Pretium, Ares to Purchase Front Yard in $2.4 Billion Deal

Patrick Clark and Prashant Gopal
Bloomberg

Pretium and Ares Management Corp. have agreed to purchase Front Yard Residential Corp. in a deal valued at $2.4 billion that would create the second-largest single-family landlord in the U.S.

Front Yard shareholders will receive $13.50 a share, a premium of about 36% over the closing price on Friday, according to a statement on Monday. The equity value of the deal is about $800 million.

Shares of Front Yard surged 35% to $13.45 in New York.

Wall Street has been plowing money into the single-family rental industry in recent months, betting on the demand for homes with more space in the suburbs. While record-low mortgage rates have fueled a housing rally, that’s driven up prices, possibly pushing homeownership out of reach for many.

That has investors looking at single-family rentals, which give residents who can’t afford to buy access to backyards and extra rooms for home offices. Blackstone Group Inc., Nuveen Real Estate, and JPMorgan Chase & Co.’s asset management arm have all made fresh bets on rental houses since the pandemic started.

“Across the country, you can see rent growth in single-family rental, increased demand, and a significant reduction in available home supply,” Don Mullen, Pretium’s chairman, said in an interview. “That turbocharged our confidence.”

Mullen, a former former Goldman Sachs partner, founded Pretium in 2012. It was part of an early wave of Wall Street firms to invest in single-family rental homes in the aftermath of the U.S. foreclosure crisis, building economies of scale that made sprawling portfolios of rental houses easier to manage.

Roughly three-quarters of Front Yard’s rental houses are in markets where Pretium has an existing footprint, allowing the firm to add density to its portfolio that should translate to higher quality services for renters and better margins for investors, Mullen said.

 

Deal Nixed

Amherst Holdings had announced a deal to buy Front Yard back in February for $12.50 a share, or about $2.3 billion. But the deal fell apart in May as the coronavirus roiled real estate markets. That announcement sent Front Yard’s shares spiraling lower.

While other single-family rental landlords have seen share prices recover from market lows in March, shares in Front Yard languished, leading shareholders to call for the company to liquidate itself. The stock had dropped 19% this year and closed Friday at $9.96.

Front Yard put itself on the block last year after settling with an activist investor. The landlord owns roughly 15,000 homes, making it an attractive target in an industry where efficiencies of scale are key.

Pretium has more than $16 billion in assets under management across residential real estate, mortgage finance, and corporate credit. Last year, it completed a $1.5 billion recapitalization of more than 20,000 houses acquired through an early single-family rental fund.

The new combined company would own and operate more than 55,000 homes across the U.S., making it the second-largest landlord in the industry.

Invitation Homes Inc., which owns roughly 80,000 houses, recently announced a new joint venture with a Boston-based firm to deploy more than $1 billion, including debt, to buy and renovate homes.

 

 

© 2020 Bloomberg

Diverging predictions for Metro real estate market

Joanne Lee-Young
The Province

The Vancouver real estate industry reported another month of higher sales and prices in September and continues to defy dire predictions of a pandemic-induced downturn.

But some analysts point out fragile aspects of the market, such as a rising condo inventory and falling condo prices.

The number of real estate sales in B.C. year-over-year in September increased 63 per cent. The average residential price in B.C. increased by 15.3 per cent compared to last year, and set a monthly record of $803,210. Total sales dollar volume in August increased 88 per cent compared to last year, according to the B.C. Real Estate Association, which represents real estate agents.

The Canada Mortgage and Housing Corp. has been in a high-profile clash with some in the real estate industry over its prediction of double-digit percentage price drops in markets such as Vancouver.

The federal government housing agency, which has tightened underwriting policies for high-ratio borrowers, has also been vocal about the danger of fuelling the stress of home ownership in expensive markets for buyers with uncertain financial prospects in a weak economy.

Now, with sales and prices rising, there continues to be agreement about a housing market cleaving in half, but disagreement about where this could lead.

“The overall housing market system seems to be dividing in two, and this is where risks start to appear,” said Aled ab Iorwerth, deputy chief economist at the CMHC.

He and others think that while prices are holding and rising, there are nuances such as falling rents, a growing preference for suburban over city locations, and extended economic weakness that could hit the condo market and pull down other house prices too.

“I think it’s still too early to be doing the happy dance. Condo prices are declining while house prices are moving higher. The result is a higher average sales price as the composition of homes selling has changed. It’s very much a mixed market and the potential fallout from deferred mortgages has yet to be realized as these deferrals are only beginning to expire,” said Vancouver realtor Steve Saretsky.

Saretsky adds there will be a record number of new condos completing this year and next. These are projects that were started during the building boom which began in 2016.

“That new construction is finally completing at a time when condo demand has slowed, and the rental market has softened. These are obvious risks that are contending with the lowest mortgage rates we’ve ever seen and a sea of liquidity provided by the Bank of Canada. Hence, the short- to medium-term direction of the market remains very much in flux.”

Realtor Ian Watt, who specializes in downtown Vancouver condos, where rising inventory has been more pronounced, said the median price in September decreased 10 per cent from THE previous month, and the median price decreased 14 per cent from September 2019.

Housing starts across B.C. in September hit 25,308, down from 33,100 during the same period in 2019.

However, that is comparing housing starts in 2019 that ended up reaching a record high of 44,932, even though most forecasts had been for the number at the end of the year to be around 35,000.

 

© 2020 Postmedia Network Inc. All rights reserved. 

Vancouver home sales up nearly 54% in mid-October as recovery continues

Sean MacKay
Livabl

As of the middle of October, 1,741 homes have changed hands in the Vancouver region, up nearly 54 percent from the first half of the month last year.

It’s a strong signal that the region’s housing market will deliver more remarkable figures by month end for October.

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The mid-month sales and new listings figures were published late last week by Dexter Realty Managing Broker Kevin Skipworth, who projected that over 3,000 homes are likely to be sold across the region by the end of the month if the current pace continues.

Skipworth noted that sales momentum picked up in the second half of September, suggesting the same dynamic could play out this month too.

There are, however, likely to be some changes to the headline numbers when comparing the exceptional September figures to October’s eventual home sales tally.

For one, there were more home sales in October 2019 than September 2019, meaning the percentage increase for October 2020 is likely to come down slightly from the previous month’s record-breaking results.

“Typically, October would have more sales than September – but of course in the year of COVID, there is no usual,” Skipworth said in his monthly data round-up email.

“We may not quite see the same level of sales to finish the month but buyers are still engaging and with the number of new listings less so far in October than we saw in September, competition continues to be strong – especially for detached homes,” he continued.

On the listings side, Skipworth said 3,060 new listings had hit the market as of October 15th, down from 3,385 new listings from the same point in September. This has caused the supply of total active listings to come down to 13,670 from 13,790 at the end of last month.

“While it was a September to remember, the real estate market could still be Mr. October after we finish the month,” Skipworth said.

 

© 2020 BuzzBuzzHome Corp.

Careful, pre-construction condo investors. Lenders don’t like funding assignments

Clayton Jarvis
Mortgage Broker News

Readers of Mortgage Broker News will be all too familiar with the pitch from realtors who specialize in pre-construction condo sales: Put down your deposit, sit back and watch as that piece of paper appreciates faster than any completed condo unit in the city. Don’t worry about paying those exorbitant monthly maintenance fees, either. You don’t even need to keep the condo; you can just flip it at its new value and walk away with a pile of cash.

There was a time when condo assignments were relatively easy feats, but those days are over. Pre-construction investors considering this classic, once tidy speculation strategy need to understand that assigning a condo unit to a second buyer is no longer the slam dunk it once was.

The reason is simple enough.

“The bank’s not going to finance it at the appraised value,” says Anthony Venuto of InTouch Mortgage Solutions. “They’re going to finance at the original purchase price – and not a dollar more.”

That’s a cold, hard dose of reality for both sides of the assignment equation.

Assume a pre-con investor purchased a condo in Vancouver for $600,000 in 2015. At time of completion in 2020, the unit is now “worth” $900,000. She finds a buyer who is willing to put down a deposit based on the new assumed value. The second buyer then goes out in search of financing, only to find that no lender he can find will fund the deal based on the new price.

The new buyer is stuck. He can’t come up with enough money to cover the difference between the current purchase price and what the bank will lend. And because a condition covering such a situation wasn’t baked into the agreement he signed with the seller and her lawyer, he could potentially lose his deposit.

The original purchaser is also in a fairly nauseating situation. Rather than quickly finding a buyer for what she feels is a hot piece of real estate, she is left once again looking for someone to take the property off her hands. While she does, she will need to assume the carrying costs for a property she never intended on keeping. 

According to The Mortgage Trail’s Jerome Trail, assignments were a far smoother proposition for investors six or seven years ago, when pre-construction units in the GTA were selling for around $200,000 and being assigned for approximately $300,000 upon completion. 

“In the beginning,” Trail says, “we could get them done. They would look at a $300,000 Agreement of Purchase and Sale and we would get the 80 percent loan-to-value.”

But within a year of the assignment boom, lenders slammed on the brakes.

“They began asking, ‘What exactly is the collateral here? The condo corporation has not registered. All you really have here is a piece of paper, and our mortgage is really not registered against anything, so we can’t do these anymore,’” Trail says.

Pain in the assignment

For assignments to take place today, Trail says sellers are required to get their builder or developer to agree to the assignment and to provide the original Agreement of Purchase and Sale. End-buyers will likely need to test the alternate lending space

“There are maybe only two banks that I know of, personally, who are doing assignments,” Venuto says.

Trail says alternative lenders like Home Trust may provide 70 to 75 percent of the new valuation, but the appraisal will be based on the opinion of the company’s own appraiser, not the market, and will therefore, as he puts it, “be conservative in nature”.

Lending on assignments becomes even less attractive in an environment where condo inventory is increasing and values are softening, a novel situation most condo investors didn’t see coming. For a variety of reasons – remote work that has made costly downtown living less necessary, extended lockdowns that have made condo life feel more like prison, the evaporation of short-term rental profits – COVID-19 is drinking the milkshake of Canada’s big city condo investors.

“Is it going to last two weeks? Is it going to last six months? Is it going to last two years? We don’t know,” Trail says. “All of a sudden, we have an asset class that’s no longer appreciating. The assignment sale problem is just going to increase if the values continue to come down.”

Because so many first-time buyers get their feet wet in the condo space, Trail says many of them may not know that they are involved in an assignment until it’s too late and lenders are shaking their heads “no” in unison. He says he asks his condo clients to show him a broker version of the MLS listing before an offer is placed “so we’re ahead of that curve.”

Because Canada’s single-family market has shown no sign of cooling, the condo space will likely become increasingly attractive to buyers priced out of the detached and attached sectors. With so many pre-construction buyers looking to assign their properties before their values erode, and so many realtors encouraging buyers to waive any and all conditions, Trail says it’s imperative that brokers step in to ensure their clients exercise extreme diligence before putting in an offer on new condos.

“If you’re not on top of it up front, you’ve got a whole slew of problems,” he says. “The bottom line is, there are so many things stacking up against these transactions that I barely know where to start.”

 

Copyright © 2020 Key Media

Vancouver real estate: record $500,000 bonus awaits realtor of buyer of $13.8 million condo in tower under construction

Carlito Pablo
The Georgia Straight

As far as realtor bonuses go, this could be one for the books.

A seller is offering a $500,000 bonus for an agent who can deliver a buyer for a $13,888,800 condo in downtown Vancouver.

The condo is one of 181 residential units in a 43-storey tower currently under construction.

The development known as Alberni is expected to be completed between 2021 and 2022.

The bonus will be on top of a commission, structured as: 3.22 percent on the first $100,000, and 1.15 percent on the balance.

The commission amounts to $161,791.

Plus the half-million-dollar bonus, the money on the table for a buyer’s agent totals $661,791.

The listing was tracked by Zealty.ca, a real-estate search website by Holywell Properties.

Adam Major of Holywell Properties explained to the Straight that the deal is a contract assignment.

According to Major, a contract assignment means that a buyer will transfer the contract to buy a property to someone else before the completion date.

In other words, the seller of this unit bought the condo during pre-sale, and is now trying to market the contract.

Major recalled that the Alberni sold out during pre-sale.

Major also noted that there are 21 units listed for sale in this condo development.

All of these listings are assignment of contract sales, Major added.

The managing broker of Holywell Properties said that the $500,000 bonus could be a record.

“This is the biggest bonus commission we have tracked on Zealty.ca and the biggest I have ever seen,” Major said.

Vancouver city council approved the rezoning application for the condo project on October 20, 2016.

The mixed-use tower with commercial uses on ground level is being built at 1550 Alberni Street.

Japanese architect Kengo Kuma designed the building for developer Westbank.

The tower features a curved silhouette.

Back to the $500,000 bonus plus commission, 3902-1550 Alberni Street measures 4,030 square feet.

The property is on the 39^th floor, and it has three bedrooms and four bathrooms.

It also comes with a private Japanese garden on the balcony, two parking spaces, and a locker.

The seller is represented by Angell, Hasman & Associates (Malcolm Hasman) Realty Ltd. 

 

 

© 2020 VANCOUVER FREE PRESS

Akimbo is Redefining the Skyline in Brentwood

Michelle Hopkins
REW

Burnaby’s first super prime tower offers a new level of luxury
Brentwood has really grown up. Today, this is a sought-after neighbourhood with great outdoor cafes, fabulous shopping, parks, trails, recreational amenities, and a historic business district, all within walking distance. This is where family-owned developer IMANI Development chose for its newest and arguably its most spectacular tower – Akimbo.
“Akimbo is the first super prime tower outside of downtown Vancouver and home buyers love it – they have made Akimbo the most successful tower launch since 2018,” says Cam Good, President of Key Marketing. “It’s a huge win, not just for IMANI, but for all of Metro Vancouver as all developers have now seen that investment in truly beautiful architecture pays off for the developer and is a wonderful gift to everyone who will enjoy looking at it for years to come.”

Nestled in one of Burnaby’s most livable, fastest growing urban communities, Akimbo is an architecturally stunning 40-storey luxury high-rise glass and concrete tower soaring against the backdrop of North Burnaby’s historic real estate district.
“Akimbo is the centre-point of the new and improved Brentwood and offers a wonderful walking and shopping experience to a high street, Brentwood Mall,” says Good. “Akimbo is just one block from Skytrain – not right up against the Skytrain station – and not too far to walk. Perfect.”
Perfectly positioned along quiet streets, Akimbo is an exclusive collection of 350 one, two and three-bedroom+ condos, ranging from 460 to 1,405 square feet of thoughtfully designed spaces.
As soon as you enter through a glass lobby showcased by stylish seating areas and 24-hour concierge services, you know you are in for timeless elegance and sophistication throughout.
Designed by award-winning IBI Group Architects, the attention to detail is second to none.
IMANI truly understands how today’s families and young professionals live. Inside these bright, airy residences there is a fusion of function and beauty – with high end laminate floors, nine-foot ceilings, air conditioning, floor-to-ceiling windows, waterfall countertops and a high-end Fisher&Paykel appliance package, including a fully integrated refrigerator to match the European-inspired cabinetry.

Residents will enjoy the spacious fourth-floor amenities area, showcased by a party room complete with kitchen, a sleek lounge for neighbourhood gatherings, a fully equipped fitness centre and guest suite. Watch those sunsets BC. Is known for from the outdoors courtyard with barbecue, dining area and children’s playground. “Akimbo was designed from the inside out with the right mix of perfectly square and efficient floor plans offering home buyers incredible functionality and value – all wrapped up in what will be at completion in just under three years – the architectural landmark of Burnaby,” says Good.
Akimbo is already more than 90 per cent sold. With prices starting at just under $600k for a one bedroom and larger homes including the two-bedroom for $835K, these will surely sell out quickly. Akimbo’s award-winning presentation centre, located at 2152 Douglas Rd., Burnaby, is open by appointment Saturday and Sunday from noon to 5 p.m. For more information, visit www.akimboliving.com or call 604-359-7728. Completion is set for 2023.

© 2020 REW

Vancouver 0.21-acre commercial site sells for $31.2 million

Lee & Associates
Western Investor

Off-market deal involves multi-level retail/office building on West Hastings Street.

 

Type of property: Retail

Location: 475 West Hastings Street, Vancouver

Size of property: 9,360 square feet

Land size: 0.21 acres

Zoning: DD (Downtown district)

Sale price: $31.25 million

Type of deal: Off-market transaction

Date of sale: August 29, 2020

Brokerage: Lee & Associates, Vancouver

Brokers: Don Mussenenden and Arash Rezai

 

© Copyright 2020 Western Investor

Vancouver rents fall as immigration goes negative

Frank O’Brien
Western Investor

 — East Vancouver 16-suite rental building sold for $5 million.| Goodman Commercial

Net immigration to British Columbia has gone negative, plunging 111 per cent in the first half of this year compared to the first six months of 2019, adding to concerns in the rental housing sector.

During the second quarter, B.C. experienced a net loss of 3,553 immigrants, compared to a net gain of more than 19,600 in the same period a year earlier, according to BC Stats. In the first quarter of 2020, B.C. had a net immigration increase of 6,024 newcomers, down 50 per cent from the first quarter of 2019, as COVID-19 travel restrictions kicked in.

Nationally, immigration levels were down 38.25 per cent in the second half compared to a year earlier, Statistics Canada reports.

The immigration plunge is having an effect on Vancouver’s rental market, according to Capital Economics’ Stephen Brown, who noted in an October 11 bulletin that the declining number of new arrivals are impacting apartment rental prices in both Toronto and Vancouver. Brown noted that both cities have seen a near 10 per cent drop in rental rates, the highest among Canadian cities, since the pandemic began in March.

According to the most recent rental survey by PadMapper, overall apartment rent increases in Vancouver have flatlined recently, but average rents for a two-bedroom apartment have fallen 15 per cent since September of last year, to $2,750 per month.

A separate study released October 15 by Rental.ca and Bullpen Research & Consulting found that the average rent for a Vancouver single-family house in the third quarter was down 29 per cent from a year earlier, to $2,553.

“Condo rents in Vancouver are down 17 per cent in the third quarter of 2020 compared to the third quarter of 2019,” the study found.

But Vancouver multi-family insiders are skeptical of reports on rental declines, noting that in the midst of COVID-19 turmoil, it is difficult to get a bead on trends.

Mark Goodman, a multi-family specialist with Goodman Commercial Inc., said some landlords are offering rental reductions while others are seeing rent increases on turnovers. He suggested that the major impact of lower immigration is on student housing rentals along the Broadway Corridor and near the University of British Columbia.

What Goodman and other agents are seeing is an “avalanche” of apartment buildings hitting the Vancouver area market, which Goodman suggested is in response to the current provincial rent freeze, soaring insurance rates and concerns about ongoing restrictive rent controls in B.C.

“Some long-time landlords are getting out of this market,” he said.

Goodman noted that, despite the angst, there is no lack of investors for Vancouver apartment buildings, saying sales have increased over the past few months and prices have stayed firm.

A national survey of landlords by CBRE, released in October, showed Canada’s multi-family sector has been mostly immune to COVID-19.

Multi-family was able to maintain 65 per cent of its five-year trailing quarterly average investment volume in the second quarter of 2020, the smallest decline of any sector, and “pricing is now even higher compared to pre-pandemic times for select properties and geographies,” stated CBRE’s Canadian Multifamily in the Post-Pandemic Era survey.

 

 

© Copyright 2020 Western Investor 

Vancouver housing is now firmly in seller?s market territory

Sean MacKay
Livabl

What a difference a year makes.

Last October, it was buyers who were calling the shots in the Vancouver region’s housing market as higher detached home inventory tipped the balance away from sellers.

Now, after an anxiety-ridden spring and a remarkable summer bounce back, home sales have continued their high-flying performance in September while new home listings struggled to keep up.

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“Market conditions [in the Vancouver region] are firmly entrenched in a sellers’ market,” wrote Central 1 Credit Union Deputy Chief Economist Bryan Yu in an economic update published late last week.

“While new listings remained elevated, strong sales have largely absorbed these units. The sales to-inventory (active listings) ratio is trending near 30 percent, whereas a balanced market is typically in the 15 to 20 percent range,” he continued.

Yu wrote that the townhome and detached home segments were “particularly tight” but even the market for condo apartments favoured sellers.

With sellers holding the bargaining power once again, home price growth has accelerated and Yu projects that appreciation will pick up further in the coming months even if the economic recovery moderates.

All this, of course, begs the question: After ending 2019 in buyers market territory, how can sellers be back in control during a year that’s seen an unprecedented freeze in sales activity during the spring and a wave of fear and economic uncertainty brought on by a pandemic?

While unemployment remains high in the Vancouver region, Yu said that rock bottom mortgage rates, stronger employment figures for higher income earners, and buyer preferences shifting to ground-oriented homes have all worked in tandem to buoy demand.

This is how the Vancouver market has shifted back into seller’s territory, even with new listings remaining elevated in September relative to year-ago levels.

Yu went on to note that home sales in the region are currently on pace to rise 20 percent over 2019’s total.

 

© 2020 BuzzBuzzHome Corp.

Vancouver council approves 55-storey condo tower

WI Staff
Western Investor

Artist rendering of curvy 535-foot tower. | Jyom Architecture

Vancouver council has approved a 55-storey condo tower that will be the fourth-highest tower in the city.

The September 30 decision approved the slender, curvy 535-foot tower that is set to be the second bookend for a major gateway into the city. Construction could start within a year, with work potentially complete in 2024.

Dubbed 601 Beach Crescent, the tower will stand across the north end of the Granville bridge from the recently completed 49-storey Vancouver House, and is due east of the Seymour Street off-ramp.

It is set to include 303 condominiums and 152 social-housing units.

Vancouver-based developer Pinnacle International pins the project’s value at about $250 million. Pinnacle has completed approximately 12,000 residences in the past 40 years in Vancouver, Toronto and San Diego, California.

While the 495-foot-tall Vancouver House and 601 Beach Crescent have similarities, they also play off each other with different architectural features.

Both projects involve international design firms working collaboratively with Vancouver partners. For Vancouver House, famous Danish architect Bjarke Engels worked in partnership with Vancouver’s DIALOG; at 601 Beach Crescent, the design is the brainchild of Shanghai’s Jyom Architecture, in partnership with Vancouver’s GBL Architects.

Councillors Melissa De Genova and Colleen Hardwick were opposed and Sarah Kirby-Yung was absent in city council’s 8-2 vote to approve the 55-storey tower. •

 

 

© Copyright 2020 Western Investor