latest rental market report released last week, Ottawa’s rental housing vacancy rate fell 1.3 percentage points last year to 2.1 per cent, while the average rent for a two-bedroom apartment rose 4.8 per cent. The veteran real estate executive said CAPREIT plans to channel its capital into developments that are already under construction, purchasing them from merchant builders when they are nearing completion. “Any city in Canada with a population of over 200,000 people is pretty much in a housing crisis now,” Kenney said. “Ottawa is no different. Anywhere where you see multi-family rentals being built, we’re at the table to talk about ownership.” At the same time, Kenney said the rental housing industry is facing a number of headwinds. Rising interest rates and soaring construction costs have prompted some developers to rethink their investments amid mounting fear of a looming recession. Meanwhile, the federal government has said it plans to consider “possible reforms to the tax treatment of REITs,” and Kenney worries such measures could discourage investment in firms like his. Last year, CAPREIT banded together with the four other largest Canadian real estate investment trusts, including Ottawa-based InterRent REIT and Minto Apartment REIT, to form an industry lobby group called Canadian Rental Housing Providers for Affordable Housing. “Tax doesn’t build homes,” Kenney said. “We don’t understand why they want to stop the supply of capital.”