Telus is building rental housing on properties that once powered its internet and phone networks, a move that could lead Canada’s third-largest telecom to spin out a separate real estate company. 

The firm has converted nearly its entire telecommunications network to fibre in recent years, freeing up about 200 properties where it used to power its old copper-cable network. Through an initiative called Telus Living, Telus is using some of that land to build apartments at a time when demand for housing in Canada is surging.

Breaking ground: Telus has two residential buildings under construction in B.C. on decommissioned sites—one in Sechelt on the Sunshine Coast and another in Nanaimo on Vancouver Island. The developments will have 254 units combined and are expected to be completed next year. The company has identified another 16 properties to convert into residential or mixed-use buildings, chief financial officer Doug French told The Logic last month. Those developments could add between 2,500 to 2,800 rental units, he said. 

The REIT play: The real estate portfolio in question could have a gross value between $2 billion and $3 billion, according to comments French made to Bloomberg. (Telus has an enterprise value of about US$45 billion.) French said the company could eventually use the assets to establish a real estate investment trust, which Telus may roll out as a public company. “We have to build an asset of consequence first before we even consider [a REIT],” he said. “That would be probably getting to those 16 properties I referred to.” 

In the meantime, the company would earn money through rental payments. While French said the revenue won’t be a “game changer” for Telus’s balance sheet, it “is monetizing an asset that was going to be redundant,” he said, and “helping us pay for fibre sooner.” 

TD Securities analyst Vince Valentini said he doesn’t expect real estate to become one of Telus’s main businesses. “It’s not their core competency,” he said, but “it’s a way to surface a little bit of incremental value.” While Telus could simply sell the properties to established developers, Valentini said it makes sense to clinch a piece of the hot residential market and potentially sell the finished developments in the future for much more than just the land. 

The spinout scheme: Telus spun out its IT services company as Telus International, which went public on the Toronto Stock Exchange in February 2021. Telus CEO Darren Entwistle has hinted at plans to take its health and agriculture businesses public as well. 

The new corporate landlords: Telus is among a cohort of large Canadian corporations entering the residential market, as the near-countrywide housing crisis and the rise of remote work changes where value lies in Canada’s real estate landscape. 

Apartments are a particularly hot segment. “The rental market supply shortage is massive,” wrote RBC economist Rachel Battaglia in a July report. Rental vacancies fell to an all-time low of 1.5 per cent last year, according to the report, while demand has grown more than three times faster than growth in the rental stock from 2017 to 2023.

Loblaw’s real estate arm Choice Properties has at least eight developments with rental units that are built, proposed or under construction. Sobeys’s Crombie REIT also has a slate of apartments in its portfolio. And furniture retailer Leon’s made news this year with plans to convert land it owns in Toronto to 4,000 housing units, including townhomes, condos and apartments. 

“There’s a lot of momentum around repurposing and converting old buildings to something that better fits where we are right now in terms of work from home, in terms of population growth, in terms of just the needs of the market,” said Adam Jacobs, head of research at Colliers Canada, a real estate services and investment firm. “The challenge for most developers,” he added, “is it’s so hard to purchase land right now and to finance land.” Companies like Telus and Loblaw that already own plenty of real estate are well positioned, he said, to convert it for potentially more lucrative uses.