Vancouver-based Anthem Properties Group Ltd. is launching an initial public offering (IPO) to raise capital for one of its projects.
Anthem announced Tuesday it aims to raise up to $82 million for Citizen, a 66-storey, mixed-use development in Burnaby’s Metrotown. The money raised will be added to other funding sources already secured for the project, including $269 million from pre-sales.
The offering is understood to be the first real estate IPO of its kind in Canada. CIBC Capital Markets is the sole agent for the IPO, and has successfully completed similar offerings for U.S. assets.
“Policy changes, increased costs, shifting market cycles and more create an ongoing challenge for developers hunting for capital which requires innovative and creative thinking to get projects off the ground,” said Anthem CEO Eric Carlson in a statement.
Units in the IPO will be issued through the Anthem Citizen Real Estate Development Trust (REDT), a newly created, unincorporated investment fund with a five-year target investment horizon.
Located at 4663 Kingsway, Citizen is planned to be a tower comprised of 372 market condos and townhomes, 200 market rentals and 73 non-market rentals, with a 176-suite hotel and 4,881 square feet of leasable retail space. The condos are 77-per-cent pre-sold.
The minimum investment for the IPO is $10,000. Investors could receive a pre-tax compounded gross annualized return of about 18 per cent before fees over a term of five years, subject to two discretionary one-year extensions.
“Investors will receive a priority investment return of 15 per cent before distributions are made to the current owners on the pre-offering investment and the asset management fees are paid,” said Anthem’s investor presentation, using defined terms from the IPO's prospectus.
The project has rezoning approvals and entitlements complete, the release said. Construction is expected to begin in the fourth quarter of 2024 once the IPO has closed. An excavation permit was issued on Aug. 8 with the full building permit issuance expected in May 2025, according to the company.
“There can be no assurance that the project will be developed or operated successfully, that the operations of the REDT will be profitable or that cash from operations will be available to make distributions to [unit-holders],” the IPO’s prospectus states.
Some experts believe this new type of funding model has desirable features, such as allowing individual investors to participate in the industry on a project-by-project basis and spread their risk across multiple developments and developers.
“If people like a project, they can invest and benefit from its success, and if people don’t like it, then the developer can take that as a signal and perhaps revise the project,” said Andrey Pavlov, finance professor with Simon Fraser University’s Beedie School of Business.
While Real Estate Investment Trusts (REITs) have existed since at least the 1970s, they are generally used to buy and operate commercial real estate, he said. Anthem’s REDT is different in part because the project is mainly residential in nature.
“I think this [type of funding model] is a great idea, and I hope it becomes far more popular in Canada,” said Pavlov. “We need every possible source of private capital if we have any chance of providing sufficient housing in our country.”
He noted that the last federal budget’s goal of 3.9 million homes by 2031 will require at least $2 trillion for construction costs alone, excluding land and infrastructure.
