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The property, located at 17627 63 St. NW in the McConachie neighbourhood, comprises 277 residential units featuring generous, family-friendly layouts and condo-style amenities, including a rooftop patio and barbecue space, social areas, gym and yoga rooms, and a theatre. Residents will enjoy convenient access to ample greenspace, downtown access, and public transit, as well as schools, recreational spaces, and numerous entertainment options.

With the inclusion of the property, this year’s additions to the Apartment Fund totalled more than $275M, excluding transactional costs.

“It’s been a tremendous year for acquisitions, with the Trust expanding at its fastest pace since inception,” says Jason Roque, CEO and Founder of Equiton. “Our new addition in Edmonton, along with all the other properties we’ve purchased, set us up for continued growth in 2025 as interest rates continue to fall.”

The Apartment Fund holds a diverse mix of property types, each playing a role in generating value for investors. Stabilized new properties, such as the acquired building, can achieve market rents, providing reliable cash flow. Meanwhile, the Trust’s earlier acquisitions in Toronto and Welland, Ontario, offer significant potential for organic growth through renovations and revenue increases. Leveraging a variety of growth strategies has enabled Equiton to successfully navigate all types of economic conditions.

“We’ve built a solid foundation with our disciplined approach to financing and due diligence practices,” says Ryan Donkers, Vice-President, Investments at Equiton. “In 2024, we took advantage of less competition to make some solid additions. I see 2025 as a year for aggressive growth and potentially expanding the Apartment Fund into other established markets in Western Canada.”

Alberta remains one of Canada’s fastest-growing real estate markets, leading in rent growth while maintaining its affordability advantage over other major cities. Combined with a presence in Toronto and the GTHA, the Apartment Fund provides investors with access to the country’s top rental markets.

Equiton Living will manage the properties and rental inquiries can be made at www.equitonliving.com.

Equiton’s Apartment Fund now comprises 42 properties in Ontario and Alberta with a total of 3,740 portfolio units. The Fund specializes in acquiring multi-residential properties in Canada and increasing their value through active management, targeting an annual net return of 8-12%. Investors benefit from monthly distributions from rental income and capital appreciation from property value increases.

ABOUT EQUITON

Proudly Canadian-owned and operated, Equiton is a leading private equity firm that delivers notable returns for investors. We believe in making private real estate investing accessible to Canadians and provide easy access to all types of investment-grade real estate through our proven high-performing investment solutions. We offer true diversification, full transparency, and all the benefits of real estate investing without the difficulties of financing, tenant management, building maintenance or project management.

For more information, visit www.equiton.com.

MEDIA CONTACT

Kathy Gjamovska
VP, Marketing & Communications
kgjamovska@equiton.com
289-208-0817

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Short-Term Real Estate Investors

Short-term, or speculative, real estate investors play a unique role in the real estate market. Unlike traditional real estate investors who tend to prioritize long-term value and rental income, speculative investors aim to profit from short-term price fluctuations. Their strategy often involves purchasing pre-construction units with the expectation of selling them at a higher price before or shortly after completion. This approach is inherently riskier, as it relies heavily on market timing and favourable economic conditions.

Why Short-Term Speculative Investors Are Stepping Back

Over the past few years, high interest rates, rising mortgage costs, and increased inventories reshaped the short-term investment landscape. These pressures are now easing as interest rates and mortgage costs decline, but previous rate hikes raised borrowing costs, making it costly for speculative investors to hold unsold properties. This has led to short-term speculators, who traditionally drove demand, retreating from the market.

Meanwhile, long-term investors and end users, groups with aligned priorities, are gaining influence. While speculative investors focus on quick returns, long-term investors and end users prioritize livability, walkability, and high-quality construction that retains value over time.

Who Are the End Users?

End users encompass a variety of demographics, each with unique needs:

Downsizers: Downsizers are senior end users transitioning from single-family homeownership. For this group, affordability is less of a concern than livability. They prioritize spacious layouts, high-end amenities, spaces suitable for entertaining, and an overall ease of living.

Urbanites: Urbanites are typically middle-aged individuals, with or without children, who prefer the advantages of apartment-style living in urban areas. They value central locations in established neighbourhoods, ease of commuting, a low-maintenance lifestyle, and the security offered by condominium living.

First-Time Homebuyers: First-time homebuyers are young, established adults for whom affordability and gaining entry into the real estate market are top priorities. They often seek locations with convenient access to amenities such as schools and transit, with plans to upgrade to larger accommodations as their needs evolve.

Hybrid End Users: Hybrid end users view condos as both a long-term investment and a practical solution for personal use. For example, some parents purchase a condo for their young children, renting it out until the children are old enough to use it themselves, mitigating rising housing costs in the meantime.

Designing Condos for Livability

The shift toward end-user demand is revolutionizing how apartment-style condos are designed. Smaller units optimized for rental income are giving way to:

• Larger layouts for families and downsizers.
• Amenities focused on lifestyle and security.
• High-quality boutique buildings in established neighbourhoods.

These designs appeal not only to end users but also to long-term investors who recognize the growing demand for livable urban spaces.

Equiton is designing unit layouts to meet the changing needs of buyers. At Sandstones Condo in Toronto, we’ve added an extra floor and created layouts tailored for those planning to live in their condos. With these enhancements and other exciting projects on the horizon, we anticipate strong interest from buyers.

Boutique Buildings: The Key to Livability

Neighbourhoods are the focal point of this transformation. End users want condos in established areas with access to transit, amenities, and community. Boutique buildings—mid-rise, thoughtfully designed, and located in vibrant neighbourhoods—better meet these needs.

The city of Toronto is recognizing this demand, modifying zoning laws to encourage the development of mid-rise boutique buildings. With fewer barriers, developers like Equiton can focus on delivering what the market wants: high-quality, livable condos tailored to real homeowners.

In contrast, large towers in newer, master-planned neighbourhoods can face challenges. These projects, often geared towards investors, may have a harder time appealing to end users who place a higher value on livability and long-term investment potential.

Real Estate as a Long-Term Investment

As Toronto’s condo market evolves, the focus is shifting back to its roots: building homes. Speculative investments can lose value over time, while high-quality, livable properties in desirable neighbourhoods are more likely to retain their worth or grow in value.

Real estate fundamentally remains a long-term investment. Developers and investors who align their strategies with this principle can thrive by delivering products that meet the needs of end users.

Be Part of Toronto’s Transformation with Equiton

If the idea of creating vibrant, livable communities excites you, you can play a role in shaping Toronto’s future. Equiton offers a unique way to invest in the development of high-quality condos designed for today’s most influential homebuyer—downsizers, urbanites, first-time homebuyers, and hybrid end users.

By investing with Equiton, you’re not just growing your wealth, you’re supporting the creation of thoughtfully designed spaces with spacious layouts, premium amenities, and vibrant community features. Best of all, our registered account options, including RRSPs, RESPs, and TFSAs, make it easy and tax-efficient to be part of this transformation.

Don’t just imagine the future, help build it. Contact our investment specialists to learn more: inquiries@equiton.com.

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Recent headlines about declining Greater Toronto and Hamilton Area (GTHA) rents have prompted Canadian real estate investors to look closer. While high interest rates have slowed overall rent growth compared to last year’s record highs, purpose-built rentals remain resilient.

Why are GTHA Rents Slowing?

The GTHA has seen a notable increase in new condominium rentals in recent quarters. In Q3’24 alone, Toronto saw a 52% increase in condos listed for rent. Driving the shift are highly leveraged investors and speculators, unable to sell at desired margins and facing rising mortgage payments. As a near-term solution, many are listing their condos as rentals, often at attractive, below-market rates.

Additionally, developers have delivered a record number of new condos, some of which are also being converted to rentals. These typically measure 400 to 500 square feet — sometimes as small as 350 square feet — and may be located in dense high rises, commanding lower rents. Notably, condo rentals under 500 square feet experienced the largest annual rent declines (7.1%-9.2%, Q3’24) in the GTHA, according to Urbanation’s UrbanRental Q3 2024 GTHA Rental Market Report.

What the Data Shows: Purpose-Built Rentals on a Positive Long-Term Trajectory

This influx of condos has temporarily slowed rent growth across all categories, but not equally. GTHA purpose-built rent growth, down in Q3’24, held onto approximately twice as much momentum as condos. Looking long term, however, GTHA purpose-built rents are up 17.5% over pre-pandemic levels recorded this quarter five years ago and continue to trend positively.

Rental Declines a Temporary Trend

Several macroeconomic drivers have supported the rental category’s long-term resilience and low volatility:

Population growth: After recent cuts to federal immigration targets, Canada still plans to welcome 1.14M immigrants over the next three years. The GTHA receives a significant share of Canada’s newcomers, who tend to rent.

Home affordability: The GTHA could overtake Vancouver as the most expensive housing market in Canada this year. Many Canadians choose renting over ownership due to the category’s relative affordability and flexibility.

Limited housing supply: Rental apartments are chronically underbuilt in the GTHA, even as purpose-built completions reached a 30-year high of 2,319 units YTD. With Canada needing more than 2.2 million such rentals by 2030 to meet excess demand, according to the National Housing Accord, the entrenched supply-demand gap will continue to support investments in purpose-built apartments.

Maintaining Growth in All Types of Markets

In periods of slower-but-positive growth, private REITs like the Equiton Residential Income Fund Trust (Apartment Fund) leverage strategies to maintain momentum:

Gap to Market: A healthy gap to market allows property owners to increase rents on natural turnover without outpricing tenants. The Apartment Fund, with a 35.1% gap to market as at Q3’24, achieved a 19.9% YTD rent increase on natural turnover, generating $40.0M in value. It was able to capture an average increase of $305 per new lease. The Apartment Fund’s recent strategic acquisition in Toronto aligns to its gap-to-market strategy with a 25% revenue gap to market.

Tactical Rent Pricing: In markets with higher vacancy exposure, strategic rent adjustments may be necessary to stay competitive. Even then, the Apartment Fund’s rental rate spread enables continued growth when compared to previous periods.

Quality Units: In tight markets, renters seek value-for-dollar. Units in the Apartment Fund’s GTHA portfolio average 710 square feet — typically larger than some newly launched condos — and receive on-site customer service, a notable driver of resident satisfaction. Desirable layouts support higher rents.

Rental Market Outlook:

• New condos’ effect on GTHA rent growth is expected to be temporary. As interest rates decline further in 2025, more condo investors will likely raise rents or transact units, stabilizing their impact on overall rent growth.
• The GTHA finds itself at the tail end of a period of oversupply. With Q1’24-Q3’24 condo starts down 54% compared to 2023, the resulting undersupply in the next three to six years will put upward pressure on prices and rents.
• Rentals with larger layouts and professional management will continue to drive a premium amid an influx of undersized condos. Strong fundamentals will continue to support rent growth in the purpose-built category, although at a slower pace versus recent highs. An anticipated reacceleration in 2025 offers investors the opportunity to benefit from a potential recovery as temporary rental declines resolve.

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Economic review

• The Bank of Canada (BoC) implemented two interest rate cuts totalling 50 basis points in Q3’24, bringing its key interest rate to 4.25%. August inflation data showed that Consumer Price Index growth fell to within the BoC’s 2.0% inflation target for the first time since February 2021. With inflation tracking downward, a slowed economy, and rising unemployment, the BoC will likely continue to steadily cut rates, contributing to improved market conditions and moving cap rates in a favourable direction.

Transactions

• Residential home price growth continued to stall, with Toronto and other premium markets particularly impacted. This led to modest transaction gains that nonetheless reached their highest level since July 2023.
• Decreased competition across most categories, including purpose-built apartments, created advantageous buying opportunities for well-capitalized companies to expand their portfolios with strategic acquisitions.
• In contrast to modest transaction gains in other categories, multifamily sales volume soared 1,000%+ Y/Y to $1.06B from $91.1M in Q3’24, This resurgence was primarily driven by institutional capital, and includes the Trust’s second major acquisition of the year. Institutional activity generally precedes broader moves within the market and can indicate its trajectory.

Home prices and rents

• National average asking rents ended the quarter at $2,193, up 2.1% from a year ago. Rents for purpose-built apartments rose by 5.4%, while condominium rents declined 1.7%. Although Canadian home prices ended the quarter 3.3% below year-ago levels, they made modest gains throughout the quarter compared to early-year lows. This trajectory may signal homebuying challenges in the future, favouring the rental category.

Construction and starts

• Canada Mortgage and Housing Corporation (CHMC) housing supply data released Q2’24 found that, in the first half of 2024, Canada’s six largest metro areas observed the second strongest wave of new construction since 1990. Purpose-built rentals comprised nearly half of all apartment starts during the period.
• In Q3’24, builders broke ground on a larger-than-expected number of units in July, with Ontario housing starts surging 57% from the previous month. Nationally, total starts increased 5.0%, driven in part by a 6.0% increase in multi-unit urban starts. Toronto continued to lead North America in construction activity with over 80 cranes in operation. However, this represents a substantial decrease compared to the 220 cranes recorded earlier this year. This slowdown may signal worsening supply shortages in the future. CMHC noted that the pace of new housing is still unlikely to satisfy demand, doing little to improve housing affordability.
• With this longstanding supply-demand gap in mind, Equiton partnered with Concordia University’s John Molson School of Business to launch new, artificial-intelligence (AI) driven insights into key factors contributing to rental growth across Canada. Leveraging a neural network model to generate rental projections, the report forecasts rent price increases of up to 225% in major markets, by 2032.

Portfolio Update 

New property acquisition in Toronto 

The Equiton Residential Income Fund Trust (the Trust) expanded its presence in Toronto with a three-property acquisition in September. The addition represents just under 350 residential rental units, including premium townhomes situated in one of the city’s most exclusive mid-town communities. This strategic move into Forest Hill and North York further expands the Trust’s footprint in one of North America’s strongest multifamily markets and bolsters its portfolio with strong existing and potential cash flow. The Trust’s total holdings now comprise 41 properties in Ontario and Alberta with a total of 3,463 portfolio units. 

The purchase complements the previous quarter’s acquisition of four rental properties in Welland, Ontario. The Welland portfolio features a gap to market of 73.3%. The Trust has since started the process of making improvements that will reduce operational costs over the long term, including the implementation of a utility sub-metering program. Sub-metering is proven to reduce energy and water consumption by enabling Residents to directly control their usage costs, thereby enhancing the overall living experience. 

Committed to resident satisfaction 

In adherence to the firm’s commitment to Environment, Social, and Governance (ESG) practices, Resident satisfaction remains a priority. To track satisfaction and help guide Resident initiatives, Management conducts regular satisfaction surveys at key points in each Resident’s tenure. By the end of the quarter, the number of resident satisfaction surveys collected had already surpassed last year’s total. To further enhance Resident satisfaction portfolio-wide, on-site Resident Managers received comprehensive customer service training, equipping them to respond more effectively to feedback. Training is a key part of Equiton’s governance and social strategies, with regular sessions offered both online and in person for all Employees, from new hires to the leadership team. 

Management is in the process of finalizing the leasing strategy for Maison Riverain, a joint development in Ottawa that will add over 1,100 rental units to the local market. Tactics include model suites, virtual tours, and a dedicated leasing office. Occupancy is projected to commence in early- to mid-2025. 

Performance 

In the third quarter of 2024, Class F DRIP Unitholders received a 7.94% trailing 12-month total return, contributing to a 10.92% annualized return since the class’s inception. The portfolio’s weighted average cap rate appreciated to 4.43% Y/Y by approximately 46 basis points, inclusive of recent acquisitions. Operational performance predating the recent Toronto acquisition offset this increase, which was attributed to market-driven conditions. The portfolio generated quarterly revenue and NOI increases of 18.8% ($6.5M) and 21.0% ($4.1M) Y/Y, respectively. 

Rental growth was supported by efficiently filling vacancies through active marketing strategies. Portfolio occupancy of rent-ready units ended the quarter at 99.3%, well above the national average of 96.8%. While same-store market rents rose approximately 5% Y/Y, the Trust achieved an 11% increase in same-store rents in the same period through its extensive renovation program. 

Meanwhile, the Trust realized same-store utility savings of more than $350K (11% Y/Y) through a combination of lower natural gas costs, energy conservation efforts, and the ongoing portfolio-wide sub-metering program. 

The Trust’s demonstrated ability to capitalize on gap to market rent while reducing costs speaks to the effectiveness of its active management approach, which generates value through operational efficiencies and strong organic growth. The portfolio’s gap to market remains stable at 35.1% as at September 30, from 35.8% in the previous quarter, retaining potential for future appreciation. 

Market Outlook and Fund Strategy 

Rate cuts spur real estate activity 

The slower pace of the economy and controlled inflation leave room for further interest rate cuts in Q4’24. Canadian economic growth is poised to recover moderately as rates potentially settle at a new baseline. Rate easing could trigger new real estate activity as early as the first half of 2025, particularly in the residential market, pushing up home values and constricting cap rates on income-producing properties. 

The potential for lower rates could further ease underwriting challenges and encourage cautious optimism around new dealmaking. 75% of Canadian real estate firms, responding to Altus Group’s latest sentiment survey signalled an intent to transact in the next six months. The Trust’s capitalization and prudent financing strategy positions it to benefit from improved financing conditions. As an active buyer, the Trust continues to explore the growing Ontario and Alberta markets. 

The slowing in market rent growth recently experienced by major cities like Toronto is expected to rebound slightly. In certain metros, such as Kitchener, Waterloo, Guelph, and Ottawa in Ontario, this moderation already appears to have run its course. Equiton’s portfolio of income-producing properties benefits from a substantial gap to market, creating opportunities for growth beyond rental increases alone. 

As more buyers enter the market and home sales recover, new home construction is expected to rise in 2025. According to Deloitte’s Fall Outlook, the number of new homes could rise from 246,000 in Q1’25 to 267,000 by the end of the year. Nonetheless, housing completions are expected to fall far short of existing demand. As home affordability improves in the near term, Equiton anticipates that some renters may transition to homeownership, creating new turnover opportunities. 

Market cycle presents new opportunities 

Looking ahead to Q4’24 and beyond, Canadian rental markets are beginning to recover from pockets of marginally higher vacancies and slower rental price growth. Historically, softer rental markets have been part of natural market cycles, often presenting brief windows of opportunity for strong gains during the subsequent rebound. The Trust’s acquisition of assets with exceptional fundamentals bolsters its resilience and positions it for substantial gains in upcoming quarters, leveraging both market rent gaps and capital appreciation. 

Find Equiton’s previous quarterly report here:  Q2 2024 Commentary and Outlook – Rate Cuts to Extend Rental Growth 

Click here to download this article in PDF 

Forward-Looking Information

Certain information in this communication contains “forward-looking information” within the meaning of applicable securities legislation.

• Forward-looking information may relate to future events or the Trust’s performance.
• Forward-looking information includes, but is not limited to, information regarding the Trust’s distributions, growth potential and volatility, investor returns, ability to achieve operational efficiencies, objectives, strategies to achieve those objectives, beliefs, plans, estimates, projections and intentions; and similar statements concerning anticipated future events, results, circumstances, performance or expectations and other statements that are not historical facts. These statements are based upon assumptions that the management of the Trust believes are reasonable, but there can be no assurance that actual results will be consistent with these forward-looking statements.
• Forward-looking information involves numerous assumptions, known and unknown risks, and uncertainties that contribute to the possibility that the forward-looking statements will not occur and may cause actual results to differ materially from those anticipated in such forward-looking statements. Some of these risks are discussed in the section “Risk Factors” in the Offering Memorandum. These forward-looking statements are made as of the date of this communication and the Trust is not under any duty to update any of the forward-looking statements after the date of this communication other than as otherwise required by applicable legislation.

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