Continuum Residential Real Estate Investment Trust has withdrawn its planned initial public offering after Starlight Investments agreed to purchase a 44-building multifamily portfolio primarily in the Toronto area from the REIT for about C$1.7 billion ($1.3 billion).
The deal involves a collection of high-rise concrete buildings with a total of 6,271 rental suites. Continuum has been marketing an IPO in Canada and the U.S. after filing an amended prospectus with the Ontario Securities Commission on October 21. The marketing drive resulted in an order book of more than C$1 billion. During the process, Starlight approached the REIT with an offer to buy the entire portfolio at a value of C$20.1 per trust unit of the REIT—which trumped the expected price of C$15.5 to C$16.5 per unit for the IPO opportunity.
Through the transaction, expected to close next month, Toronto-based Starlight will be adding to its North American platform 32 income-producing rental properties with 6,271 suites. Of these, 82 percent (5,133 units) are located in Toronto and surrounding urban centers including Oshawa and Hamilton, Ontario. Another 9 percent (571 units) are located in the nation’s capital of Ottawa and the remaining 9 percent are in London, Ontario.
Continuum is an affiliate of Q Management LP, a real estate asset and property management entity. In addition to the REIT, Q Management also manages two private equity multifamily funds in Ontario encompassing 5,234 units owned and under contract in 45 buildings.
Apartments Sizzle in the Great White North
Investors are rushing into Canada’s booming multifamily market, with investment volume reaching historic highs for four consecutive years, including the record level of C$8.3 billion in 2018, according to a September report by CBRE. Average rents for purpose-built rental units nationwide have grown by 4.4 percent annually from 2016 to 2018, and by 5 percent in Toronto. Rapid rent growth has fueled lucrative investment returns of 9.8 percent as of the first quarter of 2019. The multifamily sector also boasts a very low average national cap rate of 4.4 percent.
Starlight, which has $11 billion in assets under management, is an active buyer of Canadian assets, having earned the title of the country’s top purchaser of the year by scooping up 19 properties totaling 2,089 suites in 2018. The company’s portfolio includes roughly 36,000 multifamily units across Canada and the U.S.
In November of last year, Starlight purchased a 20-story, 236-unit community in Toronto’s Scarborough Village neighborhood.