The Nine on 5th was somewhat of a departure from the typical Sparrow Capital model. We completed the purchase in December 2013. The property is located near downtown Calgary and comprises a large commercial unit on the ground floor and nine luxury condo units on the top 3 stories.
The project was built in 2010 by a local charitable foundation as an adjunct to their adjacent affordable housing development. They had intended to sell the condos but the units remained vacant since their construction due to complications in finalizing the condominium documents.
We worked with our legal team to solve this problem by designing a unique set of condo bylaws. Under the new bylaws, the authority and responsibilities of the condo board were effectively divided between two committees, so that our building could be governed independently from the larger neighbouring building.
Under the standard Sparrow strategy, we would have rented out the residential units and held the entire building for the long term. This was a valid option since the property would have cashflowed nicely at our purchase price. In our analysis, however, high-end condos are not well optimized for cashflow so we decided to resell the condos directly.
The condo sales were completed in January 2015, which left us with the commercial space and no mortgage. We then refinanced the property and were able to return all of the partners’ invested capital plus a 40% return within 18 months of the start the project.
The ground floor is occupied by Urban Athlete, a beautiful boutique training facility serving the Hillhurst and Kensington neighbourhoods.