Tricon, Canada Pension Plan to Invest in Toronto Apartments

The joint venture is expected to develop as many as 3,000 units of multifamily housing in Toronto valued at $1.1 billion.

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Tricon Residential Inc. and Canada Pension Plan Investment Board have formed a joint venture to develop between 2,000 and 3,000 units of multifamily housing in Toronto valued at approximately $1.1 billion (C$1.4 billion). The JV will provide up to nearly $400 million (C$500 million) in equity capital with CPP contributing up to approximately $278 million (C$350 million) and Tricon up to almost $120 million (C$150 million).

The joint venture will focus on high-quality rental units located close to major transit and employment that are intended to be held long term by the owners. Tricon will serve as the developer, asset manager and property manager for the JV projects. The first project has been placed under contract and is expected to consist of two towers with 870 units built on a 1.8 acres site in Toronto’s Downtown East neighborhood near the CBD and a future Ontario Line subway station.

It will have a mix of one-, two- and three-bedroom units and an amenity package featuring a fitness center, rooftop garden, outdoor pool, 24/7 concierge and automated parcel management station. The total development cost is estimated at approximately $476 million (C$600 million) including about $152 million (C$192 million) of equity capital contributed from the JV. Tricon’s share is approximately $46 million (C$58 million). Construction is slated to begin in early 2022 and be completed in 2025.

Hilary Spann, managing director, head of Real Estate Americas, at CPP Investments, noted in a prepared statement that the greater Toronto area continues to experience significant undersupply of purpose-built rental properties as well as modern, institutionally owned and operated rental properties. Spann said CPP Investments sees a long-term opportunity to build and invest with Tricon.

Gary Berman, president & CEO of Tricon Residential, said in a prepared statement increasing the stock of private rental housing is a stated goal of the city of Toronto and provincial governments. He noted Toronto has compelling long-term rental fundamentals including high population growth, a diverse economy and increasingly stretched home prices. Berman added the dislocation occurring in the land market presents an opportunity to source attractive development sites and provide high-quality rental apartments to meet today’s renters’ needs including large livable suites, extensive amenities and lifestyle programming.

The joint venture will enable Tricon to scale its Toronto-based multifamily portfolio to more than 7,000 units.

Tricon Transactions

Last month, Tricon announced it was recapitalizing its United States portfolio by entering into a joint venture with two unidentified institutional investors which purchased a combined 80 percent interest in the existing 23-property portfolio. Tricon will retain 20 percent interest in the portfolio, which is valued at $1.3 billion. Tricon will use $425 million from the recapitalization to repay outstanding debt and for general corporate purposes.

The JV will have an initial term of 10 years. Tricon will control day-to-day operations of the portfolio and will also receive asset management, property management and potentially performance fees for managing the JV. The parties are in discussions to form a separate joint venture to acquire additional multifamily properties in the U.S. Sun Belt, adding scale and diversification to Tricon’s portfolio.

Tricon owns and manages more than 30,000 multifamily rental units and single-family rental homes in the U.S. and Canada. The company has been investing in recent years in the SFR market in the U.S., which has been growing and attracting interest from institutional players like Blackstone Group.

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