Tricon Capital Group announced it has expanded its Toronto multifamily development program, Tricon Lifestyle Rentals (or “TLR”) to over 3,000 units with the addition of its seventh project in downtown Toronto.
The new mixed-use development built in partnership with TAS is located at 7 Labatt St. in Toronto’s downtown east submarket on a 1.3 acre site that is fully zoned for a 560,000 square foot building.
The addition of the project at 7 Labatt brings Tricon’s multifamily development pipeline to over 3,000 units with an estimated total cost of approximately $1.2 billion and targeted development yields of 5-6 per cent; Tricon’s average ownership stake in this portfolio is approximately 30 per cent. The seven projects are expected to be completed over the next three to four years.
“Tricon has committed to building a market leading purpose-built rental platform in Toronto and continues to execute on this plan with the addition of its latest project in the thriving Corktown neighbourhood,” said Tricon’s President and CEO Gary Berman. “Even in the context of a competitive land market, we have been able to secure compelling sites at an attractive land basis by partnering with strategic developers and institutional investors seeking long-term cash flow.”
“Toronto continues to support extremely compelling rental economics with immigration in excess of 100,000 each year, a diverse economy, high quality of life, and growing status as a global city,” he continued. “During 2018, year-over-year rental growth topped 10 per cent and vacancy remained very constrained at less than 1 per cent, according to UrbanRental. Tricon is at the forefront of providing class-A multifamily rental apartments within the most sought-after locations across the city, and is leveraging 30 years of development experience to pursue strong investment returns for our investment partners and shareholders.”
The project at 7 Labatt is immediately south of the Regent Park re-vitalization, a 69 acre master plan that has been transformed to a vibrant, family-oriented urban community. The site is in close proximity to cultural, community and state of the art athletic amenities, and offers convenient access to three downtown streetcar lines as well as the Don Valley Parkway. The project will include approximately 600 residential units, expected to be split evenly between rental and for-sale condominium units. Tricon’s interest in the project site was acquired from TAS, a community-centric mixed-used developer, and the project will be developed in partnership with TAS with construction expected to commence in mid-2020 and completion anticipated in late 2023. The total equity commitment for the project is approximately $60 million (~C$80million), with 30% from Tricon, 50 per cent from an institutional investor, and 20 per cent from TAS.
The Selby, located at Bloor and Sherbourne streets, commenced initial leasing in December 2018. Interest in the building has been strong across multiple demographic cohorts, with leasing activity picking up into the new year and per-square-foot pricing well above underwritten assumptions. Leasing activity is expected to accelerate as upper floor suites are released and additional amenities are opened including an Oliver and Bonacini restaurant, the mansion, spa, and pool. In addition, the launch of The Selby marks the introduction of the Tricon House operating brand, which brings customer-focused and lifestyle-oriented apartment living to Toronto. Tricon House buildings are defined by architecture and design excellence, exceptional amenities and common areas, service levels that simplify our residents’ lives, and a commitment to resident community.
The Taylor at 57 Spadina Ave., commenced construction in Q1 2018 with the demolition of the existing retail building and has materially completed site excavation. The Entertainment District submarket where the project is located has sustained above-average rent growth as it continues to be one of the most sought-after rental neighbourhoods in Toronto for renters. Average rents in this node were C$4.10 per square foot as of Q4 2018, according to Urbanation, which is meaningfully above Tricon’s underwritten rents. Meanwhile, 40 per cent of construction costs have been awarded and are in line with budgeted expectations.
Tricon Lifestyle Rental’s other developments, including Scrivener Square in the Rosedale/Summerhill neighborhood, two sites at the West Don Lands adjacent to the historic Distillery District (in partnership with Dream Unlimited Corp. and Kilmer Group), and 8 Gloucester in the Yonge & Bloor neighborhood, are all currently in the design stage with construction projected to start in 2019-2020.
Tricon U.S. multifamily development projects
In the U.S., Tricon is pursuing an orderly exit of its two multifamily development projects. Both buildings are expected to be sold in 2019 with the net proceeds used primarily to reduce Tricon’s corporate debt. Going forward, Tricon intends to only invest in businesses where it can obtain scale and hold a leadership position, and aims to increase its exposure to investments with predictable rental income and cash flows which may include multifamily investments.
At The McKenzie, adjacent to Dallas’ affluent Highland Park neighbourhood, construction of the 183-unit rental building was substantially completed during the fourth quarter of 2018 and lease-up is progressing well. The building is being actively marketed for sale. At The Maxwell in Frisco, construction of the 325-unit rental building continued as planned and is expected to be substantially completed in early 2019, while lease-up is currently in the early stages.