Altyn Equities Summer 2023 Update – ‘Unprecedented Times for Real Estate Investors’

July 28th, 2023

Greetings investors. If you are an investor in Canadian real estate, you have probably been watching the past 16 months with great interest. The Bank of Canada has now hiked its key rate 10 times to the highest since 2001 and this will have a profound impact on real estate that may not be fully felt for years. Many investors are facing resilience in their portfolios for the first time.

The lending universe for multifamily investing has been flipped upside down in recent months, with a flock to CMHC, especially the MLI select program. Loans have been scaled back dramatically for new purchases, and debt is much more expensive with longer amortizations up to 50 years. This essentially eliminates any mortgage paydown, increasing risk to investors.

Expenses have been increasing relentlessly for multifamily owners, as well as red tape and bureaucracy, in particular from CMHC, however rents have been increasing at a dramatic pace as well. What is the path forward for multifamily investors in the face of so much uncertainly?

Rents in Canada are now $2000 for a 1-bedroom in most locations in Canada. In fact, even the most expensive rental markets in Canada, Vancouver, Toronto, Burnaby, Ottawa, Hallifax, have all seen double digit rental increases in the past year, and this trend is expected to continue with no foreseeable end in sight.

Equally notable, is that rents have also risen by double digits in the least expensive markets:

July 2023 Zumper Rental Report for 1-bedroom rents:

Year over year rents for the 2 MOST expensive rental cities in Canada:

Vancouver $2770 Year/Year 20.4% Increase

Toronto $2420 Year/Year 15.2% Increase

Year over year rents for the 2 LEAST expensive rental cities in Canada:

Edmonton $1100 Year/Year 14.6% Increase

Saskatoon $1140 Year/Year 15.2% Increase

Rents on the prairies have been too low for years, and in fact rents today are still lower than they were in 2014. Vacancy rates began to come down in 2022 and now Saskatoon has 1% vacancy, and Edmonton and area is trending down quickly as well. This means rental incentives are vanishing, and rent increases are being given, for the first time in 8 years.

In the past 12 months we have handed out major rent increases to all buildings in our portfolio, up to 20% in some buildings as we ‘catch up’. I believe we still have $400 in rental upside PER SUITE in the next 18 to 24 months as this trend continues.

2023 Mid Year in Review – Project Update and 2024 predictions

Altyn Equities has had an impressive 6 months with our assets in Saskatoon and Edmonton with rents rising at the fastest pace on record. We successfully added another 18 units to our portfolio in May 2023, and have another 12 suiter we will close on in September. I am working on a limited partnership and much larger deals heading into 2024.

The expected in migration to the prairies is accelerating in 2023/2024 as people and new Canadians (500,000+ expected/year) will move to areas with a low cost of living and high paying jobs. I fully expect a 40% rental upside in Edmonton to $1400 for a 1 bedroom in the next 24 months, with a tremendous 5-year upside in these markets.

I am extremely excited to launch our newest multifamily acquisition, a premium 12 suiter in Stony Plain, Alberta. The project is in fantastic condition, an amazing suite mix, and a price of only $1,250,000 ($104,167/unit).