High Art Capital has launched a Greater-Toronto-Area-focused fund expected to be capitalized with at least $1.3 billion to acquire blocks of newly completed, unsold condominium units and convert them into long-term rental housing.

The GTA rental and affordable-housing initiative is designed to deliver approximately 2,200 rental units in the near term, including about 550 affordable suites that will be protected in perpetuity through title-based mechanisms and related agreements, said High Art. Affordable rents will be set at the lower of 25% below local market rent or 30% of median gross household income across the GTA.

The affordable units are aimed at workforce households that are priced out of market rents but do not qualify for rent-geared-to-income or other subsidized housing programs. A not-for-profit organization will be engaged to allocate the units to eligible applicants.

The fund is anchored by a commitment of up to $300 million in mezzanine debt financing and a nominal equity investment from the province’s Building Ontario Fund, which closed on February 13.

“Timing matters in this market,” said Ryan Roebuck of High Art. “There is a rare opportunity right now to convert newly completed but unsold housing into long-term rental supply at scale. “This initiative is designed to create real housing availability in the near term, preserve a meaningful affordable component and help stabilize a critical segment of the GTA housing market, all of which has become possible through our partners at BOF.”

Michael Fedchyshyn, CEO of the BOF, said the partnership demonstrates the power of collaboration between the public and private sectors to address housing challenges.

“By working together with High Art Capital and our service providers, we’re creating rental housing options in the near-term, and securing affordable homes for generations to come,” he said. “This project was made possible by BOF’s participation, requiring no development charge, tax waivers, or direct subsidies to realize its affordability objectives. This type of innovative approach, a first of its kind at this scale, is exactly why BOF was created.”

High Art Capital will run an open, competitive process to acquire eligible units, requiring submissions to include blocks of at least 10 vacant units in registered residential or mixed-use condominium buildings completed on or after January 1, 2023, across Toronto and the regional municipalities of Durham, Halton, Peel and York.

The firm has reached agreements in principle with Del Condominium Rentals, part of the Tridel Group of Companies, and Menkes Condominium Rentals to manage leasing and tenancies, and to work with a not-for-profit partner on affordable-unit allocation.

Canaccord Genuity is acting as exclusive financial advisor and sole agent to High Art, while law firm Wildeboer Dellelce is serving as legal advisor to the firm and Bennett Jones is advising Canaccord Genuity.

Toronto-based High Art is a private real estate investment firm focused on Canadian markets, partnering with government, institutional and private capital to target underserved or overlooked segments through thematic investment strategies.

The BOF is a provincial Crown agency mandated to catalyze investment in revenue-generating infrastructure projects, backed by $8 billion in provincial funding and focused on sectors including housing, energy, transportation and municipal infrastructure.