Mainstreet buys more apartments in city
Apartment complex deal cost firm $17M
One of Saskatoon’s biggest landlords just got bigger after paying almost $17 million for an east-side apartment complex containing 142 units, bringing its total ownership to almost 11 per cent of the city’s roughly 13,500 apartments.
Calgary-based Mainstreet Equity Corp. bought the Fairway Greens property on Edinburgh Place for $16.9 million, according to a news release from CBRE Ltd., whose National Apartment Group brokered the deal.
The publicly traded real estate company, which specializes in refurbishing “distressed” apartments, is what its chief executive officer described as a “countercyclical” investor, meaning it buys properties when economic conditions are weak.
“We look for opportunities that have a little bit of deferred maintenance where we can reposition the asset and improve the asset and improve the quality (of life) for middle-class Canadians,” Bob Dhillon said.
Mainstreet began investing heavily in Saskatchewan around the time oil prices tanked in 2014, and had as of June 30 accumulated 47 properties totalling 1,608 units, according to its most recent corporate filings.
Dhillon said in a followup email that the company has since acquired six more buildings, bringing its total number of apartments to 1,661 divided almost evenly between the city’s east and west sides.
Saskatoon’s apartment rental market has been in flux in the last few years, with almost 1,000 units changing hands as part of a creditor protection filing amid climbing vacancy rates and, for the first time in almost three decades, decreasing vacancy rates.
Colliers International reported in June that rapid construction of new apartment complexes increased the pressure on the market, leading to a record-high vacancy rate of 18 per cent. Three years previously, amid the oil boom, it was just four per cent.
The high vacancy rate has led to the city’s average two-bedroom rental rate falling 4.9 per cent, to $980 per month, during the last year, according to PadMapper, a U.S. company that monitors the Canadian rental market.
While vacancy rates have likely stabilized around 10 per cent amid a “flight to quality” — the result of depressed rental rates — investors are still paying a premium for buildings in Saskatoon, said Colliers research manager Duncan Mayer.
“Demand for apartment buildings remains strong in Saskatoon and Regina,” CBRE senior vice-president Bradley Gingerich agreed, adding in an email that investors have driven capital rates lower, offsetting rental rate decreases.
Dhillon, meanwhile, is banking on heated real estate markets in major urban centres like Toronto and Vancouver transforming smaller cities across Western Canada, where Mainstreet operates, into “lifestyle” centres where increasing demand drives up rental rates.