CAPREIT to Invest in Canadian Housing Supply with Construction of 170 Residential Suites Within Existing Portfolio

/EIN News/ -- TORONTO, June 02, 2025 (GLOBE NEWSWIRE) -- Canadian Apartment Properties Real Estate Investment Trust (“CAPREIT”) (TSX:CAR.UN) announced today that it is planning to invest in two infill development projects for the construction of an estimated 120 residential rental suites on excess land in Mississauga, Ontario (the “GTA Development Projects”). Additionally, CAPREIT is underway with the conversion of certain underutilized non-residential spaces identified throughout its current apartment portfolio for the construction of an estimated 50 additional residential rental suites (the “Conversion Projects”). All plans disclosed herein are subject to the receipt of outstanding municipal planning and permit approvals, as well as any other required approvals, and are subject to change and such changes may be significant. There can be no assurance that all requirements for approval or completion will be obtained, satisfied or waived.

The GTA Development Projects

CAPREIT is capitalizing on (i) available government incentives, (ii) construction efficiencies and (iii) project synergies, as outlined below, to lower development risks and make it economically attractive to invest in the construction of an estimated 120 new residential rental suites across the GTA Development Projects. The GTA Development Projects are expected to earn attractive risk-adjusted returns, which are above what is generally achievable in the market today, while allowing CAPREIT to directly contribute to the much-needed supply of family-oriented “missing middle” housing in the Greater Toronto Area. The GTA Development Projects are expected to begin construction in 2027 with anticipated completion in 2028.

i. Applicable incentives for new purpose-built rental construction in Mississauga include:

• Enhanced federal and provincial harmonized sales tax rebates;
• Municipal development charge reductions (100% exemption on 3-bedroom suites; 50% exemption on all other suite types); and
• Municipal property tax reductions (35% reduction for 35-year period).

ii. Efficiencies for constructing low-rise wood frame stacked townhomes include:

• Wood frame construction is significantly faster and lower-cost when compared to concrete;
• Absence of common areas, hallways and elevators, which avoids incurring construction costs on non-revenue generating space, and increases building efficiency; and
• Sub-metering electricity, heat and water, which substantially eliminates utility costs and significantly improves operating margins.

iii. Synergies for the GTA Development Projects include:

• Building on “free”, excess land, with no alternative use or standalone sale value;
• Leveraging underutilized existing parking at the properties, which minimizes the need for high-cost excavation and underground construction of additional parking, and provides for incremental parking occupancy at the existing buildings;
• Sharing of amenity offerings with CAPREIT’s existing buildings, providing unique value to residents while avoiding associated common area construction and maintenance costs; and
• Limiting incremental operational expenses through leveraging in-place servicing contracts and site synergies (landscaping and snow removal, for example) as well as existing operational personnel.
  

After incentives, total development costs are expected to be approximately $58MM, representing $570 per leasable square foot. Based on future market rents in the low-to-mid $3 per square foot range, the GTA Development Projects anticipate a net operating income (“NOI”) margin in the mid 80% range, post-incentives and synergies. At an illustrative capitalization rate of 4.75%, the estimated value at stabilization is expected to be approximately $74MM, representing $730 per square foot. The projected NOI yield on cost is expected to be approximately 6%, representing a development yield premium of approximately 125bps, and an attractive development return on cost for a relatively quick and low-risk project.

The Conversion Projects

CAPREIT has examined, identified and commenced the relatively low-risk conversion of certain underutilized space embedded throughout its current portfolio, such as retail and office space with high and/or full vacancy, underutilized storage rooms, decommissioned former amenity spaces, excess lobby areas and non-essential rental offices. CAPREIT plans to convert this underutilized space into an estimated total of 50 additional residential rental suites, while assuming minimal redevelopment risk nor any material incremental operating expenses given the potential residential rental suites form part of CAPREIT’s existing buildings. The majority of the conversions are based in the highly constrained Greater Toronto and Vancouver Area markets, and on average, CAPREIT expects to spend approximately $17MM, inclusive of all hard costs, soft costs and overhead expenditure. The Conversion Projects have an anticipated NOI yield in excess of 6%, with estimated completions over the course of the next 6–18 months, site dependent.

“We’re proud to be reinvesting repatriated foreign capital from our portfolio repositioning strategy into the construction of new purpose-built rental housing for Canadians, and specifically into the development of homes that are high-quality and family-oriented, consistent with our core principles,” commented Mark Kenney, President and Chief Executive Officer. “The CAPREIT portfolio contains an underutilized landbank located across the country, and we’re excited to be repurposing this excess density to contribute directly to the resolution of the housing supply and affordability crisis in Canada. We would like to commend the City of Mississauga for listening to housing providers and providing the incentives needed to ameliorate the housing shortage. We’re pleased to see these types of common-sense incentives remove obstacles to development, and provide CAPREIT with the opportunity to invest in family-oriented rental housing, while earning strong returns for investors.”

“We’re excited to execute on $75MM of relatively low-risk development and conversion projects, which we expect to construct in a fairly tight timeframe at an estimated 6% effective capitalization rate,” added Julian Schonfeldt, Chief Investment Officer. “Development is not CAPREIT’s core business; however, we’re operating in one of the worst housing crises in Canada’s history, and with the strong economic returns that are made possible through leveraging significant incentives, efficiencies and synergies, it’s a ‘win-win’ scenario. We’re looking forward to proving out this relatively quick, low-risk development model at attractive yields that are well above market acquisition cap rates.”

“I am very pleased CAPREIT will be building family-oriented, stacked townhomes for the rental market in our city,” said Carolyn Parrish, Mayor of Mississauga. “Mississauga’s reduction of fees, including development charges, are having an impact on developers and builders who take pride in serving a need, rather than just maximizing profit. Thank you, CAPREIT.”

ABOUT CAPREIT
CAPREIT is Canada's largest publicly traded provider of quality rental housing. As at March 31, 2025, CAPREIT owns approximately 46,800 residential apartment suites and townhomes that are well-located across Canada and the Netherlands, with a total fair value of approximately $14.9 billion. For more information about CAPREIT, its business and its investment highlights, please visit our website at www.capreit.ca and our public disclosures which can be found under our profile at www.sedarplus.ca.

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this press release constitute forward-looking statements within the meaning of applicable Canadian securities laws which reflect CAPREIT’s current expectations and projections about future results. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “outlook”, “objective”, “may”, “will”, “expect”, “intent”, “estimate”, “anticipate”, “believe”, “consider”, “should”, “plans”, “predict”, “estimate”, “forward”, “potential”, “could”, “likely”, “approximately”, “scheduled”, “forecast”, “variation” or “continue”, or similar expressions suggesting future outcomes or events. The forward-looking statements made in this press release relate only to events or information as of the date on which the statements are made in this press release, and include statements relating to the GTA Development Projects and the Conversion Projects, including forecast financial metrics, expected timing and completion thereof. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this press release. Any number of factors could cause actual results to differ materially from these forward-looking statements. Although CAPREIT believes that the expectations reflected in forward-looking statements are reasonable, it can give no assurances that the expectations of any forward-looking statements will prove to be correct. Such forward-looking statements are based on a number of assumptions that may prove to be incorrect, including with regards to the expected receipt and reinvestment of repatriated foreign capital, all estimated and assumed financial metrics for the GTA Development Projects, expected costs and yield of the Conversion Projects, the expected timing and completion of the GTA Development Projects and the Conversion Projects, and the receipt of all outstanding regulatory and any other required approvals. Accordingly, readers should not place undue reliance on forward-looking statements.

Forward looking statements in this press release are subject to certain risks and uncertainties, many of which are beyond CAPREIT’s control, which could result in actual results differing materially from these forward-looking statements. These risks and uncertainties include, but are not limited to, the risks and uncertainties described under the heading “Risks and Uncertainties” in CAPREIT’s 2024 Annual Report and under the heading “Risk Factors” in CAPREIT’s Annual Information Form for the year ended December 31, 2024, each of which is available under CAPREIT’s profile on SEDAR+ at www.sedarplus.ca.

Except as specifically required by applicable Canadian securities law, CAPREIT does not undertake any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. These forward-looking statements should not be relied upon as representing CAPREIT’s views as of any date subsequent to the date of this press release.

For more information, please contact:

CAPREIT Mr. Mark Kenney President and Chief Executive Officer (416) 861-9404	CAPREIT Mr. Stephen Co Chief Financial Officer (416) 306-3009	CAPREIT Mr. Julian Schonfeldt Chief Investment Officer (647) 535-2544