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Renderings of The Kenten. In April, Sable Gate, the company that owns and operates the existing rental building, Kensington Gate, submitted a development application to transform it into The Kenten, a luxury condo building with units starting at $1-million.Sable Gate Corp.

A high-profile corner in central Calgary is about to get a major refresh. While the growing demand for high-end units at a strategic location represents an opportunity for affluent buyers, it is bad news for existing tenants, who have to move out by July, 2024.

Located at the intersection of Kensington Road and 10th Street NW, Kensington Gate is a mixed-use, multifamily building constructed in 1991. The structure comprises 15 retail spaces and 80 rental units, as well as 10,000 square feet of office space and a 200-stall parkade.

Adrienne McManmon has rented a two-bedroom, two-bathroom penthouse in this building since 2020, after she downsized and moved to Calgary from Ontario. Paying roughly $2,000 a month in rent, Ms. McManmon’s 1,300-square-foot apartment is a rare find in one of Calgary’s most desirable areas.

“I like walking out the door here and just going to see my friends,” she says, emphasizing the importance of being surrounded by the services and amenities she needs to enable her lifestyle. “I support every business in the neighbourhood.”

But her days of enjoying these perks at a moderate cost are numbered.

In April, Sable Gate, the company that owns and operates the building, submitted a development application to transform Kensington Gate into the Kenten, a luxury condo building with units starting at $1-million – an amount well beyond Ms. McManmon’s budget. “When my husband passed, I sold our house and came to Calgary hoping to live on that money.”

A combination of factors influenced Sable Gate’s decision to rejuvenate the asset, says Sam Boguslavsky, the company’s founder and president. One is the rising cost of maintaining Kensington Gate’s aging structure, the other is a nascent demand for high-end apartments in Calgary’s urban core.

“This building is over 30 years old now, and you start seeing failures in all of its systems,” Mr. Boguslavsky says, pointing at deficiencies in the building’s mechanical, electrical and plumbing systems. “Over the last number of years, we’ve tried to protect the tenants from significant rental escalations. But as the building ages, it requires more capital, and interest rates have gone up significantly. Then, you have no alternative but to look at viable options.”

This setback gave Mr. Boguslavsky’s company pause to re-envision the future of “the most interesting corner in Calgary.”

“Calgary has a lot of very interesting things going forward,” Mr. Boguslavsky says, noting that the city’s economic vibrancy and high quality of life are attracting people from all over the world. “So when you have something unique like this project, you want to bring it into the market at a time when it feels optimal.”

In the first half of 2023, Sotheby’s International reported a doubling in sales for condo units in Calgary’s $1-million-plus segment, relative to the first half of 2022. This growth has been driven by increased demand from young professionals and downsizers looking for more space and fewer responsibilities – a market the Kenten seeks to capitalize on.

While maintaining the building’s bottom two storeys, including all retail, parking and office space, the proposal put forward by Davignon Martin, a local architecture firm, includes the reconstruction of the top seven storeys of the structure to accommodate 50 condos and 19 different layouts ranging in size between 1,115 and 4,715 square feet.

“A lot of people are downsizing, but they still want to entertain, they still want to have their kids come over, so they need a footprint,” Mr. Boguslavsky says. “And that’s what the Kenten is doing. It provides a product that’s not readily available in the inner city.”

Kensington is a business area in central Calgary, nestled between two neighbourhoods established in the early 1900s, Hillhurst and Sunnyside. Consequently, the area is walkable and amenity-rich, with ready access to transit and surrounded by attractive green spaces such as the Bow River Pathway, Riley Park and McHugh Bluff.

“It’s a very quaint and special place,” Mr. Boguslavsky says. “It is relatively small geographically; it interacts with the downtown and the Bow [River]. The community itself has a lot of niche operators, whether it’s restaurants and galleries and movie theatres – it’s very unique not only in Western Canada, but locally as well.”

The features that make Kensington attractive to affluent buyers and investors, however, are the same perks renters like Ms. McManmon enjoy. And as the appeal of this area increases, so do the concerns regarding its long-term affordability.

According to the latest data available, between 2016 and 2011, the number of households spending more than $2,000 a month in shelter costs increased by over 60 per cent in Hillhurst and Sunnyside, as the construction of higher-end condo buildings replaced older structures.

For this reason, when the community association receives new development applications, affordability is top of mind. “For communities to thrive, no matter what its size, you need to have a mixture of incomes, education [and] family sizes,” says Becky Poschmann, a community planning co-ordinator at the Hillhurst-Sunnyside Community Association. “We want to make sure that we have that.”

(Community associations play a key role in Calgary’s planning process, as they act as liaisons between neighbours, councillors and city administration.)

The feedback the HSCA provided in response to the Kenten’s development application highlights both the net loss of rental units and of affordable units, Ms. Poschmann says. “Although we respect the introduction of more family-friendly sized condos, when the price point is a little bit higher, it does make it unaffordable for a large portion of the population.”

But the input from community associations are only suggestions.

To prevent the loss of moderately priced rental units (which are the result of decades of filtering), stronger policies are needed, says Steve Pomeroy, a researcher with McMaster University’s Canadian Housing Evidence Collaborative. “As municipalities try to focus on transit-oriented development, they also need to think about what are the logical consequences of that policy, and its potential impacts.”

There are two ways cities can ensure new buildings in transit-oriented areas support affordable housing, he explains. One is by implementing an inclusionary policy that requires developers to include a percentage of affordable units, and the other is a rental replacement bylaw to either create the same number of units at a similar cost or pay cash in lieu to an affordable housing fund.

“I think having that certainty embedded in the system, ahead of development actually happening, you’ve sent the signal to the market that there are clear requirements that these developers are going to have to meet if they’re going to go ahead,” Mr. Pomeroy says.

Although Calgary City Council approved a refreshed housing strategy on Sept. 16, addressing the loss of moderately priced rental units in transit-oriented areas wasn’t part of the actions put forward. Instead, the focus of this document is on increasing the supply of housing across the city.

According to the area’s councillor, Terry Wong, the net loss of rental and affordable units in Kensington will be offset by office-to-residential conversions in the downtown core. And in terms of policy, “the thing that council can do is to add more supply,” he adds. “But also turn over lands city owns to providers at a discounted price.”

Preconstruction sales for the Kenten launched in May, but the project’s development permit is currently under review.

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