Skyline’s Jason Castellan on Opportunities in Smaller Real Estate Markets

Smaller markets are an intriguing and profitable option for some apartment building investors as land and building prices in many major Canadian cities become too expensive.

“There’s a certain amount of infrastructure that exists in those towns that we found worked for us, and we avoided going to the markets and having to use institutional money,” said Skyline Group of Companies co-founder and chief executive officer Jason Castellan on Sept. 7 at the Canadian Apartment Investment Conference at the Metro Toronto Convention Centre.

“That’s how we grew the portfolio and now we’re expanding into other provinces as well. We have more than 16,000 units in our portfolio and we’ll keep chipping away and finding one-off properties one-by-one and aggregating our portfolio.”

Skyline started in Guelph, Ont., moved into nearby cities Kitchener, Waterloo and Cambridge, and now owns apartments in several other secondary and tertiary markets in Ontario as well as in Quebec, Alberta and British Columbia.

The smallest town Skyline has invested in is Hensall, Ont., with a population of 800. Castellan said it took some convincing of investors to purchase an apartment building for $25,000 a unit. After making improvements, the property was sold for $45,000 per unit and Skyline made a profit.

In addition to making physical improvements to buildings it purchases, Skyline also tries to provide a cultural lift by making them places where people want to live and feel engaged.“When you go into these smaller communities, you’re an outsider,” said Castellan. “Unless you win them over, they’re going to treat you like an outsider.”Castellan calls Skyline “the institutional owner for everyday investors.” A lot of its investors are locals who understand their small markets because they live there.Privately held Skyline Apartment Real Estate Investment Trust purchased 23 rental properties with 1,685 units in Windsor, Ont. for $136.2 million from Calgary-based Boardwalk Real Estate Investment Trust last summer. The city of more than 200,000 across the border from Detroit qualifies as a large market in the REIT’s portfolio, and Skyline is now the dominant landlord in the city. It owned more than 300 units before the Boardwalk deal.

“We like the market,” said Castellan. “We like the challenges that go with it and we like the fact that it went under the radar for a long, long time.”

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By Steve McLean – Property Biz Canada

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