While the world has seen market fluctuations throughout the COVID-19 pandemic, the Greater Toronto Area (GTA) multifamily sector has remained robust. A recent transaction at the southwest corner of Dixon Road and Islington Avenue in Etobicoke exemplifies this. A multi-residential offering with 352 units on 10.12 acres, Briarcrest Manor comprises two high-rise towers of 15 and 16 stories and is surrounded by natural greenspace.
Rebounding market conditions
Colliers’ GTA Multifamily Report for 2021 showed that by the end of last year, the average price in the GTA per suite increased by 12.1% to $321,049, and transaction volume soared to $3.3 billion year-over-year – signifying high demand and a return to pre-pandemic levels.
Although the rental market had its challenges throughout the pandemic, periphery regions of Toronto - such as Central Etobicoke - were less adversely affected by rising vacancy compared to the downtown core. The larger suite sizes common to the area encouraged demand, and occupancy outpaced many other areas of the city. Briarcrest Manor echoed this trend and demonstrated above average occupancy and strong rental growth towards the end of the year.
Recognizing the upside potential of Briarcrest Manor
Briarcrest Manor towers were erected circa 1964 and 1963 respectively. In recent years, management completed significant capital work to modernize on-site resident amenities. Kyle Lindsay, a senior sales representative leading Colliers Canada’s Multifamily Group, and Tim Bristow, a senior vice president and sales representative at Colliers in Toronto, recognized the upside potential of both professionally managed residential towers. The capital work helped position the property in the market because it was well-maintained with little deferred maintenance. Any future capital work would be considered “revenue-generating,” which added credibility to the additional value the property had to offer.
This saw the National Multifamily Group begin working with the client in an advisory capacity, engaging Colliers’ Development Advisory team to survey the viability of excess land intensification and subsequently secure a higher price on the property.
Navigating the ownership structure
Briarcrest Manor presented a unique challenge because it had a fragmented, multigenerational ownership structure with differing opinions on the future of the property. A single entity representing half (50%) of the ownership group wanted to divest the property, while the other combined 50% preferred to continue to hold long-term. The Colliers team represented the single, majority shareholder.
Under the partnership agreement from 1964, either 50% had the right to market the property and deliver a bona fide unconditional offer that the other partners had 10 days to match or accept. “Our client’s expectations were for us to run a marketing process, and create a competitive bidding environment where the market did not view the partners as a threat and our process as an extravagant pricing exercise,” said Lindsay. “We needed to ensure that prospective purchasers viewed this as a market transaction so they could allocate the appropriate underwriting team to deliver the most competitive offer possible. While it is not uncommon to have a right of first refusal between partners, it was unique to formally market 100% of the property while representing only 50% of the ownership.”
According to Lindsay, the key to the marketing process was to instill confidence and convey that there was a mechanism in place that would see 100% interest of the property trade as the most likely scenario. "We believed we did this effectively and were able to leverage the unique ownership structure to ensure that buyers put their best offer forward,” he stated.
Enlisting support from the team
Lindsay and Bristow were keen to understand what could increase density on the Briarcrest Manor site considering the amount of underutilized land surrounding its two towers. This prompted them to enlist the support of Jordan Rea, a senior land use planner specializing in development advisory and approvals within Colliers’ Strategy and Consulting Group. After surveying the site and its policy context, Rea prepared a 3D rendering covering several options for additional development on the site “ranging from relatively low-risk to fairly aggressive, but with supportable arguments for the additional density.”
Rea likened this to a value-add in the sense that the Brokerage team had a site they could market and prospective buyers could do their own due diligence to interpret it. “By highlighting the underdeveloped or underutilized nature of the site, you can start to appeal to a wider pool of prospective purchasers, perhaps those looking for an income property who also have some development expertise, or developers looking to take advantage of the opportunities,” he stated.
To maintain the balancing act of keeping up the market momentum while addressing the partnership concern, the Colliers team relied heavily on effective communication and storytelling while creating timelines for deliverables. “There was a clear path to acquisition, and the conditions were spoken about in advance, so there was no confusion around that,” said Bristow. “Using our expertise, we came up with ways that we could articulate a potentially much larger value proposition than we originally looked at once we were given the assignment.”
“Looking beyond the current value of the property to its future potential led to success for the client as they were able to obtain a higher-than-expected price on the property,” Bristow concluded.
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