Foundation Capital was in London this week for back to back meetings with councillors and ministry officials. Today, what happened in those rooms, why we refuse to build luxury condos, and where 500 permanently affordable homes now sit.
PV, Mit & Jeff
Three days in London this week. Ministry officials, councillors, community members. What actually happened in those rooms, and why we think the affordable housing trade is finally getting seen.
Foundation Capital was in London Ontario this week, back to back with councillors, ministry officials, and community members. The rooms landed harder than expected. This week's livestream (linked below) walks through the raw version. Today's letter is the thesis version.
Foundation Development Fund II Tranche 1 sold out this week. Wellington Towers moves into pre construction with 432 units on a single downtown London parcel on the Wellington Bus Rapid Transit corridor. The application heads to council at the end of September. And the government, at three levels, is now sitting at the table with us on the affordable component of the building.
Today, the through line that connects all of that. Why we do not build luxury. Why that decision keeps proving right. And why we think this is finally the moment the affordable housing thesis stops being contrarian and starts being consensus.
PV and Jeff walk through the ministry meeting, what Ed Holder is unlocking at senior levels of government, the case going to council in September, and why the anti luxury trade is the real trade.
Almost every mid market Canadian city has a group of established developers who have built the same product for thirty years. Luxury condos. Rooftop pools. Yoga studios. Balconies large enough to hold a table nobody uses. That is what pencils when the developer starts from "what is the highest rent I can charge on the top floor" and works backwards.
The three of us are not in that room. We are landlords first. We started by buying and operating apartments across Southern Ontario, unit by unit, tenant by tenant. We know exactly what the median London worker earning $25 an hour can afford. We know what a household on ODSP can afford. We know why a three bedroom sitting empty in the south end for the last eight months is not a family unit at that rent, it is a shared house for three roommates who each have a car.
Every design decision at Wellington Towers is reverse engineered from that operating experience. Smaller compact units instead of oversized three bedrooms. Purpose built rental instead of investor owned condos. Minimal parking, because the site sits on the Wellington BRT corridor and the province just invested roughly half a billion dollars into that transit infrastructure. The building is designed for the tenants who are actually being priced out of London, not the tenants the old room wishes they had.
This week we sat down with the second in command to the Ontario Minister of Municipal Affairs and Housing. The kind of meeting that historically takes new operators years to earn. We got in quickly because Ed Holder, the former Mayor of London and former federal Minister of Science, is on our team and opens doors that would otherwise stay closed.
The conversation was substantive and, more importantly, aligned. Government at three levels (municipal, provincial, and federal, through programs including Build Canada Homes) is in active discussions with us about coming into the Wellington Towers capital stack as a real equity partner on the affordable component. Not a covenant. Not a subsidy that expires. A dedicated class of shares that lets public capital sit in the equity stack alongside private investor capital, tied to a long term commitment on affordable rents. If the City wants permanent affordability on those units, we will commit to it.
The reason the meeting landed is that the political and economic case is now obvious to the province. Ontario just invested roughly half a billion dollars into the London Bus Rapid Transit corridor. Wellington Towers sits directly on that corridor. A purpose built rental tower delivering hundreds of permanently affordable homes to Londoners who ride that BRT every day is exactly the kind of transit oriented density the province spent that capital to enable. It is a real ROI on the BRT investment, measurable in ridership, in housing, and in every household we take off a supportive housing waitlist.
Depending on where the discussions land, the affordable component of Wellington could scale from roughly 100 units to as many as 500 permanently affordable homes in a single building. Homes for London households on the supportive housing waitlist, households living with disabilities, households on ODSP, households in transitional care, and lower income Ontarians who cannot access the private rental market at $1,800 per door. All at rents between $980 and $1,100 per month. All held affordable for the life of the covenant.
On the private investor side, the return math stays intact. Every additional government dollar into the stack replaces private equity that would otherwise have to be raised, which is why Tranche 2 in 2028 may look materially smaller than we anticipated a month ago, or may not need to happen at all.
The Wellington Towers application heads to London city council at the end of September. In the run up, we are engaging with community stakeholders across the city to share the details of the site and the affordability commitment. The case for the application is straightforward on its own terms.
The site sits directly on the Wellington BRT corridor, which the province funded specifically to spur transit oriented density. The zoning permits minimal parking requirements on that corridor by design. The building brings roughly 1,000 units of purpose built rental to a city that is critically short of them, with roughly 100 units already designed to be permanently affordable and up to 500 in the range if the government discussions land. A councillor voting yes on this file is voting yes on affordable housing in a housing shortage, on transit ridership in a transit corridor, and on infill density on a single parcel instead of scattered smaller projects across the city.
The pushback we hear online is almost entirely about parking and building aesthetics. The parking objection ignores that the site is a transit oriented development on the corridor the province just spent half a billion dollars building. The aesthetics objection ignores that the building is designed to house 1,000 Londoners at rents they can actually afford, not to look like the same luxury glass tower every other developer wants to build. As one councillor put it to us this week: do you want your kids to drive by this building in 20 years and hear "dad built this and it looks pretty," or "dad built this and housed 1,000 Londoners who needed it"?
Every private developer who chases luxury is competing with every other developer chasing luxury, in the narrowest slice of the rental market. The demand at the top of the rent stack is bounded by how many households can pay $3,000 per door. The demand at $1,500 and below is effectively unbounded. Every household we cannot house at that rent is currently on a waitlist somewhere.
Every unit of affordable housing we deliver is pre leased before we finish it. Every unit at $980 with ODSP or transitional support behind it lease up on day one. The vacancy risk that dominates a luxury developer's pro forma effectively disappears at the affordable end of the market. And when government capital sits in the stack alongside private investor equity, both sides of the return math get better, not worse.
For an accredited investor thinking about Foundation development capital, this is the frame. The next opportunity in the pipeline is what those Queen's Park conversations shape. Development Fund III is in early construction. If you missed Tranche 1 and want to be at the table before the next round takes shape, this is the week to signal it.
432 Units · 25 Storey Purpose Built Rental · London, ON
$100K Min · Cash Only · Accredited / Existing FC Investors
$10K Minimum · RRSP / TFSA / RESP / LIRA Eligible
Targeted: 15% Annualized (7% cash monthly + 8% appreciation)
Mid market core workforce housing across Southern Ontario. Open to new subscribers.
Have a great weekend,
PV, Mit & Jeff
P.S. The livestream this week is worth 30 minutes. Raw, unfiltered, walking through what happened in the room in London. Reply Room if you are accredited and want to talk about where the next Foundation development capital opportunity fits for you.
