Condo investment fund set to benefit from Ontario’s proposed tax break

High Art Capital, a $1.3-billion government-backed condominium investment fund, is set to become a top beneficiary of Ontario’s proposed sales tax break for investors who buy units for rental.

The province and federal government announced a plan this week to rebate the harmonized sales tax (HST) for most buyers of new-construction homes, creating a 13-per-cent discount for purchasers and offering a boost to the struggling Toronto-area condo market, where sales have plunged to almost 40-year lows and more than 7,000 recently built condominiums sit empty and unsold.

While the rebate applies to individuals who plan to live in a new-construction home, it will also give corporations such as High Art another financial incentive to make bulk purchases of unsold condos to add them to the rental market. The market for bulk sales for rental investors has been gaining steam over the past year, and industry insiders say there are close to 50 private funds and high-net-worth individuals buying unsold apartments in batches of 40 to 50 at a time.

In a research note titled “Cue the builder bailouts,” Bank of Montreal senior economic Robert Kavcic noted the High Art investment pairs well with the province’s HST rebate plan as “another move to help builders clear out inventory.”

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The Ontario budget proposal is a limited time offer, giving all buyers a year to qualify for the rebate on the 8-per-cent provincial sales tax as long as the newly-built home will be used for rental and construction started prior to March 31, 2026. Ottawa will provide Ontario with the funds to provide a rebate on the federal goods and services tax (GST) of 5 per cent. Combined, that would knock off 13 per cent off the price of an unsold home.

High Art Capital launched on March 10 with an announcement it had obtained a $300-million investment from the province’s Building Ontario Fund to buy unsold condos and had agreements in principle with two established housing developers to help manage the condos, which will be turned into rental units.

High Art is expected to raise an additional $1-billion in debt and equity from a mix of private and institutional investors, giving it $1.3-billion to be used to buy 2,200 condo units. Those units will be turned into rentals, with 1,650 units rented at market rates and 550 units at affordable rates.

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The financing is Building Ontario Fund’s first investment into affordable housing. The $8-billion fund was formed in 2024 to invest with private investors in infrastructure deemed critical for the province such as affordable housing, long-term care homes and transportation. The fund is providing High Art with $294-million in mezzanine debt and $6-million in equity.

Building Ontario Fund chief executive officer Michael Fedchyshyn said High Art will buy the condo units for less than the average sold price of similar units in the Toronto region.

The $1.3-billion works out to about $591,000 per condo unit. That is lower than the average value of a resale condo in the Toronto region of $652,945. It is also cheaper than many completed unsold units. Urbanation Inc. data show that the average asking price for a new condo was $1,196 per square foot in the final quarter of 2025, which amounts to about $717,600 for a 600-square-foot unit.

Unsold inventory is continuing to grow and get more expensive, according to condo market analyst Pauline Lierman with Zonda Urban, who said newly delivered buildings in 2025 had, on average, about 5 per cent of the units unsold, and are closer to 20 per cent unsold in 2026.

Ms. Lierman also said 81 per cent of unsold condos delivered in 2025 were priced between $1,000 and $1,399 per square foot. But for buildings arriving in 2026, only 51 per cent of new units fall in that range, with another 33 per cent priced between $1,400 and $1,799 per square foot.

Urbanation estimates that close to 15,000 units of unsold inventory will swamp the market in the next few years.

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Jeremiah Shamess, executive vice-president and sales representative in the private capital investment group at commercial real estate company Colliers International Group Inc., has been tracking the Toronto area market for unsold inventory for two years and said he’s counted close to 650 condos unloaded in bulk sales, with most of that coming in the past six months.

“Almost all the bulk condo sales that are happening are being sold below the cost of delivering the units. No one’s making money on this, they are just paying back construction loans,” Mr. Shamess said.

Mr. Shamess is currently marketing a bulk sale of 55 unsold condos at a Kitchener, Ont., project called Weber Yards that was purchased out of a receivership process in 2024. In his experience, most bulk buyers and sellers of condos don’t want public exposure of these deals.

“Many developers feel as though this is a kind of shame on the industry, so they are trying to be careful in how they do it,” said Mr. Shamess. “There’s lots of developers who will not sell bulk.”

The managing partners of High Art are relatively unknown in the condo development world. BOF’s Mr. Fedchyshyn said High Art was founded by experienced investors with backgrounds in capital markets, construction, private equity and real estate operations. He said they have spent a considerable amount of time and effort to analyze, investigate and understand the Greater Toronto Area condo market.

“Right now, there are a record number of unsold condo units, and a dramatic slowdown in new construction activity that could worsen the region’s housing shortage in the long term,” Mr. Fedchyshyn said. He said buying unsold condos frees up developer and lender capital, and it encourages new housing starts.

“The reception in the market has been strong and serious,” High Art managing partner Ryan Roebuck said in a statement to The Globe and Mail. “The objective is to move quickly on existing inventory rather than wait years for new purpose-built [rental] supply to come online. We think that is commercially practical and policy-relevant at the same time.”

Mr. Roebuck is a former investment banker and an early investor in Canada’s cannabis market, notably as a founder and director of PharmaCan Capital Inc., which became Cronos Group Inc.

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With financial backing from tobacco giant Altria Group Inc., the company today has a $1.37-billion-dollar market capitalization. In 2020, Mr. Roebuck opened two high-end cannabis retail stores in Toronto called Edition X, but he said they were sold in 2024. He’s also been the investment manager of XDL Capital Group – founded by Canadian tech entrepreneur Dennis Bennie – since 2011.

High Art declined to comment on the interest rate it is paying on the loans from BOF and said any management fees it receives are commercially sensitive and confidential.

High Art plans to sell the rental units to investors after holding them for a minimum of five years, according to BOF, and the loan would be repaid from the proceeds of those sales. BOF also would not disclose the terms of its loan.

The fund said it expects to earn interest on its loan and a small return on its equity investment. “BOF’s equity interest is nominal and as such, return on equity is projected to be nominal,” Mr. Fedchyshyn said.