Hardhats and shovels at a Telus Living ground-breaking. The company has many pieces of prime real estate that can be redeveloped as it transitions from copper to fibre optic.Telus Living
Real estate is all about location, location, location, as people say, and that helps explain why telecommunications company Telus Corp. is making a big push into real estate development.
When land lines were in their heyday, telephone exchanges would be one of the first things to be established in a community, like a flag being planted, before the town was built around it. Because telephone calls were facilitated by copper wires that can only go so far, companies like Telus positioned exchange facilities in central locations.
With the advent of fibre optics, however, those facilities are now being phased out, leaving Telus with a bunch of prime pieces of real estate. More than 2,000 pieces, according to Telus vice-president of corporate real estate Manasweeta Bhatia.
“The evolution of our development story actually goes back to our core business,” she said. “As we transition our network over from copper to fibre, there is a significant reduction in the space requirements. Signals can be transferred much faster and over much longer distances. To use the subway line example, you can take out certain stations in the middle that are not as prominent.”
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The question then was what to do with those excess pieces of real estate, much of which Telus has held for more than 50 years. The locations gave Telus the answer.
“Given the residential nature of the communities, we felt that these highly valuable centrally located sites – usually on amenitized transit-friendly corridors – would be a great opportunity for housing,” Ms. Bhatia said.
These housing projects are now advancing under the Telus Living brand, with two six-storey projects – one in Nanaimo on Vancouver Island and one in Sechelt on the Sunshine Coast – in British Columbia set to complete construction this year and deliver a total of 254 rental units.
Over the past few years, Telus has submitted development applications for over a dozen sites in communities across B.C. They broke ground on a small 55-unit project in Vancouver in November and are hoping to break ground on a project in Victoria by year’s end.
All in all, Ms. Bhatia said 40 properties have been targeted for redevelopment, and that about half of them are in the planning process or under construction. Together, they will deliver 3,000 rental units. A vast majority of these initial sites are located in B.C., but the program may expand to Alberta and Quebec, where Telus owns a handful of properties. Ms. Bhatia says they are aiming for a portfolio of 10,000 rental units.
A vast majority of the projects are owned by and being advanced through a 50/50 joint venture with Ledcor Property Investments Ltd., the development arm of construction giant Ledcor Group, although there are smaller joint ventures with other partners such as Omicron Canada Inc. and Colliers.
“Telus and Ledcor have actually worked together for nearly a decade or more, [ever since] we set out to build Telus’ fibre network out west,” Ms. Bhatia said. “We have a long-standing relationship. They have the strength and expertise in the real estate sector as well, so when we started looking at more complicated sites that required a sophisticated partner, we naturally turned toward Ledcor.”
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The vast majority – about 95 per cent – of the housing units will be rental, with a select few being strata due to site-specific constraints and project viability.
“We like the rental residential model much more than a stratified model where we exit at the end. We’d like to remain part of those communities and be part of the character and residential experience within that community. I think there may be select sites where we may go strata, only because the size or shape of the development may not be conducive to a larger residential building. We have a project in West Vancouver right now that is actually a complex of 12 strata properties, but that’s after we tried making it multifamily [rental].”
Although most of the projects will be low-rise, there are also larger projects in the pipeline. At 730 Raymur Ave. in Vancouver, for example, Telus has submitted a rezoning application for 436 rental units across 25-storey and 22-storey towers, and Telus has proposed several other towers of that scale in Vancouver.
Rendering of the project at 730 Raymur Ave. in Vancouver, which is expected to create 436 rental units in two towers of 25 and 22-storeys.Musson Cattell Mackey Partnership
It’s not exactly a good market for developers right now, with presale purchasers still hiding out and rents continuing to drop across the country, but Telus is pushing through and Ms. Bhatia sees opportunity.
“Generally, the real estate market tends to be cyclical. We definitely feel that in the communities we’re located in, the demand for housing isn’t going to drop. I wouldn’t say we’re being aggressive with our assumptions in our development pro forma. We’re definitely taking a conservative approach – hoping that the market will recover significantly, but also being pragmatic about how long it might take.”
“Despite the fact that you’re seeing a drop in immigration and other reasons why demand is going down, the demand is still not flat. So if supply is not catching up, when the cycle picks up again, you’re still going to see a discrepancy between demand and supply, so these developments are well-positioned to come out at the right time – five or six years from now. We think we’ll catch the market at the right peak.”
Ms. Bhatia, who joined Telus in 2008, is an architect by training, and has a background in construction. She adds that building now also has the benefit of more competition with trades and construction pricing, although she recognizes that there are “headwinds” at the moment and that they are also conscious about not overbuilding for certain communities.
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What’s new for Telus is the residential aspect, not the development aspect, as Telus has quietly developed some commercial real estate over the years. This includes a light industrial building at 3855 Wayburne Dr. in Burnaby, B.C., called The Node and the Telus Park Surrey campus, both of which completed last year. There’s also the Telus Ocean office building in Victoria set to be completed later this year.
A different team manages the commercial projects, but Ms. Bhatia says Telus Living has a team of about 10 at the moment and could draw resources from the corporate team and scale up easily in the future.
“I think from a financial lens, we have a distinct diversification opportunity for our business, whether it’s taking this towards an investment portfolio that will be held by Telus in the long-term or looking at near-term divestitures. We’ve positioned ourselves with the optionality of holding it as a long-term REIT portfolio, or we can hold them as we are now.”
Ms. Bhatia says the company eventually wants to grow the portfolio to around 70 or 80 projects and estimates a net asset value, at full build-out, of $3-billion.