While pre construction condos sit flat, single family rental math goes upside down, and commercial office towers get marked down 40 to 50%. One corner of Canadian real estate is still working. Here is why it is, and why the others are not.
PV, Mit & Jeff
The three real estate moves most investors are sitting on right now are all broken. The fourth is where capital is actually compounding. We need to talk about it directly.
Class B office vacancy in downtown Toronto: over 20%. GTA pre construction condo prices, last 24 months: flat to negative. Single family rental cash flow at current mortgage rates: underwater on day one.
These are the three real estate trades most investors are sitting on right now. They have been broken for two straight years, and the math is not getting better on the timeline anyone hoped.
The fourth trade is targeting 20% to 24% annualized. It has every federal subsidy in this asset class behind it. The equity book has a hard ceiling and is filling this month. We need to talk about it directly.
Toronto pre construction condos have been the default real estate move for Canadian investors for two decades. That run is over for now. The assignment market is full of sellers trying to exit at a loss. Prices are flat to negative across the GTA over the last 24 months. The carry on a $1M unit runs around $5,000 a month in negative cash flow at current mortgage rates, because the rent the unit commands no longer covers the carrying cost.
The math broke for a structural reason. The asset itself did not change. The capital stack underneath retail real estate did. When mortgage rates moved from 2% to 6%, every pro forma the retail buyer used to underwrite a condo stopped working at the same time.
The next move retail investors reach for is buying a rental house. That math is in worse shape. Entry pricing on a tenantable single family asset in most Southern Ontario markets still sits at $700,000 to $1,000,000. Mortgage rates put the monthly carry above the rent the property generates from day one.
The structural problems compound. Ontario's Residential Tenancies Act caps the annual rent increase at a regulated guideline number that has trailed inflation in every recent year. One vacancy, one repair, one tenant who stops paying, and the whole position turns negative for months. A single family rental is a single tenant business. The diversification is zero.
The most common version of this trade in 2026 ends with the owner subsidizing the tenant out of pocket every month while waiting for appreciation that is not coming on the timeline they assumed.
Commercial office is the cleanest example of a real estate sub sector in genuine structural decline. Class B office vacancy in downtown Toronto sits above 20%. Other Canadian markets are worse. The shift to hybrid work did not reverse after the pandemic ended. It got embedded. The square footage corporate Canada actually needs is permanently lower than the square footage that exists.
The downstream effects are showing up everywhere. Office towers trading at 40% to 50% discounts to peak valuations. Lenders pulling back from new office loans. Receiverships and forced sales in markets that had not seen one in a generation. Even trophy assets are getting marked down.
The lesson buried in the office story matters for everything else. Real estate is not a monolith. Sub sector selection is the entire game. Office is structurally short of demand. Purpose built rental is structurally short of supply. The two sit inside the same asset class and are moving in opposite directions, for reasons that are not going to reverse on a rate cut.
All three broken trades share one feature. They put the investor on the retail side of the table, paying the full price the market clears at. Purpose built rental development is the one corner of Canadian real estate where you are on the build side instead.
Four tailwinds exist for purpose built rental that none of the other three trades get. They are not promotional. They are written into the federal and provincial code right now.
CMHC funds new purpose built rental at up to 95% loan to cost with interest rates priced inside any other development debt in the country. A condo developer cannot access this. A single family investor cannot access this. And the program does not stop at construction. The institutional buyer who acquires Wellington Towers at stabilization can also use CMHC insured financing at high leverage to take it down, which lifts the price they are willing to pay. Cheap financing on the build, and cheap financing for the exit buyer. Both legs of the trade subsidized by the same federal program.
GST has been removed on new purpose built rental construction. A federal policy decision in 2023 made GST recoverable for new rental builds and not for new condo builds. Hundreds of thousands of dollars of cost per building, gone, for purpose built rental only.
The demand side is structural and one way. Sub 2% vacancy in our submarkets. Population growth from immigration running at multi decade highs. Home ownership pricing out a full generation of would be buyers who become long term renters by default.
The institutional bid at the exit is real, deep, and active. Pension funds, insurance companies, and sovereign wealth are buying hundreds of millions of stabilized purpose built rental this year. RioCan's $379M sale lands directly into that buyer pool. The same pool will be there when Wellington Towers reaches stabilization.
432 Units · 25 Storey Purpose Built Rental · London, ON
$100K Minimum · Cash Only · Accredited / Existing FC Investors
Targeted Return: 20% to 24% Annualized
Wellington Towers is 432 purpose built rental units across two 25 storey buildings in London, Ontario. The site is under our control. The precast strategy is locked. The capital stack is being assembled against today's CMHC terms.
Our build cost basis is tracking below comparable Toronto purpose built rental on a per door basis. The targeted 20% to 24% annualized return lives in the spread between that build basis and the cap rate the institutional market is paying for stabilized product. Compounded over a four year build and stabilize horizon, a $200,000 allocation models to $414,720 at the low end and $472,842 at the high end.
Dev Fund I closed to new capital in April after hitting its raise target with the same operating team and the same playbook. Dev Fund II is the next chapter, on a bigger asset, with the tailwinds above stacked behind it.
1. "I want to wait until rates come down."
Read this carefully. The CMHC purpose built rental program is at its most generous terms right now precisely because rates are elevated. When rates fall, two things happen. The federal subsidy on this program compresses, and stabilized cap rates compress, which lifts the price our exit buyer is willing to pay. Capital that gets in before the rate cut captures both legs of that move. Capital that waits captures neither.
2. "What if the build goes sideways?"
A fair question, and the honest answer is that development carries real risk. Here is what we have done to compress it. Precast construction reduces schedule risk and weather risk to a fraction of poured concrete. The build contract is fixed price, not cost plus. The capital stack is CMHC senior debt with insured terms. The exit has two paths, not one: an institutional sale at stabilization or an internal acquisition by FCPRET. Either path is priced at the same stabilized cap rate.
3. "$100,000 is a lot to commit."
Reframe the number. $100,000 is the same cheque you would write as a 20% down payment on a $500,000 starter condo. The question is not whether you can move that amount of capital. The question is which side of the table the capital sits on once you do.
A $100K condo down payment puts you on the retail buyer side, paying full market for a finished asset, exposed to mortgage carry, flat resale, and the structural problems we covered above. The same $100K in Wellington Towers puts you on the developer side, capturing the spread between build cost and stabilized exit, with a CMHC subsidized capital stack underneath you. Same cheque, completely different return profile, because you are profiting like a developer instead of paying like a buyer.
If $100,000 genuinely is not available right now, FCPRET is the $10,000 on ramp into the same operating team with 7% targeted monthly distributions. But if the answer is "I have it, I am just not sure where to point it," the reframe above is the question to sit with.
Dev Fund I filled in the order calls were taken. The investors who confirmed early got allocations. The investors who waited one more week to confirm ended up on the wait list. The wait list did not convert into a second tranche. It converted into nothing.
Dev Fund II is filling the same way. The equity book has a hard ceiling tied to the specific dollar amount Wellington Towers needs to close its capital stack. When the book is full, it is full.
PV, Mit, and Jeff are taking development calls directly this week. If a Wellington Towers allocation is on your radar, this is the week to book.
8 Stabilized Apartment Buildings · Southwestern Ontario
$10K Minimum · RRSP / TFSA / RESP / LIRA Eligible
Targeted Return: 15% Annualized (7% cash + 8% appreciation)
Talk soon,
PV, Mit & Jeff
P.S. If you have been sitting on the sidelines watching Canadian real estate for the last two years, you are not wrong about most of what you have seen. Condos went flat. Single family math went underwater. Office towers are getting marked down 40 to 50%. The conclusion to draw is not that real estate is dead. It is that the wrong sub sectors of real estate are dead, and capital is rotating into the one corner the federal government, the institutional buyers, and the demographic tailwind all agree on. Purpose built rental, built at developer cost. Wellington Towers is how we are positioned. The call to book is at the top of this email.
