Bryce Stewart, the owner, president and CEO of Toronto-based 23:32 Capital Inc., believes manufactured housing communities are an asset class “crying out for more competition” which can offer part of the solution for Canada’s affordable housing woes.

His company owns, operates and develops manufactured housing communities as a real estate-focused merchant bank.

In an interview with RENX Homes, Stewart spoke about what he considers the underappreciated potential of such communities. The properties allow residents to enjoy the pride of home ownership without the costs of also owning the land, a distinction he noted in a previous position when he was exposed to a Canadian REIT which is active in the sector.

“What I saw, as an advisor to CAPREIT, was that there wasn’t really anyone in Canada developing these communities.” he said. “Given where we’re at now with affordability where housing prices are, there is a substantial need for this sort of offering that just wasn’t being addressed in the marketplace.”

Its latest acquisition, a $22-million portfolio of manufactured housing communities in three Ontario communities, grows 23:32 Capital’s existing presence in the niche sector.

After rest, solving a housing problem

23:32 Capital was founded in May 2020 after Stewart’s almost 23-year tenure at Scotiabank, mostly spent in Global Investment Banking.

He witnessed a generational housing problem due to Canada’s immigration policy, which he argues does not line up with its housing strategy, leaving many with no suitable place to live. Manufactured housing communities were an opportunity being largely ignored, despite bypassing the biggest problem with housing, which he said is really a land affordability issue.

They also reduce waste compared to traditional homebuilding.

From an investor perspective, most of the rent paid to 23:32 Capital flows to the bottom line which makes the sector attractive.

After leaving investment banking in late 2019, Stewart said he was unsure about what to do next. He had the space to step back, reflect and rest, which is when he conceived of 23:32 Capital. Named after a verse in the Book of Leviticus that mandates the Sabbath, Stewart said it embodies the value he puts on rest as “the father of inspiration.”

“I’m really not sure I would have the capacity to think clearly without that time to really dream about what I wanted to do and to think about what made sense for me.”

He spent most of 2020 building a team that would handle property management and understand civil infrastructure.

23:32 Capital’s advisory board includes, among others: Ira Gluskin, CIO of Irager + Associates Inc.; Mario Barrafato, CFO of Choice Properties Inc.; Chris Tambakis, the CEO of Adgar Investments & Development; and Brian Johnston, former COO of Mattamy Homes.

It was only in 2021 when 23:32 Capital had the confidence to raise capital, Stewart said. That year, it also acquired its first property.

Now 23:32 Capital has seven properties worth over $70 million and over 475 land-lease sites in Ontario.

Additionally, 23:32 Capital raised $25 million for a closed-end fund in December 2022 with Osmington Inc. as its first investor.

The $22-million portfolio acquisition in Ontario

23:32 Capital purchased a 271-site, $22-million portfolio from Great Blue Resorts comprised of three rural manufactured housing communities in Ontario.

The acquisition was paid in cash from capital commitments and property-level debt financing.

The community at the 18-acre McCreary’s Beach Resort in Perth has 117 sites; 30-acre Woodland Estate Resort in Campbellford, holds 94 sites; and the 50-acre Maple Lake Park, outside of Woodstock, has 60 sites.

The McCreary and Woodland communities are under a seasonal/cottage land lease, while the Maple Leaf Park community is a principal residence. There are no vacancies at any of the properties.

Stewart highlighted the natural beauty of the communities, noting their lakes, forests and trails.

“In all three cases we fell in love with the properties. The economics were strong and we thought they were great, solid properties,” he added.

Stewart sees “substantial” demand for manufactured housing communities in Ontario. He said it's driven by empty nesters and retirees looking to downsize and ease into a lower-maintenance lifestyle in communities with people in their age range.

Cap rates for the three communities range from seven to eight per cent. Stewart said it is reflective of two factors: interest rates and the communities being an asset class that is underappreciated by the investing public.

“The business is far more understood by the ordinary person in Canada, than it is by the investment community based in Toronto,” he said.

What is next for 23:32 Capital

Stewart hopes to educate the Canadian public about the value of manufactured housing communities to increase the supply of affordable housing, which he is doing by speaking to potential investors and lenders, and various levels of government. Municipal governments are especially key as they control zoning laws.

“We want to grow the pie. There’s room for competition here.”

His ambition is to see 23:32 Capital become Canada’s largest manufactured housing communities company, which means plans for more growth, development, funds and acquisitions.

23:32 Capital is about to launch its first development in Napanee, Ont. and intends to raise capital for its second fund later this year, Stewart said.