How Rental Apartment Development Can Build Investor Value — One Stage at a Time

When it comes to real estate investing, there are many ways to get involved. Some may gravitate toward the higher-risk with higher-reward potential of development, while others prefer the historically steady income and growth potential of Private Canadian Apartments* — an asset class with a strong track record.

Fortunately, investors don’t have to choose between growth and income potential. Rental apartment funds with development capabilities could offer both, creating value through each stage of construction while generating income once the buildings are complete.

Rental development projects are often measured on estimated completion value or the number of new units they will eventually add to an apartment portfolio. However, a well-executed project can create value with each milestone along the development pipeline even before a building is completed — investors don’t necessarily have to wait until a building is finished to see that value take shape.

Such milestones include: 

Each milestone adds to the project’s value and contributes unique advantages that may not be available when buying an existing building.

In markets experiencing high rental demand and rising rents, acquiring high-quality rental assets at a discount becomes increasingly challenging due to competition. Development remains one of the few reliable ways to access long-term value at cost, supported by government-backed solutions for rental housing. 

At times, ground-up development can mean a significant discount to buying a comparable completed building on the open market. Acquiring projects that are partly through the development process can offer a balance of long-term value and reduced development and/or construction risks, particularly for companies with in-house development expertise. 

The early development stages like permitting, approvals, and construction add value to a project when rising appraisal values are reflected in the fund’s net asset value (NAV). In this way, investor returns may be enhanced as the project moves along the pipeline.

Development ownership allows a fund that owns and manages a portfolio of rental apartments to customize properties to reflect their company strategy and market demand. This is a long-term operational advantage because the units and buildings are designed to meet Resident needs and ownership priorities, not simply for resale. In other words, early design decisions can impact rental growth potential, reduce future capital costs, and create long-term efficiencies, such as energy savings. 

Controlling every stage of development allows rental developers to create high-performing assets that are designed to deliver durable income and built-in growth for investors. The guidance of in-house development experts has been central to the success of the Equiton Residential Income Fund Trust (Apartment Fund) portfolio, which recently celebrated the grand opening of its first major rental development project in Ottawa. From its prime location and thoughtful amenities to disciplined construction cost controls and built-in energy efficiencies, the project has been planned, developed, and constructed to generate long-term value — and investors are already seeing the results. 

Want to learn more about how rental development can enhance your portfolio?
Explore our insights and investment solutions at www.equiton.com 

IMPORTANT INFORMATION: This communication is for information purposes only and is not, and under no circumstances is to be construed as, an invitation to make an investment with Equiton Capital Inc. or securities of certain issuers that are related or connected to Equiton Capital Inc. (“Related Issuers” or “Related Issuer”, as applicable). Investing in Related Issuers involves risks. Recipients of this document who are considering investing in Related Issuers are reminded that any such purchase must not be made on the basis of the information contained in this document but are referred to the applicable offering memorandum associated with the Related Issuer. A copy of an offering memorandum associated with a Related Issuer may be obtained upon request made to the attention of Equiton Capital Inc. All information contained herein, while obtained from sources which are believed to be reliable, is not guaranteed as to its accuracy or completeness.