Hines‘ Canadian real estate portfolio has “significantly” outperformed its holdings in other western markets, so the company has amassed an additional $2 billion in funds to deploy according to one of its top Canadian executives.
During its 20 years of operations in Canada since entering the country in 2004, the global real estate owner, developer and manager has been involved with over 13 million square feet of developments and properties, from office buildings to retail, residential and mixed-use developments.
With offices in Toronto, Vancouver, Calgary and Edmonton, Hines is now focused on the country’s multifamily market.
Avi Tesciuba, senior managing director and co-country head for Hines Canada, told RENX the company remains “very bullish about the Canadian market,” where it has been earning impressive returns on its investments.
In fact during the past year or so, a second fund has been raised that has $2 billion of investment capital specifically for development and redevelopment in Canada.
“We find that the real estate returns have outperformed the U.S. and Europe significantly. Over the last 15 years, it was 9.2 per cent versus 8.5 per cent annually, with half the volatility,” Tesciuba pointed out.
“And in a downturn in 2008-’09, it also experienced much better returns. While the U.S. was getting -8 to -19 per cent in 2008-’09, the Canadian real estate experience (was) +3 and -1 . . . much more stable, less volatility.
“We’ve found that the Canadian real estate market is very attractive. We’ve specifically raised funds to address that, so we’re now trying to deploy it. We’re focusing on four key markets – Toronto, Vancouver, Montreal and Calgary – and focusing primarily right now on multifamily rental within this fund.”
Office space has also been developed with the funds.
Hines begins occupancy at Two Park Central
Reflecting the focus on multifamily, the company recently began welcoming its first residents to the Two Park Central project in Calgary. It is a 531-unit luxury apartment building in the heart of the vibrant Beltline neighborhood.
“We loved the location. It’s within walking distance of downtown. We developed and are still managing Eighth Avenue Place (a two-storey office complex in Calgary’s core). So you’re just minutes away from downtown,” Tesciuba said. “We were also able to assemble a site that includes One Park Central. So between One Park and Two Park, we have about 1,000 units between the two buildings.
“We control the laneway – we bought the laneway from the city. So we’re really able to create a full community just between the two buildings. It’s more than just a single building. For a developer, it’s a dream to be able to create a community like that.”
Tesciuba said there are some macro aspects about Calgary and the multifamily market in the city that resonate well with Hines.
“There is a fundamental under-supply of rental in Calgary and this is meant to address it with high-quality product,” he said.
Calgary’s tech sector performs well
The city’s tech sector has been strong recently and Tesciuba said as an office landlord Hines is experiencing that in its buildings. Also, industries outside the oil and gas sectors are growing.
“We like the economic fundamentals about Calgary. We think it is a very busy, friendly environment and specifically no rent controls. If you think about multifamily investors, the biggest concern that they often cite is government policy,” Tesciuba said.
“When you think about Calgary and their pro-business environment, that believes in free markets, we don’t have land transfer tax in Calgary, we don’t have rent control, it makes it very attractive for multifamily investment.”
Increasing immigration trends, affordability and quality of life all solidify Calgary’s position as a great alternative. The cost of housing is lower, incomes are high and it’s known internationally as a very livable city.
“The supply-demand dynamic in real estate is very strong to us,” Tesciuba said. “If you look at the existing multifamily stock it’s old, outdated – 54 per cent of the units that are available today were built before 1980. So that’s over 40 years old.
“And the total quantity of supply in Calgary is the lowest per capita in Canada. We’ve only got three units per 100 people . . . It’s about half of what similar cities would have in terms of inventory. . . . We are looking to do more multifamily product in Calgary.”
“Magnet” office attracting tenants
Tesciuba said the company also remains bullish on what it calls “magnet” office.
“That’s well-amenitized, well-located buildings near transit and well-managed buildings,” he said. “Despite what’s been going on with COVID, if you look at buildings like Eighth Avenue Place in Calgary, it’s nearly full. If you look at our building called CIBC Square in Toronto, that is 100 per cent full.
“These buildings are doing really, really well despite the COVID dynamics that are still happening.
“We believe that these types of buildings, these office buildings, will do well. And so we’re still interested in looking at office buildings.”
In line with that belief, the company has developed two T3 (transit, technology and timber) buildings in Toronto – T3 Bayside on the waterfront and T3 Sterling in the Junction area.
Hines’ major Toronto developments
Earlier this year PSP Investments, one of Canada’s largest pension investment managers, announced a partnership with Hines to develop The Hangar District alongside PSP subsidiary, Northcrest Developments, at the Downsview Airport Lands redevelopment.
The Hangar District is the first proposed neighbourhood in the Downsview transformation and will be an example for how the site is to be reimagined over the coming decades.
This initial proposal, being reviewed by the City of Toronto, envisions nearly 3,000 homes, including rental apartments and affordable options; more than 7,000 new jobs at businesses located in retrofitted hangar buildings, new commercial and office spaces; and amenities including shops, parks, day cares and public spaces.
The T3 Bayside project is designed by world-renowned Danish architecture firm 3XN and is part of a much larger mixed-use development.
Phase I offers 251,000 square feet of next-generation creative office space along Downtown Toronto’s eastern waterfront. Phase II, a planned twin building adjacent to Phase I, is in pre-development.
The Bayside Toronto project is located on a 13-acre site along Toronto’s waterfront. The mixed-use waterfront community is part of Waterfront Toronto’s 2,000-acre revitalization plan, the largest such initiative currently underway in the world.
Hines was selected as the master developer for this project through an international competition that drew 17 submissions.
When complete, Bayside Toronto will contain more than two million square feet of residential, office, retail and cultural uses resulting in a diverse live-work-play neighbourhood featuring:
- the two mass timber office buildings, T3 Bayside Phases I and II;
- and four condominium developments, of which three are complete – Aqualina (362 units, 2018), Aquavista (227 units, 2019) and Aquabella (174 units, 2021). The fourth development, Aqualuna (240 units) is slated for completion this year.
At completion, 20 per cent of the residential units will be considered affordable.
Elsewhere in Toronto, 88 Bathurst is a 312,000-square-foot mixed-use project with 307 luxury rental residential units, 55,000 square feet of boutique office space and 26,000 square feet of high-end retail. It is designed by 3XN and amenities include a rooftop pool with skyline views. Project delivery is expected in the first half of 2025.
T3 Sterling Road is a 423,452-square-foot heavy timber creative office development across three buildings in Toronto’s Lower Junction neighborhood.
The firm is also involved at CIBC Square, a three-million-square-foot development in downtown Toronto.
Vancouver office projects
Hines has two office development sites in Vancouver in the planning stages, “and we’re looking to expand into Montreal, given how critical of a city it is and how well-populated (it is),” he said.
T3 Mount Pleasant in Vancouver is under development with 190,000 square feet of office space.
1166 West Pender in Vancouver is an employee-centric 32-storey class-AAA office building which is in the planning stages. Hines is hoping to break ground in the near future, though there is no firm timeline.