(Bloomberg) — Hines, a real estate company with nearly $96 billion in assets under management, is pitching international investors on a Canadian apartment building deal as a way to bet on the country’s tight housing market.
The US firm is seeking to sell a 462-unit rental building in Calgary after completing construction nearly three years ago, with the expectation it will fetch around C$200 million ($147 million), according to Avi Tesciuba, head of Canadian operations at Hines.
Rents in Canada climbed last year as a longstanding shortage of housing was met with a record amount of immigration. Meanwhile, in the for-sale market, higher mortgage rates and a lack of homes being listed are squeezing buyers, exacerbating the housing crunch.
“We believe long term in Canada and it starts with population,” Tesciuba said in an interview. “The housing supply has frankly been very slow to respond to this population change, and therefore, the housing shortage that we’re seeing now is expected to intensify in the coming years.”
Calgary, the center of Alberta’s oil industry, saw a record migration to the area last year, helping push the rental vacancy rate down to 2.7%, the lowest since 2014, according to Canada Mortgage and Housing Corp.
Hines is selling the 32-story One Park Central building in Calgary to return profit to investors at a time when it believes the market is favorable. The aim is to secure a deal by the early fall. The company expects to finish construction on the second phase of the Park Central project, a 40-story tower, next year.
Finding more buyers for apartment buildings could provide more of an incentive for developers to pursue these types of projects.
“You’re taking a major risk,” Tesciuba said, referring to a developer such as Hines starting on an apartment project. “Knowing that capital will be available and interested on the exit gives you more comfort in making that big bet.”
The sale is being managed by brokerages RBC Capital Markets Real Estate Group and Avison Young.
