Minto Apartment REIT buys stake in Vancouver Island shopping centre redevelopment

University Heights shopping centre

Ottawa’s Minto Apartment REIT is adding to its portfolio in British Columbia with a deal to help finance the redevelopment of a shopping mall and adjoining retail property on Vancouver Island.

The firm said last week it is lending its sister company, Minto Properties, more than $50 million to purchase a Victoria-area property in a joint venture with South Carolina-based Greystar Real Estate Partners and an unnamed institutional investor.

Under the new agreement, Minto REIT is providing a $51.7-million loan to finance 80 per cent of its sister company’s interest in the project. Minto Properties and the institutional investor will each own a 45 per cent stake in the development, with Greystar holding the remaining interest and acting as the project manager.

The plan calls for the partners to redevelop a portion of an 11.5-acre site in Saanich, B.C., that’s currently occupied by the 119,000-square-foot University Heights shopping centre and a 76,000-square-foot Home Depot store.  

Under the current proposal, the joint venture will convert the mall into a mixed-use multi-residential and retail property, with five six-storey wood-frame buildings containing 593 rental suites atop more than 113,000 square feet of grocery-anchored retail. 

The property is subject to a long-term lease with Home Depot, which will be expanding its store by about 9,200 square feet and adding a new garden centre and 20,000-square-foot seasonal outdoor area.

The site is located less than 1.5 kilometres from the University of Victoria. Minto REIT said there is “significant demand for student rental housing in the area,” adding that two of the five rental buildings will specifically target students with smaller furnished suites and student-focused amenities. 

According to the Canada Mortgage and Housing Corp., Greater Victoria's vacancy rate for purpose-built apartment rentals stood at one per cent in October 2021, down from 2.2 per cent a year earlier and tied with Halifax for the lowest rate among major Canadian cities.

The project is expected to be approved this spring, with construction targeted to begin later this year or early in 2023. Once construction is complete, the REIT will have the option to purchase Minto Properties’ stake in the development at a five per cent discount on its then-appraised fair market value.  

Minto REIT chief executive Michael Waters said the investment represents an “important strategic milestone” for the company.

Low vacancy rates

“It provides geographical diversification and exposure to a strong rental market,” Waters said in a statement. “The Victoria rental market is characterized by low vacancy rates and is supported by strong population and employment growth. University Heights is located proximate to two post-secondary institutions. We see this attractive investment as a building block for continued growth in the region.”

The new agreement comes less than 15 months after the REIT’s first investment in B.C. in December 2020, when it helped Minto Properties finance Lonsdale Square, a master-planned community in North Vancouver. 

Last December, Minto REIT provided Minto Properties with a loan worth up to $19.6 million to help its sister firm acquire an 85 per cent stake in another Vancouver project that will include a six-storey mixed-use multi-residential property containing 108 suites and about 11,500 square feet of at-grade retail space.

Earlier this month, Minto REIT said it generated funds from operations of $13.2 million in the fourth quarter ending Dec. 31, up 10.2 per cent from a year earlier. The firm posted a net income of $24.9 million, an 8.4 per cent increase from the fourth quarter of 2020.