The former president of Boardwalk REIT and current CEO of Nexus Industrial REIT are part of a group of investors who will spend the equivalent of $87.5 million in cash and stock to purchase three Class A multi-family properties in Calgary comprising 149 units.

Early stage capital firm Trillium Acquisition Corp. will pay $17 million in cash and 94.8 million common shares to acquire:

• Nimmons Residences, an 84-unit apartment building located at 1420 19 Ave. SW which includes a heritage house now used as a law office;
• Cunningham, a 41-unit apartment building at 1509 15th Ave. SW; And
• Wilderness Ridge, a 24 townhome complex located at 1426 23 Ave. SW.

Rob Geremia, who was president of Boardwalk REIT for 15 years until his departure about three years ago, will become CEO of Distinctive Quality Living Residential (DQL), which will be listed on the TSX Venture Exchange (TSXV). It will replace Trillium once the deal is closed and approved and will focus on the acquisition and management of Class A multifamily properties.

Kelly Hanczyk, CEO of Nexus Industrial REIT, will become one of the directors of DQL.

Real estate developers are part of the ownership group

Meanwhile, Jordan Giustini, president and CEO of Brava Development and Ryan Bazant, president of Construction Learwhich developed and built the three properties, “will hold a significant share and position in the publicly traded company,” Geremia told RENX.

All three properties are 100 percent occupied.

Geremia said having a capitalization company “gives us quick access to the public markets to raise capital.” Although other opportunities were explored to raise capital in the private market, “they were not as open as we think the public markets are.”

Capital Pool Companies are shell companies created to raise capital before going public on the TSXV.

Geremia said multifamily rental developers seeking liquidity may face exit strategy challenges. A mechanism that gives them some liquidity while maintaining an ownership position may be a viable option for them.

“Given the current new tax rules, particularly on capital gains, this is becoming more and more attractive for many owners. We can offer them a transfer to a publicly traded company, rather than having to sell the asset completely. We are receiving some preliminary interest in this model.

The deal for the three properties was initially announced in May, but was amended in late October.

Geremia pointed out that the TSX Venture Exchange requires a large amount of documentation, including audit statements for each property, which has slowed down the approval process. He hopes the transaction will be finalized by the end of the year, based on feedback from the TSXV and any changes that may be necessary.

Buyers looking for newly built assets

The apartment buildings are within walking distance of each other, he said, while the townhouse project is just a 10-minute drive and “tends to be freer because it doesn’t There aren’t many common spaces.

All three buildings are new, between three years old and within a few months of their completion.

“That’s one of the criteria I was looking for,” Geremia said, noting that some older buildings on the market are being sold at “very aggressive prices,” close to 80 or 90 percent of their construction value.

Once you factor in the deferred capital needed to maintain these older assets and their lower operating margins, “it’s almost better to build new ones.”

“We thought there was no significant discount based on older assets, so why not explore the possibility of acquiring very good Class A assets at a very good cost?”

As a bonus, “these guys are high quality developers who have developed a number of units in the past.”

No maintenance capital will be needed for several years on the buildings, he said.

Additionally, newer assets tend to operate at much higher operating margins, above 75 percent, while older assets tend to operate in the 65 to 70 percent range, Geremia said. “Every dollar invested in the top line gives you a better opportunity to add value to the bottom line. »

DQL considering further acquisitions

DQL will be looking for other assets and Geremia said several projects underway in Calgary would be of interest, including three or four developments being built by Brava Development and Lear Construction.

“We believe we will be able to significantly grow this portfolio over the next three to five years.”

Following the closing of the transaction, Geremia, Hanczyk and Bazant will serve as directors of DQL. They will be joined as directors by Ted Manziaris, co-founder of Turtle Island Recycling, which was later acquired by GFL Conseiland co-owner of the NHL’s Seattle Kraken; and Shailen Chande, the former CFO of Northwest Healthcare Properties REIT.

“We have a very strong board, not only from a governance perspective, but also from a transactional and financial perspective,” he said.