Signs of market improvement and increased engagement from residential developers heading into the summer building season; UIG well positioned to capitalize as low-rise residential market improves
TORONTO, ON, July 11, 2024 – Urban Infrastructure Group Inc. (TSXV: UIG), a leading stage-one concrete and drainage infrastructure construction group, specializing in large scale new residential housing developments, is pleased to provide an update on its recent corporate activities and operational initiatives.
“The Canadian housing market, and more specifically the Ontario residential new housing market continues to experience a slowdown, tied to developers delaying new builds in anticipation of further interest rate cuts. However, signs of market improvement and cautious optimism from residential developers going into the summer building season are visible. Our team at UIG is busy on multiple new project starts, while focusing on expanding our sales efforts with the hiring of two new commissioned sales representatives. In an effort to capture more market share and new contract wins, UIG is now partnering with a select number of complementary stage-one construction groups and jointly bidding on numerous larger projects under the UIG banner. Additionally, UIG’s M&A efforts remain a high priority, with discussions continuing with multiple acquisition candidates,” stated Ungad Chadda, CEO of UIG. “The market still faces challenges, but UIG is well positioned to capitalize as the market improves,” added Chadda.
Resumption of three contracts – Totaling 298 units in addition to a Newly Awarded Contract for 200 units:
Coming off scheduling delays due to market weakness and a fiscal second quarter which is a seasonally slow period due to the winter months, the Company announces that it has begun three new stage-one construction projects across the Greater Toronto Area (GTA) totalling approximately 298 units, with crews deployed on site in Mississauga, Markham and Milton. Additionally, on July 9, 2024, UIG was awarded a new contract for 200 units at the Joshua Creek development site in Oakville, Ontario. When added to the already completed in-year unit count of just over 300, UIG is confident that its crews will be near capacity for the balance of the year. UIG’s pipeline of projects continues to grow and is currently comprised of over 1,550 units for which bid applications have been submitted.
New partnerships and a bolstered salesforce:
UIG announces it is partnering with a small group of trusted stage-one construction service providers, thereby offering a broader complement of infrastructure services including excavation, low-rise forming (basement walls), concrete and drain and backfill. UIG has submitted detailed pricing on two projects where, as per its stated strategy, it is offering a one-stop-shop for developers. The reception to the turnkey, ‘up-to-the-foundation-wall’ offering has been unanimously well received and we are optimistic that UIG will soon secure these broader and larger mandates.
Additionally, UIG announces it has added two senior construction and real estate professionals to its strategic sales team. The objective is to continually be generating high quality developer leads to ensure that its existing, deep industry relationships are further being expanded and broadened. The team will also play a key role in developing UIG’s brand awareness within the marketplace.
Consolidation and expansion via M&A:
UIG has made it clear that M&A is an important growth driver for the business, and is currently very active in M&A discussions across the stage-one construction industry. Management continues to leverage its relationships with select stage-one niche construction businesses whose capabilities strategically complement UIG’s well-established concrete and drain business (such as low rise forming, electrical utilities, concrete supply). Many of these acquisition candidates are established, well run family-owned or owner-managed businesses lacking succession plans or liquidity options which make them potential new contributing members for UIG’s platform going forward.
Ontario Residential Construction Market Data – Working through the headwinds:
Ontario Concrete and Drain Association (OCDCA) reports calendar Q1 2024 activity:
As reflected in UIG’s previously disclosed results for the period ended March 31st, 2024, the OCDCA reports that low-rise activity was down 10.7% as compared to the same quarter last year. Further, the OCDCA report anticipates that the months of April, May, and June of 2024 will continue to fall short of 2023 levels for the same period.
Building Industry and Land Development Association (BILD) reports GTA new home sales (June 26, 2024):
Greater Toronto Area (GTA) new home sales remained slow in May, with monthly sales hitting lows not seen since the pandemic-impacted May 2020. Year-to-date sales from Jan-May 2024 are also sitting at a record-breaking low at 39 per cent below Jan-May 2009, the Building Industry and Land Development Association (BILD) announced. There were 936 new home sales in May, which was down 71 per cent from May 2023 and 71 per cent below the 10-year average, according to Altus Group, BILD’s official source for new home market intelligence. “New home sales across the GTA continued to languish in May under the weight of elevated prices and high interest rates,” said Edward Jegg, Research Manager with Altus Group. “Despite the rate drop earlier this month, additional relief will be required to coax prospective buyers back into the market.”
Bank of Canada interest rate cut:
The Bank of Canada finally lowered its overnight rate, a characteristically cautious reduction — 5% to 4.75% — but as the Bank’s first rate cut in over four years, it brings with it a certain sense of cloud-parting. With continued evidence of underlying inflation easing the BoC agreed that monetary policy no longer needs to be as restrictive and reduced the policy interest rate by 25 basis points. As interest rates begin to come off, and Canada enters into a credit loosening cycle, UIG management expects to see a pull forward of projects in its pipeline.
Long-term Ontario residential construction outlook:
While currently in a stage of cautious optimism, the Ontario construction industry promises to be strong in the coming years, with economic, demographic and macroeconomic tailwinds aligning to support UIG’s ambitious growth strategy. Signs of a cooling in inflation will enable the Bank of Canada to further ease monetary policy and lower interest rates, thereby jumpstarting Canadian residential developers to resume construction in new building projects.
About Urban Infrastructure Group
Urban Infrastructure Group Inc. (TSXV: UIG) is a leading concrete and drainage infrastructure construction group engaged in the earliest stage of the construction process – known as Stage One. Urban Infrastructure Group specializes in large-scale, master-planned residential communities, with partners and customers behind some of Ontario’s most significant residential development projects.
Connect with UIG: https://urbaninfrastructuregroup.com/
Contact:
Bill Mitoulas
Investor Relations
T: +1.416.479.9547
E: [email protected]
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