This is part three of a series on Northview, the North’s biggest landlord. Read part one here, and part two here.
Full disclosure: One of the reporters involved in the creation of this series lived in Northview housing.
In March of 2020, Yellowknife North MLA Rylund Johnson stood in the Northwest Territories’ Legislative Assembly and gave a searing indictment of an upcoming real estate transaction.
“Congratulations on your intention to purchase Northview Real Estate Investment Trust,” Johnson said in a statement crafted as an open letter to the CEOs of real estate investment giants Starlight Investments and KingSett Capital.
“I wish to inform you that, upon closing this deal, you will own a small city in the subarctic called Yellowknife.”
In November of that year, Starlight and KingSett finalized their $4.9-billion purchase of Northview Apartment REIT. It was billed as the largest acquisition in the apartment sector in Canadian history.
With the sale, Northview REIT became Northview Canadian High Yield Residential Fund, a publicly-traded real estate fund, which today has about $1.9 billion in assets spread across Canada.
The fund subsumed Northview REIT’s vast portfolio, which included 32 residential properties in Yellowknife, containing 1,051 units, as well as 440,471 square feet of commercial space in the city.
In November, 2020, Starlight Investments and KingSett Capital purchased Northview Apartment REIT for $4.9-billion. According to Northview Fund’s 2020 prospectus, upon acquiring Northview REIT, ‘the fund expects to own approximately 50 per cent of the rental market in Yellowknife.’ (Walter Strong/CBC)
Among the portfolio’s commercial assets in Yellowknife were the courthouse, Lahm Ridge Tower, Walmart and the YK Centre complex, which houses the Independent grocery store and downtown walk-in clinic. Most of these properties house territorial government tenants.
According to Northview Fund’s 2020 prospectus, upon acquiring Northview REIT, “the fund expects to own approximately 50 per cent of the rental market in Yellowknife.”
Toronto-based KingSett Capital already had an outsized presence in Yellowknife’s downtown, claiming the Northwestel building, Precambrian Building, Scotia Centre and Gallery Building — all home to N.W.T. government offices — as well as the vacant and derelict Bellanca Building.
In his statement to the Legislative Assembly, Johnson asserted that “Northview’s current market power, combined with KingSett’s market share, is an index that will make Yellowknife one of the most highly concentrated real estate markets in Canada.”
Territorial ministers, however, barely said a word.
Pressed by Johnson in the legislature the following March on whether the government would examine its leases to make sure “we are not, in fact, paying a premium to any of these southern landlords,” Infrastructure Minister Diane Archie only committed to reviewing the agreements as they expire.
Half of N.W.T. lease dollars go to Northview, KingSett
According to the N.W.T. Finance department, the government pours more than $17 million annually into the coffers of KingSett and Northview for office space alone.
This amounts to more than half of the nearly $31 million the government spends on all its leases.
The Northwest Territories Housing Corporation, which provides public housing and residential rent subsidies, funnelled another $3.1 million into about 160 Northview units last year.
To put these amounts into perspective, the territory puts more money toward its Northview and KingSett leases than it spends on community water and sewer services ($19.9 million annually).
Politicians in charge have said little publicly about the N.W.T. government’s relationship with these real estate firms. The Housing and Infrastructure ministers both declined interviews for this series.
Northview’s Simpson House apartments in Yellowknife. A June 2021 report on housing from the Legislative Assembly’s Standing Committee on Social Development says the average rent in Yellowknife is $1,614 per month. The national average rent, by contrast, is $987. (Walter Strong/CBC)
Finance Minister Caroline Wawzonek said the government’s job is to make sure it gets the most out of the money it spends.
This includes examining whether it’s better for the government to lease, or to build and own buildings. The latter, she said, comes “at a significant cost and risk and liability.”
“With the market being what it is, with the offerings being what they are, knowing the limits on our own ability to invest in capital infrastructure, we have to find a balance,” said Wawzonek.
An Infrastructure department spokesperson said it’s government policy to endeavour to lease at “no greater cost than that of ownership,” unless it’s in support of an N.W.T. business.
The territorial government is reviewing its procurement process. Wawzonek said this review will include looking at how the government procures its leaseholds.
Northwest Territories Finance Minister Caroline Wawzonek said the government examines whether it’s better to lease, or to build and own its buildings. The latter, though, she said, comes ‘at a significant cost and risk and liability.’ (Mario De Ciccio/Radio-Canada)
To investors, Northview promotes its high volume of government-backed leases in the North as ensuring secure and stable cash flows.
The company says governments represent a low credit risk and will often cover damage and repair costs incurred by tenants.
Northview reports that nearly 46 per cent of its base commercial revenues come from leases with the governments of the Northwest Territories (26.3 per cent), Nunavut (11.3 per cent) and Canada (8.2 per cent).
On the residential side, more than half of Northview’s rental revenue in Nunavut comes from leases guaranteed by the territorial government.
I want us to stop being the anchor tenant in all of their buildings when they have repeatedly shown little interest in our community.– Rylund Johnson, MLA for Yellowknife North
To Johnson, the steady stream of northern dollars to southern landlords is a problem.
“These landlords have long treated real estate as an investment as opposed to the offices and homes that we all live and work in,” he said in the legislature in March.
“I want us to stop being the anchor tenant in all of their buildings when they have repeatedly shown little interest in our community.”
Housing shortage ‘good news for investors’
In the N.W.T., only regional centres, like Yellowknife and Inuvik, have a private rental market. But even in these communities, affordable options are scarce. What’s more, the territory doesn’t cap annual rent increases.
A June 2021 report on housing from the Legislative Assembly’s Standing Committee on Social Development says Yellowknife offers more rental options than any other community in the territory, but the average rent is $1,614 per month. The national average rent, by contrast, is $987.
Northview’s Sunridge Place in Yellowknife. ‘REITs and other financial firms are unique in that they’re acquiring rental housing on behalf of investors, so acquiring it and turning it into an investment product,’ says Martine August, a housing researcher at the University of Waterloo. (Sidney Cohen/CBC)
Speaking at a Legislative Assembly committee meeting in April, Yellowknife Mayor Rebecca Alty said 40 per cent of homes in her city were either “not adequate,” “not suitable” or “not affordable.”
To Northerners, the rental housing shortage is part of a territory-wide housing crisis.
To Northview, it’s a selling point.
The company’s business model is built, in part, upon increasing its share of rental real estate in “secondary markets” — smaller, remote communities in which resource extraction and government fuel the local economy.
In these markets, government-backed leases guarantee Northview steady income, and shorter building seasons and high construction costs discourage the competition.
We think there is a definite housing shortage, or almost a crisis level in Canada … and the good news for investors is there is no easy solution in sight.– Daniel Drimmer, CEO of Starlight Investments
Northview spokesperson Danny Roth told CBC News via email that the company rejects “the characterization and narrative that Northview’s local presence in the North and its provision of rental accommodation to northern residents is a reflection of ‘dominance.'”
However, the company’s own prospectus says that barriers which have prevented other developers easy entry into N.W.T. and Nunavut, and Northview’s existing portfolio of northern properties, allow it “to capitalize on this market.”
Indeed, with a persistent dearth of affordable housing and no limit on annual rent increases, the Northwest Territories and Nunavut have proved to be fertile ground for Northview.
As of last September, the company’s portfolio derived more than 40 per cent of its value from properties in the two territories.
N.W.T. and Nunavut accounted for more than half of Northview’s net operating income (revenue minus operating expenses).
As its new name suggests, Northview promises shareholders high yields, and with a target yield of 10.5 per cent, the company predicts an attractive return on investment.
Speaking during a Queen’s University commercial real estate executive seminar in 2019, Starlight CEO Daniel Drimmer put it this way: “We think there is a definite housing shortage, or almost a crisis level in Canada … and the good news for investors is there is no easy solution in sight.”
He added, “This is not good news for consumers.”
Starlight did not respond to questions or requests for an interview.
Turning housing into an ‘investment product’
Martine August is a housing researcher at the University of Waterloo who’s studied residential real estate investment companies.
She suggests a key strategy of companies like Northview and its REIT predecessors, which operate in communities with few rent controls and limited housing supply, appears to be one of “capitalizing on tenant desperation.” They can “squeeze” higher rents while making minimal investments in their properties.
When asked about this assessment of Northview, the company’s spokesperson said they reject these claims and “object to the mischaracterization.”
August told CBC News that “financial landlords,” including publicly-listed real estate companies like Northview, prioritize driving profits for shareholders and company executives “above all else.”
“REITs and other financial firms are unique in that they’re acquiring rental housing on behalf of investors, so acquiring it and turning it into an investment product,” she said.
They do this, she added, at the expense of typical housing goals, like creating high-quality living spaces and affordable homes.
The courthouse is one of several commercial buildings in Yellowknife that is owned by Northview and houses government offices. (Walter Strong/CBC)
Northview objects to the notion that it raises rents and cuts back on maintenance to benefit shareholders.
“Those suggesting that neglecting properties or actively allowing them to fall into a state of disrepair is strategic to a REIT do not understand the industry, our business, or the expectations of Northview’s investors,” said Roth.
“Owning and managing rental properties in the North is a long term investment requiring a strong and steady commitment to the communities where Northview is present.”
No N.W.T. gov’t intervention in acquisitions
The N.W.T. government hasn’t sought to weaken Northview’s impact on the rental market. If anything, according to MLA Johnson, it’s bolstering the company’s “near-monopoly” over apartment rentals in Yellowknife and Inuvik.
The government didn’t intervene in 2015, when Northern Properties acquired the residential holdings of True North Apartment REIT to become Northview Apartment REIT, nor did it do so in 2020, during the acquisition of Northview REIT by Starlight and KingSett.
“[The territorial government] should be making submissions to the competition bureau and raising its concerns. They’ve never done that,” Johnson told CBC News.
“And I guess it would be a little rich for them to do that, considering they’re the anchor tenant for Northview.”
Johnson told the Legislative Assembly that he’s taken it upon himself and raised the market share issue with the Competition Bureau of Canada “on multiple occasions.”
The competition bureau did review Starlight and KingSett’s purchase of Northview, and decided not to challenge the acquisition.
In March of 2020, Yellowknife North MLA Rylund Johnson stood in the N.W.T. Legislative Assembly and told the CEOs of Starlight Investments and KingSett Capital that, upon acquiring Northview Apartment REIT, ‘you will own a small city in the subarctic called Yellowknife.’ (Mario De Ciccio/Radio-Canada)
“Certainly when I heard about the [Starlight and KingSett] takeover, my eyebrows went up, because it’s potentially troubling — but only potentially,” said Adrian Bell, a broker with Century 21 Prospect Realty in Yellowknife.
He said the competition bureau would step in if Northview was undertaking “predatory practices,” and he himself hasn’t heard of that happening.
“I still think it’s really unfortunate that there’s not more of a mix of ownership,” he said. “You worry that if you’re not happy with one landlord, you can’t go walk across the street.”
‘Something’s better than nothing’
Meanwhile in downtown Yellowknife, commercial vacancies abound.
KingSett’s 10-storey Bellanca office tower, which has been sitting empty since 2012, is a stark example. On a blustery day three years ago, about five storeys’ worth of its siding came crashing down.
The siding has yet to be replaced.
KingSett did not respond to questions or a request for an interview for this series.
KingSett’s Bellanca office tower in downtown Yellowknife after about five storeys’ worth of siding fell down in 2018. It has yet to be replaced. The building has been vacant since 2012. (Mark Hadlari/CBC)
Mayor Alty sees potential for the Bellanca in the city’s ongoing efforts to revitalize the downtown core. It could be converted into apartments, or a new Aurora College campus, she said.
But the city can’t afford to buy the building, said Alty, and it has limited power to incentivize anyone else to, beyond adjusting parking space requirements.
“Something’s better than nothing,” she said of filling the Bellanca. “Anything to bring more people downtown would be a good use of it.”
In his open letter, Johnson urges Starlight and KingSett to divest from some of their Yellowknife assets and give local buyers a fair shot.
“At the very least,” he said, “perhaps you could try and do something about that 10-storey vacant tower that you own.”