Nearctic wants to find a way to convince Edmontonians to ditch sprawl and embrace innovative infill housing
OWNER David Kent
Nearctic’s redevelopment of the 22-acre Strathearn Heights site will increase the number of units from 500 to 1,750 and will include townhomes, condo-style mid-rise buildings, three residential highrises and 40,000 square feet of commercial space.
Edmonton’s Nearctic Group got its start buying and refurbishing distressed commercial and industrial assets. But founder David Kent, who oversees a company in the building management and construction business, has another passion. Infill. In a downtown coffee shop, he spreads architectural drawings and building schematics across the table to talk about his plans for the future: accessible, urban infill housing in the city’s mature neighbourhoods. “I was born in Vancouver and grew up in Montreal, and I’ve lived and worked in Europe, so I always considered the inner city to be the heart of a city,” says Kent. He’s determined to bring the kind of innovative infill development found in those cities to Edmonton. That won’t be easy. His projects are contingent on convincing mature neighbourhoods that infill development is, well, development.
When Kent first moved to Fort McMurray in the mid ’70s, he had $11 in his pocket, all of it borrowed. Nearctic, founded in 1979, got off to an equally rough start. Originally a general contractor, the company’s initial project proposals failed, and in 1981, Alberta’s boom-and-bust cycle went bust. After a couple of years of consulting work, though, Nearctic partnered on the renovation of an Edmonton strip mall, which launched its primary business. In 2005, the company started branching out into residential development.
Nearctic’s gross revenue in 2012 was just over $9 million. The company currently manages 14 commercial or industrial properties, with rents averaging between $9 and $15 per square foot. Nearctic also owns three mid-market residential properties, including the 22-acre Strathearn Heights development in south-central Edmonton. Most of its 25 full-time employees work in building maintenance and management, but the company also has a $50-million active construction program.
Nearctic has several ambitious projects in the works including a row of back-lane townhomes and a four-storey apartment where the main floor units have street-level entrances. It’s not always easy, however, to convince existing residents in mature neighbourhoods that these projects make good neighbours. “Our real weakness is in the marketing side … self-promotion is not something that we’re trained or very good at,” says Kent.
Kent says the company’s other major challenge is in succession planning. Kent and the rest of the upper management are all in their 60s. Because of the recession in the 1980s, Kent says there’s a “missing generation” in Nearctic’s staff, and that many of the company’s up-and-comers are still in their 20s. The company is in the process of developing a structured plan for the replacement of key personnel.
Real estate development and management is competitive, but it can be tougher when you’re a small, private company up against larger competitors. “We’re competing against well-funded public companies like REITs and pension funds, so we have to be a little more innovative and a little more responsive to survive if we want to stay private,” Kent says. Competitors include companies like Boardwalk REIT and Mainstreet Equity, with revenues that dwarf Nearctic’s. The company’s focus on infill and design/build projects, and Kent’s insistence on staying private, sets it apart.
Over the next five years, Nearctic intends to double in size. This year, the company hopes to double revenues by adding new buildings to its portfolio and by building 50 units of profitable infill housing. Nearctic is also seeking city approval for some ambitious and innovative new housing developments, such as a new development in Edmonton’s Oliver neighbourhood that combines a mid-rise apartment with townhomes in the main floor.