Canadian REITs Look to Keep Good Times Rolling
http://www.reit.com Canada’s commercial real estate markets held up well compared to other markets around the world during the financial crisis, and Michael Brooks, CEO of the Real Property Association of Canada (RealPAC), said that strong performance has continued.
“Our banks didn’t have any financial meltdown during the crisis, and we are still in fantastic shape from a bank-lending point of view,” Brooks said. “Commercial debt is plentiful and available.”
Brooks spoke with REIT.com at the European Public Real Estate Association’s (EPRA) annual conference in London earlier this month.
From a property value standpoint, Brooks said prime office and retail assets are in an “auction” environment with 10 to 15 bidders for assets. He added that in some cases cap rates are lower than they were even back in 2007 because you still have positive leverage with your cost of borrowing.
“What we are seeing a little more of is the REITs in Canada being much more dominant buyers,” Brooks said. “Back in the mid-2000s, REITs were often outbid by the pension funds. Now the pension funds are going global.”
Funds are not the only organizations looking to expand globally. Some Canadian REITs, including RioCan, have begun to explore outside of their own borders.
“I think this trend is in its early days, but I do expect to see more of it,” Brooks said. “There are only three or four doing it now. The rest seem to be finding product within Canada that meets their investment criteria.”
Looking ahead to 2012, Brooks said the biggest challenge will be continuing the momentum built in recent years. He said the underlying fundamentals of the assets and the strong yields have continued to make REITs a winner in Canada.
“We have some legislation in the works that will loosen the rules a little bit for REITs. It is a series of technical fixes that will give Canadian REITs a little more latitude in getting creative with their acquisition pipelines,” Brooks said.
By Matt Bechard