Urbanation’s recent condominium rental report found that Toronto’s housing market is the hottest it has been in years with a year-over-year price increase of 11.8%.
The rising cost of housing in the GTA along with increased demand due to a strong labour market and continued population growth are expected to have lasting implications on Toronto’s rental market. Despite over 60,000 new condos completed over the last few years, vacancy rates have remained under 2% in downtown Toronto and average rental rates have increased by 9% year-over-year. The average condo spends only 12 days on the market, with most of the units being rented at or above asking price.
In 2016 Cranson Capital Securities (“Cranson Capital”) launched the Central Condominium REIT (“The REIT”), a portfolio of brand new condominiums located in downtown Toronto. The REIT’s experienced management team accurately anticipated the rise in Toronto’s rental market due to the limited supply and strong demand. Cranson Capital raised $7.7 million from over 150 investors to allow the REIT to purchase a total of 60 condominium units located in the downtown core. Investors have already seen their investment grow significantly since acquisition. The REIT paid an aggregate price of $20.4 million for the 60 units, 30 of which are located at Epic in the West Queen West area, and 30 of which are located at Musee in the Bathurst and Adelaide area. When compared to current market prices of similar units, the value of the portfolio is up over 17% to $24 million. When considering the 65% leverage that the REIT employs, investor’s equity is up over 40% since the time of purchase.
The REIT is capitalizing on the hot Toronto rental market and is able to lease the units at an average rate in excess of $3.00/sq ft. The REIT plans to grow the portfolio by acquiring additional condominium units in the downtown core. Based on the current portfolio, increasing market trends and projected capital appreciation, the REIT is targeting 135% total return over a 5 year period.
“Central Condominium REIT provides investors the opportunity to own rental properties in the appreciating Toronto condo market,” commented Robert Jacobs, Director and Officer of the REIT, “without having the personal liability of a mortgage or the hassles of being a landlord. The REIT takes care of all the operational responsibilities. ”
Additionally, the REIT is RRSP, TFSA and RRIF eligible, which is not possible when directly purchasing a condominium unit. Investors will receive cash distributions from the REIT on a pro rata basis, based on the number of units held. “Central Condominium REIT has already created significant value growth for investors” commented Devon Cranson, President of Cranson Capital, “the REIT is a great vehicle for investors to capitalize on the growing residential rental market in downtown Toronto.”
About Central Condominium REIT
Central Condominium Real Estate Investment Trust (the “REIT”) is a portfolio of brand new condominiums in downtown Toronto, acquired in bulk, directly from developers at or near completion at discounted prices. Led by Robert Jacobs, Director and officer of the REIT and Anthony Heller, president of Plazacorp, the REIT purchases completed condominium units with the intention of renting them out to tenants while benefiting from the growth in demand for rental units and the anticipated capital appreciation over time.
Plazacorp (“Plaza”) is one of Toronto’s most experienced residential condominium construction and development organizations with over 10,000 condominium suites either already completed or under construction. Since 1981, the Plaza philosophy of providing a high level of standard quality in every condominium built has made its name synonymous with lasting value. Plaza was among the first condominium developers and builders in Toronto to include such finishes as granite counters and floors, marble bathroom counters and floors, halogen lighting, under-mount sinks, porcelain tile, engineered hardwood floors and stainless steel appliances as standard features rather than costly upgrades. Plaza developments can be found in many of Toronto’s most desirable urban neighbourhoods including Yorkville, North Toronto, King West, Queen West, Lawrence Park, Liberty Village, St. Lawrence Market, Harbourfront, and Mt. Pleasant Village.
About Cranson Capital
Cranson Capital is a boutique investment banking firm which focuses on providing financial and advisory services to small to medium sized growth businesses. The business consists of two divisions; Cranson Capital Securities and Cranson Capital Solutions, both of which offer unique services to support our investors and entrepreneurs. Cranson Capital Securities is an Exempt Market Dealer that specializes in raising capital through private placements in real estate, growth companies and financial services. Cranson Capital Solutions is a corporate finance advisory firm which focuses on finding the right financing solutions for our entrepreneurs. For more information visit: www.cransoncapital.com