The Equiton Residential Income Fund has made its first acquisition of what founder and CEO Jason Roque expects to be a busy 2021. The fund has expanded into Hamilton with the purchase of two linked apartment buildings, totalling 360 units, for $54.3 million.
Located in the Beasley neighbourhood of East Hamilton, the buildings are at 125 Wellington St. N. (18 storeys) and 50 Cathcart St. (six storeys). They contain a mix of bachelor, one-, two-, and three-bedroom apartments, and occupy nearly an entire city block.
“We had been looking at Hamilton,” Equiton founder and CEO Jason Roque told RENX in an interview. “I’m from Hamilton, so I know the market really well but we hadn’t come across anything that worked for us. This opportunity came up and we thought it was a good deal so we figured we’d better jump on it.”
The off-market deal was facilitated through a mutual acquaintance in the banking industry who connected Equiton with the vendor, Roque said.
The properties were constructed during the 1970s. Roque said the units were both well-maintained and well-operated by the vendor, a private company. Building systems do require some upgrades, however.
“Good deal” for concrete building
“There are some major capital works that are needed on the building, so we are going to start those right away, but I would say what attracted us was that the previous owner had done a good job of managing it,” Roque said.
He noted that while there is some upside opportunity in rents, there is no dramatic gap between in-place and market.
“We just see that from our perspective it was a good deal for a concrete building of this size and this efficiency in that market. Plus the area there in Hamilton is really gentrifying. I think there’s medium- and long-term opportunity because of everything that’s happening in the area.
“I’ve lived in Hamilton my entire life for the most part and you’d always hear about things being built downtown but nothing ever got built, but that’s changing. There are construction cranes nearby, so we know it’s up and coming, so we figured this would be a good long-term buy for us.”
Known as Wellington Place, the buildings are just minutes from downtown Hamilton and a short commute to McMaster University. Nearby are several public parks, public transit, GO Transit, Hamilton General Hospital and St. Joseph’s Healthcare.
Equiton will take over management of the buildings.
Equiton focused on multires acquisitions
The purchase is one of the fund’s largest to date, increasing its portfolio by about 35 per cent to just under 1,400 units and the value to about $325 million in AUM.
While Equiton is also interested in commercial and retail properties, the immediate focus is on multiresidential.
“The majority of our purchases this year, 80 to 90 per cent of our purchases, will be multires,” he said.
For a couple of reasons.
First, Equiton’s fund has been highly successful. Second, there is significant capital available to invest in the sector, which has been a strong performer throughout the pandemic.
“Our fund has been around. It will be our five-year anniversary in May,” Roque said. “The fund has had positive returns every month since inception (59 consecutive months), so we are starting to see the capital flow in much more quickly.
“I would say from my perspective it’s really because of time and tenure. We’ve been around for a long time now so we are starting to see increasing capital inflows.”
Equiton’s purchases in late 2020
Equiton had a busy second half of 2020 in Southern Ontario, making a series of acquisitions and entering into a joint venture in Guelph to build a mixed-use development with RRH Rental Properties. It also internalized its property management functions.
The Guelph development involves the demolition and redevelopment of a 3.5-acre property which has been home to a The Beer Store outlet, which will be moved into a new building in the first phase. The JV will then develop 96 townhomes.
It also acquired two 38-unit apartment buildings at 650 Woodbine and 787 Vaughan Roads in Toronto in November.
In July, it expanded the Equiton Residential Income Fund portfolio in Guelph, purchasing two apartment buildings comprising 112 units. They are located near the Stone Road Mall and an adjacent commercial and services corridor.
“We’re growing,” Roque concluded. “I think over the next few years you are going to see more rapid growth.”
Founded in 2015, Equiton is a private equity firm based in Burlington specializing in private market real estate investments. It purchases and manages residential and commercial income properties, and invests in real estate development projects.
Its leadership team has more than 100 years of combined real estate, investing and management experience.
Collectively they have overseen the acquisition and management of over $10 billion in real estate, developed over 100 million square feet of real estate projects and overseen a combined portfolio of more than 10,000 apartments in Canada and the United States.