Tricon, CPP Investments form C$500m Toronto multifamily development JV

Tricon, CPP Investments form C$500m Toronto multifamily development JV

Tricon Residential Inc. and Canada Pension Plan Investment Board (CPP Investments) have formed a joint venture to invest in build-to-core multifamily rental projects in the Greater Toronto Area.

The joint venture will provide up to C$500 million of equity capital, including up to C$350 million from CPP Investments (70%) and up to C$150 million from Tricon (30%), allowing for the expected development of 2,000-3,000 units at a gross development cost of approximately C$1.4 billion, including leverage.

The joint venture plans to develop rental apartments, located close to major transit and employment nodes, intended for a long-term hold by the JV.

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Tricon will serve as the developer, asset manager and property manager of the JV projects.

“We are excited to partner with CPP Investments, one of the world’s largest and most respected institutional investors, to grow our Toronto multifamily development platform. The joint venture will increase the stock of private rental housing, a stated goal of the City of Toronto and Provincial Government, and will play an important role in enhancing the City’s vibrancy and livability,” said Gary Berman, President and CEO of Tricon Residential.

Toronto’s compelling long-term rental fundamentals are firmly in place, including high population growth, a diverse economy, and increasingly stretched home prices. The current dislocation we are seeing in the land market presents an opportunity to source attractive development sites and provide high-quality rental apartments that respond to the needs of today’s renters, with relatively large livable suites, extensive amenities, and lifestyle programming (including virtual offerings) that contribute to a sense of resident community.”

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The joint venture’s first project has been placed under contract and is located in Toronto’s Downtown East neighbourhood. The development  is expected to  consist of two towers totalling 870 units on a 1.8 acre site, and will feature a mix of 1, 2, and 3-bedroom units as well as an amenity package that includes a commercial quality fitness facility, rooftop garden, outdoor pool, 24/7 concierge, automated parcel management system, bike lockers, and a half-acre public park. The location is a short walk to a future Ontario Line subway station, and benefits from convenient walking proximity to the downtown Toronto Central Business District. The total development cost is expected to be approximately C$600 million, including approximately C$192 million of equity capital contributed from the JV, of which Tricon’s share is approximately C$58 million. Construction is expected to commence on the site in early 2022 with completion expected in 2025, pending closing of the transaction.

“The Greater Toronto Area continues to experience significant undersupply of purpose-built rental properties, and even less stock of modern, institutionally owned and operated rental properties,” said Hilary Spann, Managing Director, Head of Real Estate Americas, CPP Investments.

“We see a long-term opportunity to build and invest in properties alongside Tricon, a well-respected owner, developer and operator in the region, to meet this need with newer multifamily properties in transit-oriented locations.”

The joint venture is expected to allow Tricon to scale its Toronto-based multifamily portfolio to above 7,000 units in partnership with a likeminded long-term investor and maintain an active development pipeline as nearly 1,300 units are constructed and stabilized over the next two years.

Tricon expects to maintain its capital allocation below 10% for development activities, with over 90% allocated towards stabilized rental assets.