When was the last time the very weight of a nation’s future well-being came to rest so heavily on the shoulders of a single industry?
Here we are, at the nadir of a housing crisis the likes of which has not been seen since the end of the Second World War, if the political rhetoric is to be believed. In a country where 90% of all housing stock is built by the private sector, home builders and developers now face multiple fate-defining challenges: making up for years of under-production; repairing the old housing ladder that allowed previous generations to build equity through home ownership; catching up with demographic churn; decarbonizing our built form...the list goes on.
And though tasked with these enormous civic burdens, builders must also contend with their own: figuring out how to make projects pencil when the cost of everything is shooting up; navigating flat sales due to high interest rates and soaring prices; finding all the men and women prepared to build these new homes; securing land that isn’t environmentally ruinous.
So, what’s a home builder to do?
Minto Group MI-UN-T, the venerable Ottawa developer of both condos and apartment buildings, has come up with a set of compelling answers: lean in to a lucrative side hustle in the U.S. involving active-senior developments and branding by an A-list celebrity (albeit a dead one); take full advantage of the updraft in prevailing rents, which is one of the less, shall we say, savory sides of the apartment building business.
And, most important, work both sides of the development street, which in Minto’s world means having the chops to develop purpose-built rentals as well as condos, as conditions dictate.
In fact, after two decades of condo investment muscling aside rental, Minto’s experience with the latter positions the company to address perhaps the largest void in the market right now.
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With ownership completely out of reach for the vast majority of urban Canadian renters, housing experts and policy-makers argue that the way out of the housing crisis is way more purpose-built rental, as well as more targeted incentives—better construction loan guarantees, further cuts to HST on affordable housing and so on—to direct capital toward purpose-built rental projects.
According to research compiled in March 2024 by the Task Force for Housing & Climate, Canada needs about 2.2 million new units of purpose-built rentals by 2030 to achieve a balance between supply and demand, and thus rent stability—i.e., almost 40% of the additional housing required to accommodate projected population and demographic shifts.
“We’ve always been building rentals and condos in parallel,” says Minto CEO Michael Waters. “The skill sets are very fungible between the two. We see it as one of our strategic advantages. There are periods of time—now, in Toronto, for example—when the condo market is very, very soft. But the skill sets that worked for condo work for rental, so we can continue to pursue the development pipeline, but taking development sites and pursuing them as rentals.”
Michael Waters, an accountant by training, took on the role of Minto's CEO in 2013.Alexa Mazzarello/The Globe and Mail
When Waters stepped into the CEO job back in 2013, he took over a family-owned real estate empire whose mission had grown a bit fuzzy.
The firm (a new entrant on the 2024 list of Canada’s Best Managed Companies) traces its roots to the mid-1950s, when four brothers—Louis, Gilbert, Irving and Lorry Greenberg—set up an Ottawa home-building company in the heady postwar baby-boom era. Within a decade, they’d built more than 5,000 homes in the national capital and had become one of the city’s largest private landlords.
Minto has the distinction of having built Canada’s very first highrise condominium in 1969, and blocky 11- and 12-storey complexes in suburban Ottawa in the late ‘70s, about a decade after Ontario passed its first condo law. (The units in these brutalist slabs were quintessentially 1970s, with sunken living rooms, shag carpets and “decorative screens” separating foyers from living areas.) Unlike most of its Canadian peers, Minto also set up a U.S. division, in Florida, around the same time.
Although Minto has long been a household name in the Ottawa region, Torontonians likely first heard of the company in the early 2000s, when it managed to snap up a rundown provincial office building in midtown and embarked on plans to erect a pair of highrise condos (at 54 and 34 storeys, they were considered enormous then; today, not so much). Long before Toronto’s real estate market went berserk, the project became a political lightning rod, inciting a fierce backlash among North Toronto homeowners, who predicted—not incorrectly—that those towers would transform their leafy neighbourhoods. Minto has worked hard to stay out of the limelight ever since.
By the early 2010s, the company—which eschews the flash and mass market branding of GTA-based rivals like Mattamy Homes, Tridel and the De Gasperis empire—owned a collection of real estate assets that didn’t hang together all that coherently.
Waters is an accountant by training who spent five years at Intrawest, the ski-resort powerhouse. He was a member of its Vancouver-based acquisitions team, and that stint provided a crash course in real estate development. “Whenever you’re acquiring a site and underwriting a new deal, you effectively have to look at the entire value chain for that piece of land,” he says. “Taking it through the approvals process, developing a concept for the ultimate product, costing it, developing a marketing plan, and taking it to financing. All of that effectively needs to be compressed into your underwriting.”
When he joined Minto in 2007 as CFO, the company was still, in his words, “very much a family-run business.” Roger Greenberg, who was CEO, is now on the board, along with other members of the family. By the time Waters became CEO, there were no more Greenbergs in executive positions, and a bit of drift had set in. “We had exposure to a lot of different asset classes,” Waters says. “We were in industrial real estate and hospitality and retail and office.”
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While some developers, like Menkes and RioCan, operate in multiple sectors, the denizens of Canada’s building industry often stay in their own lanes: office, commercial, residential, mixed-use residential (i.e., condos on top of commercial podiums). Pension funds own many of the big malls, as well as specialized asset classes like retirement homes. The legacy apartment builders, such as Greenwin, are mainly in the property-management business, although some have begun adding towers and stacked townhouses to the bases of older apartments. As for the home builders, many now do both single-family and highrises.
With the blessing of his board, Waters began divesting those portions of the Minto portfolio that didn’t fit with the company’s original strong suit, which was residential and (later) mixed-use residential. “In many ways, [the sell-off] sort of brought us back to our roots,” he says. “From our perspective, it was the most defensible strategic advantage we had.” The hobbling of the office sector during and since the pandemic vindicated that strategy, Waters adds. “I’m glad we did it, because we were able to avoid the office asset class and some of the more damaging effects of COVID-19.”
Again, unusually for real estate developers, who tend to stay in a given region, Waters began pushing Minto into new markets—Edmonton, Calgary, Montreal. In 2018, the firm spun off its apartment assets into a REIT via a US$200-million IPO—a deal that saw 4,279 units transferred from a privately held Minto Group subsidiary to a new publicly traded entity. Waters and Julie Morin, the CFO, recently left their dual-appointed roles at the REIT because it had grown sufficiently to justify a full-time executive team. The REIT has continued to acquire apartment buildings across Canada and now owns more than 7,700 units. (To put that number in context, Canada currently has 5.4 million apartments.)
Minto, it must be said, arrived late to the REIT game, and is considerably smaller than rivals like CAPREIT and Morguard (which operates across North America and owns assets in all the property sector’s verticals). What’s more, the Minto Apartment REIT has had a bit of a bumpy ride. With a market cap of around $600 million and 2023 revenue of just under $160 million, the REIT’s shares didn’t recover from the pandemic plunge, and its return on equity is below water, for now. Yet a March 2024 analyst report from RBC Capital Markets seemed bullish, noting that the shares were priced at a significant discount to net asset value compared to others in the space. “Q4 saw a strong recovery from a weak prior-year quarter,” RBC concluded, adding that “earnings growth is now more reflective of strong fundamentals.”
“Strong fundamentals,” in this case, is Bay Street shorthand for vacancy rates in large urban markets of almost zero, which means property-management firms like Minto can command sky-high rents and max out lease hikes when units change hands. It’s a grim reminder that in a housing crisis, landlords are invariably in a position to dictate terms.
Construction crews work on site at 88 Beechwood Avenue in Ottawa, one of Minto’s recent apartment developments, in October 2023.Ashley Fraser/The Globe and Mail
Yet, in response to mounting pressure from politicians and planners, Minto is also looking to build new residential buildings that include affordable units, including on several sites on major corridors in Vancouver. Minto veteran Dan Dixon, senior vice-president of corporate affairs, points to four towers currently under development that will cost $750 million and include more than 900 rental units, a fifth of them designated affordable, per the City of Vancouver’s definition. Those deals were driven in part by a Vancouver zoning policy that provides density bonuses for purpose-built rental, Dixon says. “This is a great example of governments putting incentives in place that developers use, because they make economic sense and produce socially desirable outcomes.”
As recently as a decade ago, those Vancouver projects may well have been condos. But Minto’s ability to pivot between condos and rentals provides much needed flexibility in a market that’s surprisingly temperamental, given all the apparent pent-up need. “Our product, when we design it, can be a rental product or a condo product, and we also always think about it this way,” says VP of development Agnieszka Wloch. “This is a moment that benefits the agile.”
In a sector flooded by deep one-plus-bedroom condos marketed to investors, Minto has sought to differentiate itself in the homeowner business with some variations, such as houses that can contain an optional guest suite (for multigenerational buyers) or stacked townhouses with more family-size units, such as a multiphase project in Etobicoke, a postwar suburb on Toronto’s west flank, dubbed Westshore.
Perhaps the most daring of these moves involves Minto’s approach to sustainability, which, in some of its projects, extends further than the now standard use of LEED certification to signal (to planning officials, shareholders and buyers) a certain climate consciousness. Dixon and Joanna Jackson, Minto’s vice-president of sustainability and innovation, point by way of example to a five-tower project in Oakville, Ont., dubbed Oakvillage, which will use a “district heating” system powered by a combination of geothermal and gas boilers, to deliver heating and cooling to all the units in the complex.
Municipally owned district heating systems, which involve centralized boilers and chillers connected to multiple buildings, have been commonplace in some cities for generations. But smaller bespoke versions connecting a series of towers or a subdivision are a relatively new and somewhat risky innovation. They typically aim to spread out some of the capital expense of installing a geo-exchange system, which involves boring deep holes in the ground to tap into the heat of the Earth or to offload heat in the summer. With Oakvillage, Minto is outsourcing the district heating to a private firm that specializes in operating these low-carbon mini-utilities on behalf of property managers or condo corporations. Dixon says that as Minto decarbonizes its portfolio to meet the firm’s 2050 net zero goal, geothermal power is expected to play an ever-larger role. “This is a relatively new decision for us,” he says. “Going forward, we’re modelling all of our new purpose-built rentals with geo-exchange and then are pursuing that on projects under construction now.”
Jackson explains that for a builder that plans to own and operate an apartment for decades, net-zero math at the front end makes sense. Rising natural gas prices and carbon taxes will drive up energy costs, so upfront capital investments in low- or no-carbon heating and cooling, as well as energy-efficiency features (a well-sealed building envelope, double- and triple-pane windows, optimized HVAC controls and so on), will produce lower operating expenses in the long term. “It makes sense to put in the extra cost up front and go geothermal right from the get go.”
Jackson is also tasked with retrofitting Minto’s older apartment buildings, some of which still have old-school boilers and inefficient single-pane windows. There are thousands of postwar apartment buildings across Canada in dire need of so-called deep energy retrofits, such as a complete exterior redo, new HVAC systems, better insulation, high R-value windows—the works. While the environmental and operational payoff is significant, the capital cost of such projects is prohibitive.
Dixon says Minto’s strategy will be to undertake energy-efficiency or net-zero upgrades over a period of a few decades, to spread out the expense by undertaking those projects when certain components of the building’s various systems need replacement. “It helps to spread out the dollar spend,” he says. “We very much are developing what I call a portfolio approach to dealing with the problem of the conversion.”
One of the first, an early-2000s building in Toronto’s Yorkville district, is now undergoing this kind of renovation with help from a City of Toronto deep retrofit program. The plan involves replacing original chillers that were nearing the end of their usable lives with modern electric air-source heat pumps, and the older gas boilers available for backup. When it’s done, that 17-storey building’s energy consumption will be halved, and Jackson expects to see a 70% reduction in carbon. “It was really the ideal time to say, ‘Okay, what can we do differently? How can we make some improvements and not just go for a like-for-like replacement?’”
Unusually for real estate developers, who tend to stay in a given region, Waters began pushing Minto into new markets—Edmonton, Calgary, and Montreal.Alexa Mazzarello/The Globe and Mail
In early 2017, executives at Tampa Bay-based Minto Communities USA, which has been building subdivisions in Florida and South Carolina since the late 1970s, were plotting out a new freedom-55 style project in Daytona Beach when the owner of the land they were buying introduced them to a team from Margaritaville Holdings, which was scouting for a site for a themed restaurant. On its website, Margaritaville describes its location as “in the tropics somewhere between the Port of Indecision and Southwest of Disorder”—the laidback empire created by the late singer-songwriter and high priest of chill Jimmy Buffett. Over the years, the savvy entrepreneur became a billionaire in part by trafficking in good times—cruises, all-inclusives, eateries and anything else that appealed to his legion of “parrotheads,” as Buffett fans describe themselves.
“They had a keen interest in active living for several years, but they just didn’t know how to approach it,” Minto Communities USA president Michael Belmont recalls. “The landowner put us together, and it was quite remarkable how similar our vision was for this active-living lifestyle community.” Belmont pitched the Minto board on a partnership, with Minto building enclaves of freehold houses and cottages arrayed around a kind of town centre anchored by Margaritaville’s branded amenities and events—everything from good-time bars and pickleball courts to fitness clubs, bandshells and cafés, and even the occasional appearance by the original parrothead himself. These shuffleboard-free projects would be dubbed “Latitude Margaritaville.”
Minto, which says it has built and sold about 34,000 new homes across the southeastern U.S., certainly didn’t invent the active-living retirement community. In fact, the 900-pound gorilla of such real estate plays can be found about 90 minutes west of Daytona Beach—The Villages, a sprawling retirement cluster filled with golf carts, nine-hole greens and Republicans. Its population now exceeds 100,000 residents.
The Buffett-branded promise of an easygoing life and slightly more apolitical crowd took hold almost immediately. Belmont recalls that a few hundred people lined up in the parking lot next to the first sales centre the night before it opened. “We set up some movie screens and tried to make sleeping in a parking lot as enjoyable as possible.”
One of the first buyers was a Florida realtor named Kelley Sarantis, who seized on the opportunity but also wanted to live in this new residential theme park. She thought the idea was “brilliant.” “I felt like they both were bringing so much to the table.” Soon after she took possession, Minto called to say that some “bigwigs” were coming to visit, and would she mind if they dropped by. “Well, it ends up that the bigwig who came into town and knocked on my door was Jimmy Buffett,” Sarantis recalls. “He came in and he said, ‘Hey neighbour,’ and met my two yellow labs and showed us pictures of his Cavalier King Charles spaniels, and we just laughed about life. He said to my husband, ‘Can you believe this is all because of a song?’”
The partnership—an unlikely pairing between a low-key Ottawa home builder and pop-music royalty—has been highly successful. In the seven years since Minto began marketing Latitude, the company has sold 7,596 units, including 6,051 closings, with a backlog of 1,545 homes in the pipeline. There are now three Minto/Latitude communities—two in Florida and one in Hilton Head, S.C.—and Belmont says the company is in the process of closing a deal to buy the land for another one near Houston. At least some of the original buyers, Sarantis says, were pandemic work-from-homers who weren’t yet ready to retire.
However, the buzziness of the parrothead lifestyle can fade a bit after the novelty has worn off for new buyers. Sarantis says she and her husband now make less use of the amenities than they did at first. “When you first move here, you’re doing everything, every activity, every possible thing you can do,” she says. “It’s all new. And then, you settle in a little bit so it becomes a little less of an everyday thing.”
Sarantis has another perspective on the projects, which is the churn in the homes, many of which she represents when they go on the market. “Right now, we have 72 homes for sale in the Latitude Margaritaville location [in Daytona Beach], and there’s about 3,000 homes,” she says. “So math wise, a little more than 2%, which I feel is a very low number.” A scan of the listings, however, shows that quite a few are on the market for the second or third time since they were built in 2019 or 2020. “What I am seeing is that some of the people who signed up five, six years ago maybe weren’t intending to be investors,” she says. “But now they’re seeing a lot of equity sitting there and they’re going to say, ‘You know what? Let me cash in and move on to maybe something where I may not get the amenities, but I can pad my pocket and make my life a little easier.”
Belmont, for his part, insists there’s fairly low turnover, largely because Latitude is a retirement community geared to a somewhat younger buyer. Still, time marches on, and either the parrotheads will age in place, or they’ll move elsewhere, making way for a new flock. He does, however, allow that with both new-home and resale prices skyrocketing in recent years, some owners have been eyeing all that new-found equity. But he doesn’t anticipate that turnover will become a big deal. Neither does he expect a hangover after the boom, nor a flagging of interest because of Buffett’s death last year. “They definitely hold their value,” Belmont says. “I think the lifestyle that goes along with it has a lot to do with the value.”
Back in Ottawa—which, like so many other chilly regions, supplies locales like Florida with a pipeline of retirees and snowbirds—Michael Waters allows that Minto’s hookup with Jimmy Buffett wasn’t on anyone’s bingo card back in 2017. “It was not intuitive, for sure,” he says with a bit of a sheepish smile, “but it’s proven to be a marriage that kind of works. They’ve been good partners. We’ve found them to be dependable and reliable.” Those projects, with thousands of homes constructed amazingly quickly in the midst of a pandemic and then a brutal supply chain crisis, “have been a real engine of growth. We just caught on to something there, perhaps accidentally, but it’s proven to be pretty energizing.”
Far from the staid ethic of Ottawa’s business community and the weightiness of Canada’s housing crisis, Minto, like any reasonably fit young senior, had enough, well, flexibility to seize on something novel when opportunity knocked.