Foundation Development Fund II Tranche 1 is fully subscribed. The next capital raising window opens in 2028 at the 20% net annualized target, right before construction.
Tranche 1 is closed. Thank you to the accredited investors who allocated capital into the round.
A short announcement, a thank you, and a walk through the mechanic behind the fund. Government in the capital stack, permanently affordable housing, and the structure that will shape the 2028 Tranche 2 raise.
PV, Mit & Jeff
Two announcements up top.
First: Foundation Development Fund II Tranche 1 is completely sold out. The final subscription cleared with Equivesto over the last 48 hours. Thank you to every accredited investor who allocated capital into the round, and thank you to the readers of this daily note who forwarded, referred, and had the introductory conversations that got us here. We are good on Tranche 1.
Second: Tranche 2 capital raising will open in 2028, right before construction begins. The Tranche 2 window will be sized to bring in the equity needed for the construction start. Different vintage, different risk profile, still the same building. If Tranche 1 filled faster than you were ready for, this is the window to signal interest, hear about what else is in the pipeline, and be on the short list when the next round opens.
Now that the deal is done and the room is set, this is a good moment to walk through what actually made the fund resonate the way it did. It is not the return alone. It is the mechanic underneath. That is what the rest of this note is about, and it is the same mechanic that will shape Tranche 2.
Every developer talks about affordable housing. Almost none of them can make the numbers work without hurting the equity return. The version most raises land on is a five year covenant, a small number of below-market units, and a quiet reset to market once the covenant lapses. That is not affordability. It is a compliance filing.
Wellington Towers is a different structure. The government is a real capital partner in the stack. Not a covenant. Not a subsidy that expires. Actual forgivable dollars into the equity stack, tied to a commitment that the affordable units stay affordable for 25 years or more. That structure is what let the fund commit to a meaningful block of permanently affordable units, target 20 to 24% net annualized for accredited LPs, and still exit into the institutional buyer pool we mapped Tuesday.
Sophisticated capital reads structure before it reads pitch. That is what made Tranche 1 fill.
The flagship affordable housing capital contribution from the province. $45,000 of forgivable capital into the stack per affordable unit, forgivable over 25 years so long as the unit stays at the committed affordable rent. Miss the affordability commitment and the capital converts to a repayable loan. Deliver the affordability and it becomes permanent equity in the building. Five year subsidy turns into 25 year commitment without the developer eating the delta.
Sites within walking distance of major transit infrastructure qualify for a capital contribution tied to density. Wellington Towers sits on the Wellington Bus Rapid Transit corridor, which qualifies the first 100 units for the TOD program. Another $1.5 million into the stack that would otherwise have to come from investor equity or additional debt.
Mit and Jeff on the numbers that make Canadian multi family apartments a better long term compounder than the loudest growth stories in public markets.
Dollars to Doors and the TOD grant are the two programs already in scope. They are not the ceiling. We are in active discussions with senior provincial officials, including the Chief of Staff of the Ontario Minister of Municipal Affairs and Housing, about layering additional government capital into the Wellington stack. The intent is straightforward: bring in more forgivable public capital, deepen the affordable component of the building well beyond what the two published programs support, and keep every additional unit permanently affordable on the same 25 year plus covenant structure.
These conversations are live. If they land the way we expect them to, Wellington will house a materially larger number of Ontarians living with disabilities, on ODSP, in transitional care, or otherwise priced out of the private rental market, all at permanent affordability, all through the same covenant discipline.
There is a second implication that matters to any accredited investor thinking about Tranche 2. Depending on how much additional government capital lands in the stack, Tranche 2 may not need to be raised at all in 2028, or it may be raised at a materially smaller size than the room we anticipated a month ago. If the government fills the equity gap that Tranche 2 was designed to bridge, the private LP side of that round shrinks proportionally. Some of the remaining room could stay reserved for investors who are already inside the Foundation orbit.
Every additional dollar of government capital into the stack does two things at once. It expands the number of permanently affordable homes on the social impact side. And it compresses the runway for outside LPs on the private capital side. That is the real dual mandate of the fund.
CMHC forecasts a national housing shortage of roughly 3.5 million units through the end of the decade. Two responses have been on offer historically. "Let the private market solve it," which does not work because the market cannot pencil deep affordability. "Have the government build it directly," which does not work at scale in Canada anymore.
The version that actually works is the one where government capital sits in the stack alongside private investor equity and CMHC insured debt, and each layer earns the return it is meant to earn. Investor equity earns the market rate for taking construction and lease up risk. Debt earns the CMHC insured spread. Government capital earns zero, in the form of forgivable capital tied to a genuine long duration affordability commitment.
Wellington Towers is one 432 unit iteration of that structure. A block of units in the tower is being held permanently affordable through the Dollars to Doors mechanic, in partnership with the government agencies and non-profit operators who allocate the homes to households living with disabilities, ODSP recipients, transitional support cases, and lower income Ontarians who cannot access the private market at current rents. The unit stays affordable for the life of the covenant. The household stays housed. Investor returns stay intact.
Scale this structure across enough developments and the 3.5 million unit shortage stops being an abstract number. It becomes a build schedule. That is the point of the work, and that is the story LPs bought into in Tranche 1.
Because of the government discussions above, Tranche 2 is no longer a routine 2028 raise. It could be smaller than planned. It could be reserved to a short list of investors already inside the Foundation orbit. Depending on how much public capital comes in, it may not need to be raised at all. The window to signal interest and be positioned for whatever room remains is now, not two years from now.
If you are accredited and think you would want to allocate into a Foundation development opportunity in the next 24 months, this is the right week to have that conversation. Reach out and we will walk you through Tranche 2 as it currently stands, the other development opportunities in the early pipeline, and where a subscription commitment from you would fit. That conversation gives you first look at whatever room ends up remaining, and it puts you ahead of any waitlist that gets formed once the room is smaller.
Investors who want a position in the FC platform right now, without waiting for the next development window, can subscribe to FCPRET, our private real estate trust. Existing stabilized multi family across Southern Ontario. Mid market core workforce housing. CMHC backed long term debt. Targeted 15% annualized (7% monthly cash + 8% appreciation). RRSP, TFSA, RESP, LIRA, and cash eligible. $10,000 minimum.
Same platform. Same team. Same discipline. Different vehicles at different points on the return and duration curve.
432 Units · 25 Storey Purpose Built Rental · London, ON
Permanently affordable units in the stack · Government capital partner
$10K Minimum · RRSP / TFSA / RESP / LIRA Eligible
Targeted: 15% Annualized (7% cash monthly + 8% appreciation)
Open to new subscribers at the current unit price.
Talk soon,
PV, Mit & Jeff
P.S. The government discussion is the reason Tranche 2 is not a routine 2028 raise anymore. If you are accredited and think you would allocate into a Foundation development opportunity in the next 24 months, this is the right week to signal it. Reply Pipeline and one of us will set up a conversation about Tranche 2, the other opportunities in early development, and where a subscription commitment from you would fit. Room is finite by design.
