- What Pier 4 REIT bought two apartment buildings in Hamilton
- Why The properties traded at a low price per unit versus a competitive set
- What next The REIT has four other properties under contract
Pier 4 REIT has bought two value-added apartment buildings in Hamilton for a combined $20.1m, Green Street News can reveal.
The June 27 purchase valued the properties at $150,000/unit – well below the roughly $200,000/unit similar properties typically go for in the area. Each property priced at sub-4% capitalization rates, but Pier 4 expects to dramatically boost its yield with upgrades and by pushing rents that are nearly 90% below market.
The seller was a private family.
The properties are 500m apart, on the east side of the city between the Red Hill Valley Parkway and the community of Stoney Creek. Both were built in the 1960s and have significant upside potential.
The larger of the two, at 16 Champlain Avenue, comprises 73 one- and two-bedroom suites. It sold for just under $11m, which translates to a capitalization rate of 3.6%. The average in-place rent is $966, with an 88% gap-to-market value. It had five unit vacancies upon closing.
The second property, at 25 Nash Road North, has 61 one- and two-bedrooms, and traded for just under $9.2m. That price means Pier 4 will realize a 3.3% initial annual yield. The average in-place rent is $961, 86% below market. Three apartments are available.
Pier 4 plans to renovate the vacant units through the REIT’s “gold scope” strategy, which includes new flooring, renovated bathrooms, new counters and stainless-steel appliances. The firm also will upgrade common areas and make sustainability updates, such as switching to LED lights, installing low-flush toilets and using low-flow taps and shower heads.
The acquisitions push Pier 4’s holdings over 1,000 units. The REIT now has more than $200m in assets across 33 buildings, plus another four properties under contract.
In January, the Toronto-based REIT acquired its first two apartment buildings in Hamilton, according to Green Street’s Sales Comps Database. It paid $13.8m for 2705 King Street East and 1324-1328 Monterey Avenue. Both properties are within 3km of the newly acquired buildings.
