A year after sticking its toe into the sector, Toronto-based homebuilder Empire Communities has formally launched its rental housing division, Empire Rental Living, with initial plans to construct 5,000 rental homes in Ontario and several U.S. markets.
Known mainly as a single-family homebuilder in its U.S. operations, Empire has also constructed multifamily in several forms in Canada. Over its 27-year history, Empire has built more than 22,000 homes and condos across North America.
Industry veterans Cole Young and Donald Povieng are heading up Empire Rental Living’s North American operations. Povieng called it a “very logical move” for Empire to enter the build-to-rent segment.
“If you look at a lot of our for-sale Empire Communities homes, the owners of the company would drive through and they would see for-rent signs on the yards of homes the buyer didn’t even close on yet,” Povieng said.
“That obviously sparked something in the ownerships’ minds.
“If folks are renting their houses out, there must be something behind it. That’s part of the genesis of the formation of the rental decision.”
Preparing to launch Empire Rental Living
After studying the economics of building single-family rental communities, a sector that is well-established in the U.S., but almost unknown in Canada, Young and Povieng were hired. They’ve spent the past year preparing for the formal launch from their U.S. base.
“We spent a lot of time in Canada, Georgia, Texas, the Carolinas, markets that we’re focused on growing in to identify the actual projects, acquire them and start planning,” said Povieng, who joined Empire after a stint as president, Southern California at Encore Capital Management.
“COVID actually helped accelerate, at least in our minds, the demand for single-family rentals.
“As people started looking at their current rental situations where they have to enter an elevator, or you have someone living above, below, side to side, after being confined to your home for a while you start to get antsy and start to desire outdoor space and a different way of living.”
In addition to Ontario, Empire Rental Living is initially targeting U.S. markets in Georgia, Tennessee, Texas and the Carolinas, with additional areas under consideration.
Empire’s development plans
Empire Rental Living’s first project is part of a mid-town Toronto boutique condo and townhome development known as Maven. The 76-unit project, which is now under construction, includes 18 rental replacement units which will be retained and managed by Empire. Occupancy is scheduled to begin in spring or early summer.
The company has a pipeline of over 1,300 townhomes, stacked flats, and single-family homes under development in Ontario. The next projects in Ontario are set to launch during Q3 or Q4 depending on the progress of the pandemic.
Elsewhere, Empire also has under development a 102-unit townhome community on the south side of Atlanta, and 300 single-family homes in Austin, Texas. Another 357 horizontal apartment units are planned for Houston and Austin.
The types of rentals to be built will depend on market conditions and the property being developed. In the U.S., the bulk will be single-family, detached or townhome-type housing.
“At a high level we want to be tactical about how we operate the business,” said Young, who most recently divided his time as a vice-president at Builder Advisor Group, and at Encore Capital Management. “I think Empire is fairly unique in the sense that we are a homebuilder first.”
However, also having a team with multifamily experience in Toronto means the firm has, in-house, a wide variety of skill sets.
“It allows you to strategically set yourself up for opportunity as markets change. Our focus today is largely on the single-family space, but we have opportunities where it makes sense to do some (multifamily) . . .”
Empire aims to provide housing for life
Further down the road, Empire has an extensive pipeline of housing developments in planning stages including single-family attached and detached homes, horizontal apartments, and multifamily mid-rise buildings.
“When we think of housing, our goal as a company is to provide housing for each person at every stage of life,” Povieng explained. “You graduate from college and you can’t afford to buy a house yet, so you rent from Empire.
“Once you are ready to buy, we’ll help you buy an Empire house. And when you want to downsize and rent again and have more flexibility, we’ll rent you an Empire product.”
The firm is also working on partnerships with North American master-plan developers which could add additional markets and another 2,000 homes to its portfolio.
The portfolio will be managed by Empire’s internal property management team.
“For Empire as a whole I think it is a great way to diversify our business. It’s kind of a counter-cyclical hedge . . . and it allows us to expand our products and services into a vertically integrated segment of our business,” Povieng said.
The rental community model in Canada
One challenge, Young said, will be bring the single-family rental community model into Canada. Municipalities have little or no experience with this type of development, financing for such projects is different and even property taxation isn’t set up to accommodate such communities.
“The single-family rental business is here to stay in the US. It’s a very mature business,” he explained. “As a whole, the business doesn’t really exist in Canada. We’re kind of on the forefront of doing this in Canada.
“Our long-term goal is to bring the industry to Canada and have it over time evolve into a form like it is in the U.S.
“We need to spend some time working with the different powers that be, to (help them) really understand the business.”