Earlier this month, Vancouver-based Global Education Communities Corp (GECC) announced a partnership with local developers that would help developers get financially challenging rental projects across the finish line and quickly add an influx of much-needed student housing to the market.

The new program is called the Master Lease Partnership Program (MLPP) and will see GEC lease residential space from other local developers who may be feeling some regret over choosing the rental route.

"GECC is discussing with several developers to master-lease over 250,000 GBSF of residential rental facilities for five to 10 years, adding approximately 800 beds to GECC's growing portfolio of 1,500 beds in Metro Vancouver," the company said in a press release. "The facilities under review by GECC will be brand-new with a possession date of less than six months. These developers started developing and constructing rental buildings several years ago and are no longer interested in operating rental properties in today’s environment, thus creating an opportunity for the MLPP."

In a bit of fortuitous timing, the MLPP was announced less than two weeks before the Government of Canada decided to eliminate the GST on rental projects, so it's unclear if those developers remain uninterested in operating rental properties, but the partnership with GECC is likely still beneficial for them.

GECC — formerly known as CIBT Education Group before rebranding as GECC earlier this year — owns Sprott Shaw College, Sprott Shaw Language College, Vancouver International College, as well as the CIBT School of Business & Technology in China, and also develops off-campus student housing in Metro Vancouver under GEC Living.

In an interview with STOREYS, GECC Chairman and CEO Toby Chu said the benefits for the developers include guaranteed rental income that's supported by GEC's existing student housing infrastructure and schools, financial savings because they do not need to pay realtors commissions or market the property, and no property management concerns as that is taken care of by GEC Living.

GEC Living benefits from being able to quickly add more student housing to their portfolio, better leverage their existing infrastructure — management team, student rental platform, operations — as a result of economies of scale, and avoid the rezoning and construction process, all without having to invest a substantial amount of capital.

Chu says that the building at 1311 Howe Street in Downtown Vancouver, known as GEC Viva, was essentially under this model. The lease was for five years and GEC recently signed to lease the building for five more years, with another five-year option available after that.

The Master Lease Partnership Program is, then, an expansion of this model with some improvements.

"We enhanced our MLPP model after the Viva contract with a profit-sharing strategy so that the developer will get a higher yield, while GEC gets an exit bonus when the developer decides to sell the building in future years," says Chu.

The first new building added via the MLPP will be GEC Kingsway located at 4589 Gladstone Street in East Vancouver, about a 15-minute walk from the Expo Line SkyTrain's Nanaimo Station. Chu declined to name the developer of the building, named The Gladstone, but it appears to have been developed in part by Dava Developments while being constructed by Kerkhoff.

Chu says construction on GEC Kingsway is expected to be completed in February 2024 and will add approximately 260 beds to its current portfolio of 1,500 — a number Chu says he hopes reaches 2,500 by late 2024.

"The new GEC Kingsway property will follow GEC Living’s operating model with fully furnished rooms, weekly housekeeping, security surveillance cameras and digital locks throughout the public areas, and amenities such as student lounges and a fitness centre," the company said. Chu says they've already received offers from several GEC partner schools to take up all of the available beds.

Developers of rental buildings in recent years have been discouraged by rent control policies that are disproportionate to rising construction, inflation, and interest rates, Chu added, which has resulted in many developers disposing of their rental inventory, sometimes even at a discount. At the same time, potential buyers are also scarce due to those same factors, and Chu says their MLPP "offers developers a solution which allows them to defer their need to sell and instead collect reasonable rents."

That aforementioned "exit bonus" that GEC gets once the developer/owner decides to sell the building later on also serves as another win for GEC.

Asked whether it was other local developers who reached out to GEC about partnering, or the reverse, Chu says it was a mix of both. They were approached by many developers looking to work together, but the model also comes from their experiences with exit profits, as well as simple math and cost analysis.

As to whether or not the MLPP will result in less in-house development via GEC Living, Chu says finding the "perfect balance" is key and it'll likely be dictated by interest rates — developing and owning when rates are low and leveraging the capital of others when rates are high.

All in all, the partnership program appears to be a win-win for both GEC and the developers they partner with, while also contributing to the overall mission of bringing more rental housing into the market.