A new high-rise set to open this year in south Edmonton bears all the necessary characteristics to win over renters in the prairie city.
The 18-storey, 149,000-square-foot Central Tower will open this summer at Century Park, a fast-growing and transit-oriented hub with boutiques, cafés and other shopping amenities. With an energy efficient design, the high-rise will feature triple-glazed window walls, solar panels and a co-energy generation system. As well, it will offer concierge service, expansive balconies and community garden plots, all for market rent.
The 18-storey Central Tower, shown in this rendering, is expected to open this summer at Century Park in Edmonton. One of the project's key distinctions is its offer to renters to one day own their units without a hefty down payment or leasing premiums.
Those traits alone make the new development notable. But what’s truly unique is Central Tower will be the first rental offering tenants a risk-free, no-money-down path to ownership.
“This has never been done before,” says George Schluessel, chief executive officer and president of ProCura Real Estate Services, the company behind the project. “We’re basically creating multifamily buildings with an option-to-ownership program, transitioning renters into owners.”
Mr. Schluessel founded ProCura in 1979. The Alberta-based company has a development pipeline of about 4.4 million square feet, which includes more than 6,900 multifamily units.
ProCura calls its concept “OpTown” (as in option to own) and it will be used for all its coming multifamily and mixed-use developments.
“We call it a win-win because as developers we can lease-up the building faster.” And renters have a way to ownership in which they can build equity without paying premium rent like in a traditional rent-to-own model.
Furthermore, Mr. Schluessel argues the market is ripe for OpTown given home ownership is increasingly challenging after two decades of rising property values, along with the more recent obstacle of higher borrowing costs.
What’s more, he believes the concept could disrupt how the industry develops multifamily projects, making pure rental and condominium projects obsolete.
Indeed the idea aims to capitalize on changing dynamics in real estate as the latest census data point to home ownership falling from its peak in the late 2000s.
“OpTown is for the people who may have given up on ownership but they still want that opportunity.”
He’s so confident in the idea that ProCura will soon list a spin-off, publicly-traded company named OpTown Properties Ltd. on the Toronto Venture Exchange (TSV) under the ticker TLC.
The new corporate entity will serve several purposes, including acting as the developer and manager of future multifamily properties on behalf of ProCura. As well, the offering will raise capital to develop more than $400-million in mixed-used, multifamily projects on ProCura’s land base.
But the new company has an even more ambitious aim – marketing its services to other real estate firms seeking to convert rentals to condominiums to raise capital to build their business.
Mr. Schluessel believes the OpTown model will be attractive to developers because it will make properties easier to rent, as renters will be drawn to the opportunity of ownership. In turn, these properties may have less turnover and steadier rents.
Moreover, the company has a robust marketing component to lease buildings before completion – also attractive to developers, says Sherry Schluessel, senior managing partner at ProCura.
Typically “it’s only after the doors open you can really start to rent,” she says, adding that’s months of lost income.
Still one might ask why renters would prelease a unit they cannot to live in for several weeks.
That, according to Mr. Schluessel, is where OpTown’s most innovative aspect comes into play. The model offers long-term renters a 25-per-cent stake in the upside of the market value of their unit at the end of a five-year lease, presumably for a down payment.
While the model is unproven, the waiting list for Central Tower is already long enough to lease a third of the building, Ms. Schluessel says.
She adds the firm is only now launching a marketing campaign, aimed at leasing the building fully by mid-February even though it will not open until July.
The faster lease-up will generate rents sooner, Mr. Schluessel says, allowing the developer to access financing more quickly to develop other projects in the area.
“We have zoning for 4,200 more units, and they will all be rentals under OpTown.”
The concept may have legs, says the head of a Toronto-based investment firm.
“In a competitive market where you’re developing boxes in the sky, and others are building similar boxes in the sky, if you can shorten your sales cycle and sell out before the other guy, sure, that’s a benefit,” says Dennis Mitchell, CEO of Starlight Capital.
Yet he also sees snags.
“What happens if at the end of five years, renters can’t qualify for a mortgage?” Mr. Mitchell says.
Another key question: How will Canada Revenue Agency (CRA) treat tenants’ equity share? Will that be taxed annually as income, or at the end as a capital gain? How those concerns are addressed, he notes, may affect how well OpTown resonates with renters, and whether the concept catches on in the industry.
Mr. Schluessel says the company has hired accountants for an opinion on the tax treatment while it also has an application with Canada Mortgage and Housing Corp. (CMHC).
“If we can get CMHC underwriting, the down payment goes further.”
Even with these hurdles cleared, Mr. Mitchell sees another problem.
“One of the big challenges is explaining the concept because anything different from what people are accustomed to takes time to wrap their heads around.”
But Mr. Schluessel is confident the market will come around if only because of the limited risk involved.
“As an owner, the downside is you have an apartment building, which you would have anyway, and the worst case for tenants is they end up paying market rent for a first-class apartment.”
How OpTown works
Unlike traditional rent-to-own, OpTown tenants do not have to pay a large deposit to secure a unit. Nor must they pay rents with built-in premiums to build equity. While they are not obligated to buy, renters must sign a five-year lease, at the end of which they can vote to convert to a condominium. If 75 per cent or more vote in favour, the property management company helps tenants secure financing and manage the conversion. As well, renters receive a 25-per-cent share of the gain in market value on their unit over the five-year lease, which can be used for a down payment. Tenants who do not want to buy their unit can still rent with the developer maintaining ownership, although the developer also has the option to sell the apartment at fair market value.
Buildings to be developed under OpTown model:
ProCura Real Estate Services aims to use the option-to-own model for its nearly complete Central Tower high-rise in Edmonton’s Century Park. But it has at least two other major multifamily, mixed-use building projects for the area that will be developed under ProCura’s new spinoff corporation OpTown Properties Ltd., which will use this model.
Central Tower
A rendering of Central Tower, right, which is to open this summer.
The 18-storey building will have 175 one- and two-bedroom suites along with 233 parking stalls, and feature energy efficient heating and cooling, an amenity lounge, in-suite laundry and VIP concierge service. Floorplans are 500 to 800 square feet, renting between $2.50 and $3 per square foot.
Total cost: $66,492,432.
Completion date: Summer of 2019.
Times Square
Rendering of Times Square, which broke ground last month.
The project includes three residential towers and 13 townhouses, designed by New York architects Pelli Clark Pelli. With 472 suites, and 421 parking stalls, it also will offer more than 15,000 square feet of retail space.
Total cost: $185,644,000.
Broke ground: December of 2018.
The Louvre
Rendering of The Louvre, whose start date is yet to be determined.
The project will have 400 suites and 420 parking stalls along with concierge services, a conference centre and 9,000 square feet of commercial and office space. Project will also feature roof top patio, fitness centre, spa and library.
Total cost: $237,750,717.
Start date: To be determined.