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Thursday, July 23, 2015

Skyline invests $136 million in Windsor rental properties

The Windsor Star/Grace Macaluso

Jason Castellan is making a $136.2-million bet on the Windsor economy.

The CEO of Guelph-based Skyline Apartment Real Estate Investment Trust is purchasing 23 rental properties amid expectations that the region’s economic fortunes will improve.

“We think Windsor is ready to rock and roll,” Castellan said Wednesday. “Having that skilled workforce, the new bridge, sharing a border with the United States, whose economy is starting to gain momentum, and having the dollar in our favour, I just think Windsor is ripe for an opportunity here.”

Skyline’s purchase from Calgary-based Boardwalk Real Estate Investment Trust is one of the largest rental residential transactions in southwestern Ontario, and makes Skyline the dominant landlord in the city, said Peter Whatmore, executive managing director at CBRE’s Windsor office.

“A big sale of this nature doesn’t happen very often,” said Whatmore, adding that investors are increasingly looking outside of the high-priced Greater Toronto Area for more affordable properties that offer greater returns on investment.

The deal, which closes in September, includes 1,685 rental units, and will be in addition to the more than 300 units currently owned by Skyline in the Windsor area.

Incorporated in 1999, Skyline Apartment REIT owns more than 140 properties.

“With this acquisition and a couple of others in the pipeline, we will have over 15,000 apartment units in our portfolio and $1.5 billion worth of assets,” said Castellan.  The Windsor purchase will represent about 13 per cent of the REIT portfolio’s holdings.

Skyline targets properties in mid- and small-sized Canadian municipalities and invests in improvements that will warrant increases in rents, said Castellan.

“Tenants are value-driven like anybody else, and if you offer good value, you could increase your revenues to a limit,” he said. “We’re finding in Windsor, there’s a greater ability to do that, meaning that things are healthier than what people outside of Windsor are hearing.”

Castellan pointed to 737 Ouellette Ave., a rental property purchased four years ago that received $4 million in upgrades.

“We made garage improvements, inner suite repair and upgraded the pool area and gym,” he said. “We’re going to be making investments in our buildings.  We’re not just going to stick the tenants with increases without bringing greater services and amenities to our buildings. That’s one thing we like to excel at is improving the quality of our buildings.”

Castellan’s optimism about the local economy was validated by the latest economic forecast by the Conference Board of Canada.

Windsor’s economy is expected to grow two per cent this year, while employment is expected to rise three per cent, thanks in part to the recovering auto industry and the falling loonie, which benefits manufacturers, the board said Wednesday.

Calling the purchase price fair, Castellan said the value will rise along with Windsor’s economic fortunes.

“I’d say in the first 24 months, we see value increasing somewhere in the neighbourhood of five to 10 per cent,” he said.

“When we buy property in Windsor, we’ve been able to make returns that our investors enjoy, and it stimulates them to make further investments with us. So, we’re seeing good returns on this. We think from where we’re buying and to where we can take the value, there’s an upside potential.”

The Skyline REIT has about 2,000 investors.

“We raise our capital from investors, some of whom live in Windsor,” he said. “So to hear from them how great Windsor is has helped spur further investment there.”

Windsor-Essex

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