Large institututiional investors are cashing out their apartment buildings in Metro Vancouver as prices have soared to record highs and capitilization rates have fallen to record lows.

In December 2010, Calgary-based Boardwalk Real Estate Investment Trust sold two rental apartment buildings, one each in Burnaby and Coquitlam, for a total of more than $28 million. A separate institutional investor sold a Burnaby apartment building last summer in a share deal worth $7.3 million
“While private investors dominated the buying and selling sides [in 2010], some institutional investors executed disposition strategies involving their multi-family assets,” said Avison Young Principal Rob Greer. “Institutional vendors are taking advantage of strong pricing and robust demand for quality multi-family buildings, which allowed them to realize profits and redeploy capital in markets with higher yields.”
Capitilization rates for quality rental buildings in Vancouver will remain in the low 4 per cent range, while properties in Burnaby and the Tri-Cities should realize cap rates of around 5 per cent, according to Avison Young. Multi-family assets in the Fraser Valley, from Surrey to Chilliwack, should see cap rates of 6 per cent-plus in 2011. Premium trophy assets, particularly in Vancouver, could see compressed cap rates in the 3 per cent range. These cap rates are not only the lowest seen in Vancouver, they are among the lowest in North America.

The average apartment building in the City of Vancouver sold for around $220,000 in 2010, but a city apartment building sold this year for $245,000 per suite, a new high for East Vancouver.