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LaSalle, TAS in $120M Toronto JV: 'Core real estate with a soul' – Real Estate News EXchange

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A 130,000-square-foot light industrial building on 7.5 acres at 55 Milne Ave. in Scarborough is one of three properties acquired by a new LaSalle Canada, TAS joint venture. (Courtesy LaSalle Canada Property Fund)

A new forward-thinking joint venture between LaSalle Investment Management Canada’s LaSalle Canada Property Fund (LCPF) and TAS has purchased its first three properties in Toronto for an undisclosed price.

The acquisitions represent the first phase of the 50/50 partnership that’s initially targeting the deployment of $120 million focused on adaptive re-use, lease-up and stabilization of properties in up-and-coming neighbourhoods throughout Toronto.

“These are assets that are largely under-leased or vacant older industrial buildings that are in great gentrifying areas with good demographics and good transit fundamentals,” LaSalle Canada chief executive officer John McKinlay told RENX.

The investment thesis for the joint venture is underpinned by environmental and social best practices, he said, while still delivering attractive overall investment returns.

The goals are to:

– improve the acquired properties’ energy efficiency and reduce carbon footprints through adaptive re-use instead of demolition and new construction;

– and promote social initiatives anchored by the transformation of former industrial buildings into lively community hubs in partnership with small businesses and charitable and not-for-profit organizations, some of which will pay below-market rents.

“It’s core real estate with a soul,” said McKinlay.

Genesis of the LaSalle, TAS joint venture

While McKinlay and TAS president and CEO Mazyar Mortazavi were previously acquainted with each other, in an interview with RENX both men named LaSalle Canada senior vice-president of acquisitions Mike Cornelissen and TAS chief investment officer Khan Tran as the driving forces behind creating the partnership.

“We can see gentrification as an opportunity to leverage the character and quality of a neighbourhood and ensure that, as things change, the community is respected and empowered,” said Mortazavi.

“Through this partnership, we are pursuing and identifying opportunities in neighbourhoods for commercial properties that can have a dual role of creating value from an investment strategy but, more importantly, leveraging the assets to drive impact within the neighbourhoods and communities that live in them.

“This is core to TAS’ philosophy of being an impact company first and using real estate to drive social impact.

“It’s that alignment between ourselves and LaSalle that has catalyzed this partnership to identify neighbourhood-based assets to reposition and repurpose and create value through both capital and purpose to drive impact for the partnership.”

The first three properties

A two-storey, 19,000-square-foot light industrial property at 142 Vine Ave. in Toronto’s Junction area will be repositioned to an energy-efficient, in-fill flex office asset for commercial, community and arts uses.

Mortazavi said artists and technology startups are already in the building, which offers an opportunity to add density as part of its repositioning. TAS has been active in the Junction for 15 years and is a fan of the neighbourhood.

A 130,000-square-foot light industrial building on 7.5 acres at 55 Milne Ave. in Scarborough that was previously a single-tenant manufacturing facility will be repositioned into an energy-efficient, community-serving property.

“While the easiest thing would have been to find a single large tenant and do a distribution hub, we’re re-imagining this as a multi-tenanted, multi-use building and positioning it to be one of the greenest industrial buildings in the country,” said Mortazavi.

He believes the diversity of uses will add to the socio-economic diversity of tenants while making a sustainable environmental impact that will help reanimate the surrounding neighbourhood through its programming.

This 84,000-square-foot property at 772 Warden Ave. in Scarborough has also been acquired as part of the LCPF, TAS partnership. (Courtesy LaSalle Canada Property Fund)

An 84,000-square-foot property at 772 Warden Ave. in Scarborough’s Golden Mile neighbourhood, with access to public transit, will retain its light industrial character and include community-serving uses through a range of programs with a food focus.

“Scarborough has been up-and-coming for a very long time and we now see it at the precipice where it’s about to turn the corner,” said Mortazavi. “The socio-economic diversity of Scarborough is something that we’re both excited about and cognizant of.”

Attributes of the three properties

All three buildings are already zoned for the uses LaSalle and TAS are planning. They can also still be occupied and generate rental cash flow while being repurposed.

“The great thing with these assets is that they have short-, medium- and long-term optionality around them,” said Mortazavi. “We’re already in discussions with tenants and we’ve already started advancing the strategy on them.

“We’re looking at the assets having a 12- to 18-month turnaround to stabilization and being fully repositioned, but they’re already live and active projects.”

“Each project is kind of nimble and has a number of value levers over the time horizon we’ve identified,” McKinlay added.

Both partners are confident they can generate healthy financial returns while creating social value capital and community impact.

Good fit for the LCPF

McKinlay said these initial acquisitions embody the application of LaSalle’s key environmental, social and governance (ESG) initiatives while simultaneously positioning the LCPF for attractive value-add investment returns based on underwriting.

“We’re happy to leverage off the expertise there (TAS) since they’ve been in this space for a while and it’s a great initiative for our fund and reinforces our own active ESG investing program.”

The acquisitions increases the LCPF’s value-add allocation to 5.5 per cent, which is within its 20 per cent value-add cap. They’ll increase its portfolio on a pro-forma basis to approximately $1.8 billion.

McKinlay credits TAS with identifying appropriate assets for the joint venture and said they’re looking at other properties to add to the portfolio. He said they could surpass the initial $120 million target if things continue to go well and the right assets and opportunities present themselves.

LaSalle and TAS

LaSalle Investment Management managed approximately $73 billion US worth of assets in private and public real estate property and debt investments at the end of 2020. Its clients include public and private pension funds, insurance companies, governments, corporations, endowments and private individuals from around the world.

LaSalle Canada has executed more than $7 billion in real estate transactions since 2000. The LCPF launched in 2017 as an open-ended fund targeting commitments from Canadian and global institutional investors to acquire core properties in major Canadian markets.

TAS is an industry leader in impact development with an active pipeline and a portfolio totalling six million square feet across 18 properties throughout the Greater Toronto and Hamilton Area.

It partners with investors to focus on tackling climate change, expanding affordability and equity, and building social capital to create neighbourhoods and cities where people can thrive and belong.

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Here are some facts about British Columbia’s housing market

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Housing affordability is a key issue in the provincial election campaign in British Columbia, particularly in major centres.

Here are some statistics about housing in B.C. from the Canada Mortgage and Housing Corporation’s 2024 Rental Market Report, issued in January, and the B.C. Real Estate Association’s August 2024 report.

Average residential home price in B.C.: $938,500

Average price in greater Vancouver (2024 year to date): $1,304,438

Average price in greater Victoria (2024 year to date): $979,103

Average price in the Okanagan (2024 year to date): $748,015

Average two-bedroom purpose-built rental in Vancouver: $2,181

Average two-bedroom purpose-built rental in Victoria: $1,839

Average two-bedroom purpose-built rental in Canada: $1,359

Rental vacancy rate in Vancouver: 0.9 per cent

How much more do new renters in Vancouver pay compared with renters who have occupied their home for at least a year: 27 per cent

This report by The Canadian Press was first published Oct. 17, 2024.

The Canadian Press. All rights reserved.

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B.C. voters face atmospheric river with heavy rain, high winds on election day

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VANCOUVER – Voters along the south coast of British Columbia who have not cast their ballots yet will have to contend with heavy rain and high winds from an incoming atmospheric river weather system on election day.

Environment Canada says the weather system will bring prolonged heavy rain to Metro Vancouver, the Sunshine Coast, Fraser Valley, Howe Sound, Whistler and Vancouver Island starting Friday.

The agency says strong winds with gusts up to 80 kilometres an hour will also develop on Saturday — the day thousands are expected to go to the polls across B.C. — in parts of Vancouver Island and Metro Vancouver.

Wednesday was the last day for advance voting, which started on Oct. 10.

More than 180,000 voters cast their votes Wednesday — the most ever on an advance voting day in B.C., beating the record set just days earlier on Oct. 10 of more than 170,000 votes.

Environment Canada says voters in the area of the atmospheric river can expect around 70 millimetres of precipitation generally and up to 100 millimetres along the coastal mountains, while parts of Vancouver Island could see as much as 200 millimetres of rainfall for the weekend.

An atmospheric river system in November 2021 created severe flooding and landslides that at one point severed most rail links between Vancouver’s port and the rest of Canada while inundating communities in the Fraser Valley and B.C. Interior.

This report by The Canadian Press was first published Oct. 17, 2024.

The Canadian Press. All rights reserved.

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No shortage when it comes to B.C. housing policies, as Eby, Rustad offer clear choice

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British Columbia voters face no shortage of policies when it comes to tackling the province’s housing woes in the run-up to Saturday’s election, with a clear choice for the next government’s approach.

David Eby’s New Democrats say the housing market on its own will not deliver the homes people need, while B.C. Conservative Leader John Rustad saysgovernment is part of the problem and B.C. needs to “unleash” the potential of the private sector.

But Andy Yan, director of the City Program at Simon Fraser University, said the “punchline” was that neither would have a hand in regulating interest rates, the “giant X-factor” in housing affordability.

“The one policy that controls it all just happens to be a policy that the province, whoever wins, has absolutely no control over,” said Yan, who made a name for himself scrutinizing B.C.’s chronic affordability problems.

Some metrics have shown those problems easing, with Eby pointing to what he said was a seven per cent drop in rent prices in Vancouver.

But Statistics Canada says 2021 census data shows that 25.5 per cent of B.C. households were paying at least 30 per cent of their income on shelter costs, the worst for any province or territory.

Yan said government had “access to a few levers” aimed at boosting housing affordability, and Eby has been pulling several.

Yet a host of other factors are at play, rates in particular, Yan said.

“This is what makes housing so frustrating, right? It takes time. It takes decades through which solutions and policies play out,” Yan said.

Rustad, meanwhile, is running on a “deregulation” platform.

He has pledged to scrap key NDP housing initiatives, including the speculation and vacancy tax, restrictions on short-term rentals,and legislation aimed at boosting small-scale density in single-family neighbourhoods.

Green Leader Sonia Furstenau, meanwhile, says “commodification” of housing by large investors is a major factor driving up costs, and her party would prioritize people most vulnerable in the housing market.

Yan said it was too soon to fully assess the impact of the NDP government’s housing measures, but there was a risk housing challenges could get worse if certain safeguards were removed, such as policies that preserve existing rental homes.

If interest rates were to drop, spurring a surge of redevelopment, Yan said the new homes with higher rents could wipe the older, cheaper units off the map.

“There is this element of change and redevelopment that needs to occur as a city grows, yet the loss of that stock is part of really, the ongoing challenges,” Yan said.

Given the external forces buffeting the housing market, Yan said the question before voters this month was more about “narrative” than numbers.

“Who do you believe will deliver a better tomorrow?”

Yan said the market has limits, and governments play an important role in providing safeguards for those most vulnerable.

The market “won’t by itself deal with their housing needs,” Yan said, especially given what he described as B.C.’s “30-year deficit of non-market housing.”

IS HOUSING THE ‘GOVERNMENT’S JOB’?

Craig Jones, associate director of the Housing Research Collaborative at the University of British Columbia, echoed Yan, saying people are in “housing distress” and in urgent need of help in the form of social or non-market housing.

“The amount of housing that it’s going to take through straight-up supply to arrive at affordability, it’s more than the system can actually produce,” he said.

Among the three leaders, Yan said it was Furstenau who had focused on the role of the “financialization” of housing, or large investors using housing for profit.

“It really squeezes renters,” he said of the trend. “It captures those units that would ordinarily become affordable and moves (them) into an investment product.”

The Greens’ platform includes a pledge to advocate for federal legislation banning the sale of residential units toreal estate investment trusts, known as REITs.

The party has also proposed a two per cent tax on homes valued at $3 million or higher, while committing $1.5 billion to build 26,000 non-market units each year.

Eby’s NDP government has enacted a suite of policies aimed at speeding up the development and availability of middle-income housing and affordable rentals.

They include the Rental Protection Fund, which Jones described as a “cutting-edge” policy. The $500-million fund enables non-profit organizations to purchase and manage existing rental buildings with the goal of preserving their affordability.

Another flagship NDP housing initiative, dubbed BC Builds, uses $2 billion in government financingto offer low-interest loans for the development of rental buildings on low-cost, underutilized land. Under the program, operators must offer at least 20 per cent of their units at 20 per cent below the market value.

Ravi Kahlon, the NDP candidate for Delta North who serves as Eby’s housing minister,said BC Builds was designed to navigate “huge headwinds” in housing development, including high interest rates, global inflation and the cost of land.

Boosting supply is one piece of the larger housing puzzle, Kahlon said in an interview before the start of the election campaign.

“We also need governments to invest and … come up with innovative programs to be able to get more affordability than the market can deliver,” he said.

The NDP is also pledging to help more middle-class, first-time buyers into the housing market with a plan to finance 40 per cent of the price on certain projects, with the money repayable as a loan and carrying an interest rate of 1.5 per cent. The government’s contribution would have to be repaid upon resale, plus 40 per cent of any increase in value.

The Canadian Press reached out several times requesting a housing-focused interview with Rustad or another Conservative representative, but received no followup.

At a press conference officially launching the Conservatives’ campaign, Rustad said Eby “seems to think that (housing) is government’s job.”

A key element of the Conservatives’ housing plans is a provincial tax exemption dubbed the “Rustad Rebate.” It would start in 2026 with residents able to deduct up to $1,500 per month for rent and mortgage costs, increasing to $3,000 in 2029.

Rustad also wants Ottawa to reintroduce a 1970s federal program that offered tax incentives to spur multi-unit residential building construction.

“It’s critical to bring that back and get the rental stock that we need built,” Rustad said of the so-called MURB program during the recent televised leaders’ debate.

Rustad also wants to axe B.C.’s speculation and vacancy tax, which Eby says has added 20,000 units to the long-term rental market, and repeal rules restricting short-term rentals on platforms such as Airbnb and Vrbo to an operator’s principal residence or one secondary suite.

“(First) of all it was foreigners, and then it was speculators, and then it was vacant properties, and then it was Airbnbs, instead of pointing at the real problem, which is government, and government is getting in the way,” Rustad said during the televised leaders’ debate.

Rustad has also promised to speed up approvals for rezoning and development applications, and to step in if a city fails to meet the six-month target.

Eby’s approach to clearing zoning and regulatory hurdles includes legislation passed last fall that requires municipalities with more than 5,000 residents to allow small-scale, multi-unit housing on lots previously zoned for single family homes.

The New Democrats have also recently announced a series of free, standardized building designs and a plan to fast-track prefabricated homes in the province.

A statement from B.C.’s Housing Ministry said more than 90 per cent of 188 local governments had adopted the New Democrats’ small-scale, multi-unit housing legislation as of last month, while 21 had received extensions allowing more time.

Rustad has pledged to repeal that law too, describing Eby’s approach as “authoritarian.”

The Greens are meanwhile pledging to spend $650 million in annual infrastructure funding for communities, increase subsidies for elderly renters, and bring in vacancy control measures to prevent landlords from drastically raising rents for new tenants.

Yan likened the Oct. 19 election to a “referendum about the course that David Eby has set” for housing, with Rustad “offering a completely different direction.”

Regardless of which party and leader emerges victorious, Yan said B.C.’s next government will be working against the clock, as well as cost pressures.

Yan said failing to deliver affordable homes for everyone, particularly people living on B.C. streets and young, working families, came at a cost to the whole province.

“It diminishes us as a society, but then also as an economy.”

This report by The Canadian Press was first published Oct. 17, 2024.

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