Starlight Investments has placed a portfolio of 26 multifamily assets with 2,643 housing units in eight Ontario and British Columbia markets up for sale.

If a transaction is closed, it would almost certainly be one of the largest of the year for the sector.

Starlight and representatives of TD Cornerstone Commercial Realty Inc. and CIBC WM Real Estate Ltd., which have been retained exclusively to facilitate the sale, declined RENX’s interview requests regarding the portfolio and listing.

The portfolio is comprised of:

• 12 properties with 775 units in Toronto;
• two properties with 324 units in Mississauga;
• three properties with 394 units in Hamilton;
• four properties with 658 units in Kitchener;
• one property with 100 units in Waterloo;
• two properties with 242 units in Guelph;
• one property with 57 units in North Vancouver; and
• one property with 93 units in Nanaimo.

The properties range in size from 23 units at 26 Albert Ave. in Toronto to 279 units at 545, 547 and 565 Belmont Ave. W. in Kitchener.

The properties are all within close proximity to a variety of amenities, including retail, schools, post-secondary institutions, places of worship, parks, recreational areas, along with convenient access to public transit systems and highways, according to a listing brochure.

Selling points for the portfolio

All of the markets are also experiencing favourable market fundamentals, underpinned by job growth that’s driving occupancy and rental rate increases, the brochure states.

The units average 790 square feet and include: three per cent bachelors; 44 per cent one bedrooms; 42 per cent two bedrooms; and 11 per cent three bedrooms.

Thirty-six per cent of the units are hydro sub-metered and 24 per cent are water sub-metered.

Sixty-seven per cent of the units have been renovated and more than $50 million in capital improvements have been made to the properties since November 2020, including in-suite renovations and upgrades to building exteriors, common areas and tenant amenities.

Rental and revenue growth opportunities

The value-add improvements were designed to enhance tenant experience, reduce operating costs and drive rental rate growth while limiting the required capital spend over the near and medium terms.

The portfolio provides opportunities to capture rental upside through a capital program focused on in-suite renovations and a more than 40 per cent gap to market on in-place rental rates. 

With nearly half of the potential rental upside attributed to recently renovated units with a higher propensity to turnover, there’s an opportunity to realize significant revenue upside with a limited capital spend. 

There’s also potential for additional density at several sites through in-fill development.

Properties in the portfolio have in-place financing at fixed below-market interest rates, of which a significant portion is Canada Mortgage and Housing Corporation-insured. The $425 million in CMHC debt, with a weighted average 2.52 per cent interest rate and remaining term of 4.2 years, is assumable subject to lender consent. 

Starlight’s overall portfolio

The Toronto-based company announced in October plans to develop up to 3,000 new apartments during the next few years, with up to 1,200 starting construction in 2024 and the other 1,800 in 2025. That announcement came in the wake of initiatives last fall from the federal and some provincial governments to eliminate the GST/HST on construction and other related costs of such projects.

Starlight executive vice-president of capital expenditure and development Mariano Bocchicchio said at the time the firm was also reviewing projects in its pipeline to see if there are opportunities to provide more homes than originally planned.

The pipeline allowed for construction of up to 28,000 new units in the next 10 years.

“With the implementation of new government policies, we'll be able to reinvest that capital into building more homes and directly increasing the attainable housing supply across Canada,” Bocchicchio told RENX in October. 

Starlight is a privately held company that was founded in 2011. The real estate investment and asset management firm acts as an owner, developer and asset manager while offering a range of investment vehicles across various strategies.

Starlight’s Canadian residential portfolio is comprised of approximately 54,000 units in more than 800 residences.

The company also owns and manages a diversified portfolio of commercial assets across Canada. It has approximately $2 billion of assets under management at more than 50 properties totalling about seven million square feet.

Starlight also has approximately $5 billion of assets under management via about 12,000 multifamily units in 37 communities in 10 American markets.