Alternative asset manager TPG Inc. is currently engaged in discussions aimed at acquiring the manufactured housing arm of Canadian Apartment Properties REIT, signaling a strategic move by a significant US investor to tap into Canada's historically constrained real estate market.
According to a source familiar with the matter, TPG is in exclusive negotiations to purchase the business for a sum exceeding C$700 million ($519 million). However, the source emphasized that a deal isn't imminent, and even if reached, its announcement might be postponed for several weeks due to the confidential nature of the talks.
When reached for comment, a TPG spokeswoman opted not to provide any statements, while representatives from Canadian Apartment Properties haven't responded to requests for comments as of yet.
Canada grapples with a severe housing shortage stemming from years of insufficient construction activity compounded by a recent influx of immigrants. Consequently, a larger segment of the population finds themselves excluded from homeownership, leading to a surge in rental prices. This scenario has spurred major investors to seek entry into the market, with pension funds increasingly financing apartment developments and Blackstone Inc. recently finalizing an agreement to acquire Tricon Residential Inc., a Toronto-based firm specializing in residential properties alongside its substantial US portfolio.
As housing affordability in terms of ownership reaches unprecedented lows, manufactured housing emerges as an appealing alternative for Canadians, offering a blend of rental and ownership benefits. Similar to trailer parks, residents lease the land while owning the prefabricated house situated on it. Canadian Apartment Properties REIT currently boasts 12,134 manufactured homes scattered across numerous sites in Canada, constituting roughly 20% of its housing units as of the close of 2023, as per regulatory filings made by the company in February.
The majority of CAP REIT's operations revolve around apartment complexes, with recent endeavors focusing on divesting older assets to fund acquisitions of newer properties capable of commanding higher rental rates, alongside self-developing new buildings to bolster its portfolio.
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