SOLD!  

Here’s the story of Elva, our purpose built rental project in Calgary, from start to finish. 

Buckle up. 

We went firm on this dirt in March, 2019. We negotiated one year to close so we could complete all of our drawings and permits and close on the land, as we broke ground.  Although we are a firm with unlevered yield on cost (UYOC) as our northern star,  a delayed land closing always helps the IRR of a project. 
The economy was decent, the rental market was strong, we knew it would be a great rental project.

Closing on the land was March 31, 2020.  

Yah… remember when?

We had gone firm, with a $500K deposit, and had spent another $400K in soft costs on drawings and permits. We were shovel ready.   Then, our investors backed out.  Calgary was still an oil town, and oil was crashing. Covid was ramping up and the economy was in a free fall.  Corporate layoffs were rampant. 

We begged the existing owners of the land for an extension. Thankfully, they gave us 3 months. Then an additional 30 days. I gave them my word we would figure it out. We couldn’t lose $900K.  Certainly, they weren’t going to find another buyer in this economy at the same price, and who was more motivated to close than us? No one. 

It was June 2020, the world was shut down, and uncertainty ruled the economy. We were firm on the deal, with $900K on the line. But we had great dirt in an exceptional location in the Mission neighbourhood, with almost no competition for new, luxury rental product.  And no one else was breaking ground on projects. We also had a construction loan ready to go from a great bank, and they remained committed to us, as a longstanding client. 

We hunted high and low for a new equity partner.  We only needed to raise $5.4M. But this was peak covid, peak oil crash (remember negative oil prices?), and peak fear.  We couldn’t find the money. 

We went back to our original investor and explained that the construction market had come to a halt. If we could bring the tender results in at a certain number, much lower than our original underwriting, would they be back in?  They said yes. 

We lowered our underwritten rents 10%, tendered and negotiated like hell, and got our tender to come in at a number that worked for our investors, so we took the leap and closed on the land with cash in July, 2020. 

To future-proof the project, we chose concrete construction—the premium wasn’t huge at the time, but it felt like the right move. We updated the drawings and permits for concrete structure. To protect the downside, we modified the floor plans and increased the unit count from 52 to 61 units, using the same density. The units became smaller, with rents that would be more achievable if the economy took a serious and sustained downturn.

The risk was big: a full-recourse construction loan that required my business partner and me to put up every asset we owned and every penny of savings as collateral.

We broke ground in late 2020 and delivered in September of 2022. It was one of the toughest times to build, but despite the challenges, we completed the project under a fixed price contract, with only a six week delay—a win in those conditions.   

The risk paid off. By the time we stabilized, rents were 15% above our underwriting and we rented the entire building in 2 months.  Then the Calgary rental market went crazy. There was no supply and tens of thousands of people moving here. Rents continued to climb. 

While the building is small (we will never build something so small again), the buyer was a major institution, a testament to the demand for quality construction and sound execution we are known for. 

A great achievement for our entire team, and the asset is in great new hands!