York University, student housing facility displayed on the Real Estate Income and Impact Fund website (Courtesy REIIF)

Toronto-based Forum Equity Partners has launched a $125-million Real Estate Income and Impact Fund which will be used to acquire a $240-million seed portfolio of residential rental real estate across Canada.

The portfolio has properties located in Toronto, Montreal, Vancouver and Ottawa – which it identifies as key markets of interest within the sector.

The fund seeks to target supply-constrained markets to ensure “diversity and resiliency of income.” It will launch with a 4.5 per cent annual distribution, with an eight to 12 per cent targeted annual total net return.

It has been created to counter market volatility and the undersupply of affordable housing, the announcement states, citing 411,000 permanent residents to be admitted into Canada in 2022 alone.

After the first close on December 1, 64 per cent of the investment was comprised of student housing, 7.6 per cent on co-living and 27.9 per cent on multifamily homes. The five-year goal is to move those numbers to 26.7, 25.5 and 48.1 per cent respectively.

Seed assets include the 487-unit Quad student housing facility at York University; the 62-unit Spire co-living property in Ottawa; 10-unit and mass timber V6 Leslieville in Toronto; 26-unit Latin Quarter in Montreal; and the 109-unit Gastown Micro Apartments in Vancouver. The latter three are all multifamily assets.

Forum plans further equity raises for the fund, hoping to build net asset values to about $1 billion within four years. It plans a leverage ratio below 55 per cent.

The fund’s ESG goals

The Real Estate Income and Impact Fund is to deliver an ESG-based portfolio with targets baked into its strategy.

Forum has a multi-layered approach to the ESG goals. Part of that involves energy upgrades, given that most multifamily buildings are separately metered. On the social front, that could involve expanding criteria for potential tenants beyond just financials like credit score and job history, because immigrants to the country often don’t have a lot of credit history.

Another example of a social consideration is the diversity of its tenant base in comparison to local demographics.

“It’ll include things like, ‘how has our energy, electricity usage and water usage declined over time?’ And we’re going to set targets for reductions annually,” said Aly Damji, a partner at Forum Equity. “How much waste has been diverted? A lot of the buildings we’re buying just have garbage (disposal). They don’t have recycling and compost ability, so diversion will be an example of what we will track and measure.”

The plan is for both quarterly and annual ESG reports which will be verified by independent third parties yet to be named. In the past, Forum has worked with KPMG and Rally Assets.

Some of its targets include net-neutral GHG emissions, zero stormwater runoff, and diverting all avoidable waste from landfills.

Forum’s 2021 impact report boasts of over 500,000 square feet of infrastructure and real estate buildings that have achieved a LEED certification. It also sets a goal to “improve the lives of 50,000 people by 2030.”

“We’ve been publishing an impact report since 2017,” said Rajeev Viswanathan, CFO, and partner at Forum Equity. “It’s in our DNA, this is not a greenwashing festival. This is something we’re very serious about.”

About Forum Equity Partners

Forum itself was formed in 1996 as an investor, developer and asset manager with a focus on real estate, infrastructure and private equity. Forum’s assets under management represent approximately $1.6 billion in enterprise value.