Bulk Condo Purchases Drive Canada’s Housing Market Shift

In April, the Toronto-originated investment company High Art Capital announced the GTA Rental and Affordable Housing Initiative, a fund slated to receive at least $1.3 billion for purchasing blocks of newly built, unsold condos throughout the Greater Toronto Area and converting them to long-term rentals. In the preceding month, High Art finalized a sizable block purchase and entered a partnership with SEIU Healthcare—representing 75,000 frontline health-care workers in Ontario—to secure below-market rental units for 650 of its members.

The company secured up to $300 million in mezzanine debt financing and a nominal equity investment from the Building Ontario Fund (BOF), according to the announcement. Toronto real estate lawyer Leor Margulies explained that BOF requires 30 per cent of units remain affordable for the life of the property, ensuring a return rather than a grant. This structure tags the affordable units permanently, Margulies noted to RENX. “It’s not five years or 10 years, and BOF gets its money back,” he said. “It’s in there for a return. This isn’t a government grant.”

Bulk Purchases Drive Market Trends

While Toronto’s condo market posted its first sales gain in three years last quarter, investment groups accounted for a significant portion of those transactions. Developer-held inventory reached a record 5,001 units, up 68 per cent year-over-year, according to the report. High Art appears to be the largest bulk purchaser in the GTA, though other investors are also active.

Montreal-headquartered Jesta Group acquired a $30 million bulk condo portfolio near Toronto Metropolitan University in May, launching a $500-million acquisition program targeting more than 1,000 condo units over 12 months. Montreal’s Quinze Cent condo at 1500 Rene-Levesque Blvd. W., developed by Brivia Group and Tianqing Investment Group, saw 94 of its units acquired by a holding company owned by the chief executive officer and chief financial officer of Jesta Group for a discounted price of nearly $34 million this summer.

Similarly, Ipso Facto purchased 165 units at 1 Square Phillips in Montreal for approximately $65 million as part of a restructuring under insolvency trustee Raymond Chabot. Margulies indicated these buyers often secure discounts of at least 30 per cent from developers, allowing them to liquidate inventory quickly despite taking losses. “They’re taking a loss but they’re liquidating it, and they’re getting something now,” said Margulies of developers.

Legal and Financial Implications

Margulies highlighted that bulk buyers, sometimes labeled vulture funds, aim to rent units until selling them in five years or so, when they hope the market will have recovered, but cautioned that units sold after this period may lose Tarion warranty coverage, potentially impacting resale value. Tarion, a not-for-profit consumer protection organization established by the Ontario government to administer the province’s new home warranty program, could face financial strain if projects fail to close, Margulies warned.

Developers facing stalled sales must evaluate completion viability, considering land costs, construction expenses, and rental rates. Options include terminating purchase agreements, returning deposits, or converting to purpose-built rentals. Margulies noted that not all buildings can sustain such conversions due to unfavorable financials. Well-capitalized landowners might delay development until market recovery, while some developers are exploring rental pools or inventory loans to avoid discounted sales.

Market forces and Developer Challenges

The surge in bulk condo purchases reflects a strategy to capitalize on oversupply and excess inventory, particularly from developers holding unsold units or facing defaults. Margulies emphasized that managing these units differs from traditional building management, requiring specialized structures. High Art’s partnership with SEIU Healthcare exemplifies how unions are leveraging such deals to secure affordable housing for members, integrating social objectives into investment strategies.