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Veteran landlords selling Vancouver portfolios

Multi-building portfolios with hundreds of rental apartments being released into Metro market
West 10th tower is part of a 10-building portfolio for sale | CBRE

For decades, Vancouver had Canada’s highest rents and lowest vacancy rates, creating a multi-family mega-market that turned small landlords into paper millionaires and attracted some of the biggest players in the business.

But the pandemic has hardened tenant-favouring legislation and honed thin margins in a city now characterized by soaring costs and restricted incomes.

B.C. rent increases have been frozen since March and are expected to remain locked until the end of 2021. The City of Vancouver has restricted multi-family renovations, outlawed demolitions of older apartment buildings and tethered development of market-rental housing.

With immigration to B.C. hitting negative levels – more people left the province for other regions than arrived in 2020’s first half for the first time in history – Vancouver rents are declining while insurance premiums for apartment buildings have increased an average of 75%, property taxes have soared and capitalization rates have flatlined in the sub-3% range. This has resulted “in a dampening of enthusiasm to invest in the province’s biggest city,” according to Avison Young’s British Columbia Multi-Family Investment Report, which was released in October

It has also encouraged at least two of Vancouver’s largest longtime landlords to shove substantial portfolios onto the market, part of what Mark Goodman of Goodman Commercial Inc. in Vancouver calls an “avalanche” of new listings. Goodman said that within a recent two-day period he heard from 12 apartment property owners who wanted to sell, and 11 of the buildings are in the city of Vancouver.

The largest package being marketed is a 10-building Vancouver concrete tower portfolio with 411 rentals in prime Vancouver neighbourhoods that Hollyburn Properties Ltd. put up for sale in October through a bid process. The portfolio represents about a third of Hollyburn’s multi-family buildings in the city, but less than 10% of its total rental units in three provinces.

Hollyburn, founded in 1972 in West Vancouver, is a family business that manages and operates more than 90 rental apartment properties with about 5,700 suites in Vancouver, Calgary, Toronto and Ottawa. The company owns 33 apartment buildings in Vancouver and four in West Vancouver. Hollyburn did not reply to a request for comment.

Listing agent Lance Coulson, head of the apartment properties group with CBRE in Vancouver, said there “has been substantial interest” in what he calls a “legacy portfolio.”

Nearly a year ago, rental giant Belmont Properties, based in Vancouver for 45 years, offered a four-building portfolio of Vancouver concrete rental towers with a total of 188 units. Belmont owns seven apartment buildings in Vancouver and 28 across Metro Vancouver and Victoria.

Some see the increase in listings as a comment on the restrictive rental laws in Vancouver, but Coulson believes it reflects a pent-up release after markets stalled this spring due to the pandemic.

Others say they could be an early warning of a potential change in capital gains taxation early next year in the delayed federal budget. •