Rental Market Will Tighten in 2023, But Investment Will Remain Strong

As more and more Canadians become renters, interest and investment in multi-family rental properties are expected to remain high, despite an uncertain financial environment.

In a new 2023 Canadian Economic Outlook from real estate and property management firm Morguard, the Ontario-based company says that after a decline in spring 2020, demand for purpose-built, multi-family rental properties strengthened during the second half of 2021, extending to the midway point of 2022.

“Investment transaction volume totalled $7.1B for the first half of 2022, as reported by CBRE,” Morguard points out. “The total was in line with the record annual high of $14.1B in 2021.”

Multiple offers on investment properties were commonplace during that time, the report says, with confident investment in major markets amidst the supply of large portfolios falling short of demand.

The returns on those investments also remained healthy, with a national average return of 7.4% for the fiscal year ending June 30, 2022 — an increase of 2.2% compared to the previous year.

Returns on multi-family investments in Victoria were the highest in the nation at nearly 16%, followed by Halifax at nearly 13% — the only two markets in Canada that saw average returns over 10%.

Meanwhile, in the larger markets such as Toronto and Vancouver, average returns were at about 6%. Calgary and Edmonton saw the smallest returns on multi-family investments in the nation, with both hovering around 4%.

The strength of returns was found to be closely correlated to vacancy rates in their respective markets, particularly at the two ends of the spectrum: Calgary and Edmonton had some of the highest vacancy rates while Halifax and Victoria had some of the lowest.

By transaction volume, in the 18 months leading up to June 2022, Montreal accounted for 30% of total national sales, the most of any market in the country. Second was Toronto at 27%, followed by Vancouver at 16%.

In that same timespan, multi-family properties accounted for 22% of all real estate transactions, second only to industrial real estate sales, which accounted for 30%.

Notable transactions include CAPREIT’s $281M purchase of six properties from JOIA’s portfolio in Montreal, Q Residential’s $165M purchase of the 423-unit Golfview Towers in Toronto, and Centurion Apartment REIT’s $81.7M purchase of a 233-unit development in Surrey, British Columbia. Those three transactions were the largest transactions by price and amount of units in their respective markets.

The Rental Market

The increased investment in multi-family properties came as the national average rent price increased significantly. According to Rentals.ca data, the average listed rent in December across all types of rental unit was up 12.4% compared to a year ago, to $2,024.

And there is no evidence that the increases will be slowing down.

“Several factors contributed to the recent rental demand strengthening,” Morguard says. “Canada’s economic recovery boosted employment levels and rental demand. At the same time, young workers in the 15 to 24 age cohort were able to secure employment and rental accommodation.”

Morguard also pointed to increased international migration as adding to the demand for rentals. Many are concerned about whether the nation’s housing supply can keep up with Canada’s immigration targets, and those concerns will likely remain in place for the foreseeable future.

Vancouver-based Toby Chu, Chairman and CEO of CIBT Education Group — the parent company of GEC Living, which specializes in student rental buildings across Metro Vancouver — previously told STOREYS: “International and domestic students arriving in Vancouver to study, they rent. Migrants moving to Vancouver for work, they rent. New immigrants arriving in Canada, they rent before they buy. Interest rate causes stress test issues for new home buyers, thus they rent. Homeowners downsize from owning to renting, they rent. I think the rental crisis will transform a bad dream into a nightmare.”

Source Storeys. Click here to read a full story

Top-10 CRE Transactions Of 2022 In The GTA, GGH

Commercial real estate transaction activity in the Greater Toronto and Greater Golden Horseshoe areas slowed considerably in the second half of 2022 after an initial strong carry-over from 2021.

This year could see a reversal of that trend, with a slower start and business picking up in the third and fourth quarters, according to Altus Group vice-president of data operations Ray Wong. He believes the amount of deals that happened in 2021 and the first part of last year were unusually high and that a level of normalcy will return to the market in 2023.

“I think investment demand is still there,” Wong told RENX. “The challenge is the product.

“I think that, depending on what happens with interest rates and the availability of product, we’re probably going to see about the same amount of activity — or maybe less — compared to a year ago.”

Wong said there’s a challenge in finding price points that will satisfy both sellers and buyers, given rising interest rates, capitalization rates and carrying costs, as well as a more subdued commercial lending environment.

Riding The Real Estate Roller-Coaster: The Uncertainty Of Inflation

What is inflation? What caused it in 2022? Why is it hard to predict? What are the differences between 2022 and 1970s inflation?

Let’s examine the issue, its impact on real estate and how we can prepare for and attempt to mitigate those effects.

What is inflation and why did it skyrocket in 2022?

Inflation is a general increase in the price of goods and services in an economy over time.

We see it as a percentage and the Bank of Canada has the mandate to keep it at two per cent. The reason it skyrocketed in 2022 is that the cost of raw materials, labour and transportation all shot up.

But why did they become more expensive? We need to explain this if we want to have a chance at predicting what comes next.

It’s demand-driven: Too much money.

The COVID-19 fiscal response injected massive amounts of money into many economies. This explains increases in prices as “demand-driven” inflation. This means that governments, people and businesses had more money and spent more money.

But Europe received only half the fiscal stimulus of the U.S. yet still experienced comparable levels of inflation. Why is this?

It’s supply-driven: Too few goods.

I heard economists in early 2022 vigorously debating the topic of inflation. Most thought it was transitory.

Ben Tal of CIBC suggested it was mainly due to supply-chain problems (shipping, China’s zero-COVID policy, the war in Ukraine, etc.). And so, inflation would self-correct.

At the 2022 Canadian Apartment Investment Conference, Tal said 60 per cent of Canada’s inflation arises from supply-chain difficulties. If true, then a prudent approach for central banks would be to wait until these troubles resolve themselves.

But it gets more complicated.

Inflation is part goods and part services. Goods prices can come down (as some already have) but services can stay high (as most are).

Moreover, on the supply side, nothing is simple or predictable. The war in Ukraine is not ending. China relaxed its zero-COVID policy but then saw the ramifications due to a spike in the spread of infections.

We keep looking in the rear-view mirror and trying to find a model to explain what happened. Yet looking forward we keep getting our predictions wrong.

It looks like 2022’s climbing inflation came from both an increase in demand and a decrease in supply. Is it any wonder no one has a good model to make an accurate prediction?

The central bank and rate hikes

The Bank of Canada reversed fiscal stimulus into a tightening policy and rates went up fast.  Rate hikes lowered the demand for goods and the expectation is that the supply side will work itself out . . . eventually.

The demand for services, however, has not changed drastically even after the hikes. People still want to travel and enjoy entertainment like concerts and sporting events.

But after interest rates go up, the economy tends to do the opposite. We expect a recession.

We have seen a downward trend in the number of total businesses in Canada and there have been recent tech company layoffs. Yet a net 104,000 jobs created in December shows a different story – the expected number of new jobs was only 8,000.

It’s complicated!

What will the Bank of Canada do on Jan. 25? Raise rates by 0.25 per cent or higher?

Real estate lessons from the 1970s

Reality is always more interesting and complicated than any model can address. But we’d be well-served to substitute complex models for simple heuristics.

For those of us in real estate, what do we know about the 1970s? How was business done back then?

The OPEC oil embargo of 1973–’74 drove oil prices up by almost three times in just a year. The cost of goods went up and with it, inflation.

Labour was unionized and wages went up to keep pace with the cost of living. Federal price controls did nothing and only when Paul Volcker raised interest rates to 20 per cent in 1980 did inflation go back down to 3.2 per cent by 1983.

Let that sink in . . . a 20 per cent federal rate! Eventually, in the 1990s the federal rates were back down to mid-single digits.

The point here is that looking back the rates we see are a shock to our system because we’ve enjoyed declining interest rates for decades.

Valuations of real estate are directly affected by the cost of borrowing. The cheaper the debt, the more people can pay for real estate and prices tend to go up.

But how did people do business in the ’70s when debt became more expensive? For one, high inflation meant no pre-sales or pre-leasing.

Some used seller financing. Others used more equity.

When inflation is high, those with cash do not want to hold cash as it is losing value.

We adjust how we work to match our current reality. Once the “shock to the system” wears off, we’ll adjust again.

Where does that leave us?

The key to doing well in an inflationary “roller-coaster” and ever-changing real estate market is resilience and preparedness.

CRE businesses must be nimble and ready to take advantage of opportunities when they arise and protect themselves from short-term losses by keeping an eye out for danger signs.

• Take advantage of creative acquisition terms such as vendor debt and delayed closing when purchasing.
• Leverage modestly to ensure liquidity if you are forced to own properties for a longer period of time.
• Invest only in the best locations.
• Research, research, research: zoning, environmental, soils, demographics and more.
• Focus on asset classes most in demand with the least supply (today it seems industrial and multiresidential rental).
• Stay informed on the latest industry trends.

Being ready and able to swiftly adapt to the market unpredictability can open opportunities that many overlook.

Like a roller-coaster ride, what goes down will eventually come back up again

Source Real Estate News EXchange. Click here to read a full story

Allied Puts Toronto Data Centre Portfolio Up For Sale

Allied Properties REIT has decided to offer its downtown Toronto urban data centre (UDC) portfolio for sale following a review of options for the three properties.

In an announcement Monday morning, Allied reports “selling the portfolio in its entirety now is optimal financially and operationally.” It has retained Scotiabank and CBRE to market the assets and facilitate any transaction.

“Our principal motivation here is two-fold,” said Michael Emory, Allied’s president and CEO, in the announcement. “First, we want to reaffirm our mission and pursue it over the next few years with low-cost capital.

“Second, we want to supercharge our balance sheet and reduce our dependence on the capital markets going forward.”

Proceeds from a sale would be utilized primarily for debt reduction and to finance its development activity, the release states. The REIT could also use some of the proceeds to repurchase units under its NCIB.

Canada’s Office Market Fights On, Industrial Stays Strong

Suburban office vacancy rates were considerably lower than downtown in many markets across Canada, according to Colliers Canada’s 2022 Q4 National Market Snapshot report, which updates trends and statistics in the office and industrial sectors.

The national downtown office vacancy rate was 14 per cent and trending upward, while the suburban rate was 12 per cent and trending downward from Q3, according to the report.

“Three or four years ago, nobody was talking about the suburbs,” Colliers senior director of research Adam Jacobs told RENX. “Every tenant wanted to be downtown, the rents were going up faster downtown and it had one per cent vacancy.

“Now we’re starting to see a lot more evening out, where everything that used to be an advantage of downtown has turned a little bit more to a liability. Like, it’s connected to transit, but nobody wants to ride transit anymore.”

The average asking net rent was $22.34 per square foot for downtown office space and $17.51 per square foot for space in the suburbs.

Best and worst office markets

Of the dozen cities covered in the report, Vancouver had the lowest office vacancy rate at 5.9 per cent, with sublets accounting for 29.6 per cent of that. The average net asking rent in Vancouver was $34.25 per square foot.

Calgary had the highest office vacancy rate at 27.3 per cent, with sublets accounting for 16.9 per cent of that. The average net asking rent in the city was $14.31 per square foot.

Halifax’s office market was the only one in Canada with an office vacancy rate that decreased in every quarter in 2022. Its overall year-end rate was 13.9 per cent.

In general, office markets less dependent on large occupiers and with smaller cores usually performed better than those in larger population centres with higher dependency on public transit. There’s also less new office development happening in these smaller markets, and therefore fewer concerns about absorption.

Toronto’s return-to-office levels continue to lag, with occupancy levels reaching just 36 per cent in Q4. Toronto’s combined downtown and midtown office vacancy rate was nine per cent while the suburban vacancy rate was 11.4 per cent.

Jacobs said there was a flight to quality among tenants who wanted to be in AAA downtown buildings, and were willing to pay higher rents for those properties, but only certain employers can afford that and the trend has slowed.

Return-to-office momentum still slow

Return-to-office momentum continued to be slow throughout the quarter, with many companies implementing full-time hybrid work models. The federal government — one of the last remaining large occupiers working fully remotely — announced a return-to-the-workplace model of three days per week on site starting this year.

“There’s some momentum now of the banks, the insurance companies, the government and the real mega-occupiers starting to move towards — if not 100 per cent back to the office — at least 60 per cent back to the office,” said Jacobs. “I think that’s maybe less than we expected, but still it’s in the right direction, as far as I see it.”

The office job market remains hot and as long as employees continue to have strong leverage in choosing where and how to work, and who to work for, it seems that pre-pandemic office attendance levels won’t be matched.

Subletting was a major issue through 2021 but had been subsiding during 2022. However, an increasing amount of sublet office space came to market both downtown and in the suburbs in Q4 as companies became more accustomed to hybrid and remote-work models. Subletting was especially pronounced in Vancouver.

Adams expects the office vacancy rate to continue to increase in most cities and nationally, as well as for the rapidly rising interest rates of last year to continue to negatively impact the number of property transactions this year.

Industrial leasing remains strong

Industrial leasing remained strong across the country, with high tenant demand and land-constrained markets fuelling continually increasing asking rents.

Colliers tracked 12 markets across Canada and each had industrial asking net rents above $10 per square foot at year-end, with the average being $12.77. The vacancy rate in those cities averaged 0.9 per cent while the availability rate was 2.2 per cent.

The highest industrial vacancy rate was 4.1 per cent in Edmonton – its lowest year-end rate since 2015 – where the average net asking rent was $10.33 per square foot.

The lowest vacancy rate was 0.1 per cent in Victoria, where the average net asking rent was $18.05 per square foot.

“We’re starting to see people say ‘I’ll just take industrial space in Calgary and truck everything 1,000 miles from the Port of Vancouver,’ ” Adams said. “‘It’s so much cheaper in Calgary that, even though it’s expensive to truck things over the Rocky Mountains, I’m still coming out ahead paying $10 per square foot in Calgary instead of $30 in Vancouver.’”

Calgary’s 11.61 million square feet of industrial space net absorption in 2022 was the highest in the country and pre-leasing activity was high.

Toronto’s industrial vacancy rate was just 0.3 per cent. The market had experienced 20- to 30-per cent year-over-year rent increases since 2019 and, although momentum slowed a bit in the last quarter, the annual growth rate was still 35 per cent.

Demand remains for more industrial space

While e-commerce growth has levelled off, fulfillment centres continue to drive industrial leasing demand. Inventory under construction remains very high but still just represents a small fragment of the overall inventory.

“We could finish every industrial development in the country tomorrow and we’d still have a strong market,” said Adams. “As much as is being built, the markets are so tight.

“We’re just so far from a balanced market in terms of vacancy and rents. I just think it’s going to keep going until something really gives. It’s possible the prices will get too high for some tenants, but we haven’t seen that yet.”

Adams said a lot of major industrial leasing is being driven by large, well-financed tenants such as Amazon, Costco, Walmart and Sobeys that can absorb higher rent costs because they’re a relatively small part of their overall costs.

Industrial transaction volume, however, seems to be slowing down — again influenced by the higher interest rates that are expected to remain through most of the year.

Source Real Estate News EXchange. Click here to read a full story

Sandpiper Group, Artis REIT And Embattled First Capital Real Estate Investment Trust (FCR) Appear Headed For A Court Hearing To Determine The Date Of A Shareholder Meeting To Decide FCR’s Future Direction

UPDATED: Sandpiper Group, Artis REIT and embattled First Capital Real Estate Investment Trust (FCR) appear headed for a court hearing to determine the date of a shareholder meeting to decide FCR’s future direction.

A release Monday morning issued by Sandpiper and Artis says the two entities have asked the Ontario Superior Court’s commercial division to compel First Capital to hold the special meeting on March 1, “or as soon as practicable thereafter”.

In response to publicly stated opposition to its management strategy from Sandpiper, Artis, First Capital founder Dori Segal and others, the REIT’s management had scheduled a special meeting on May 16 in conjunction with its annual meeting.

Monday’s release claims that is too long to wait, because the activist shareholders fear management will continue with the REIT’s current business plan, including a publicly stated intention to divest some of the assets it currently holds.

FCR management set May 16 date

First Capital REIT’s management, in announcing the May 16 date, said the timing would allow it to accommodate the annual meeting, normally held in June, so shareholders would not have to take part in two meetings in a short time. It would also provide management time to “consider the implications” of an alternative strategy suggested by the critics in December.

In a response to this latest legal manoeuvre, First Capital stands firmly behind its plan to hold the meeting on May 16 and to move forward with what it calls the REIT’s Enhanced Capital Allocation and Portfolio Optimization Plan.

The plan, which includes an intention to shed up to $1 billion in assets, is one of the key factors which led to the dispute.

First Capital management also takes aim at Sandpiper founder and CEO Samir Manji, who is also the president, CEO and a board member of Artis after his firm led an activist investor campaign which ousted its previous leadership about two years ago.

“FCR will continue to engage constructively with unitholders in a manner that is in the best interests of all unitholders, and not just Samir Manji,” a release issued late Monday states. “First Capital also notes that a significant number of unitholders have expressed their support for the Portfolio Optimization Plan, with numerous sell-side analysts also recognizing its merits in their published research.”

It then states FCR management plans to continue moving forward with the plan.

The critics called for the special meeting in an effort to remove several current board members – chair Bernie McDonell, Andrea Stephen, Annalisa King and Leonard Abramsky – and replace them with trustees of their choosing.

The critics have also called for the resignation or removal of CEO Adam Paul.

The candidates proposed for the FCR board are Sandpiper founder and CEO Samir Manji; K. Adams and Associates Ltd., founder and president Kerry Adams; lawyer and Definity Financial director Elizabeth DelBianco; and Blake, Cassels & Graydon LLP partner Jacqueline Moss.

King High Line a key issue in dispute

Chief among the activists’ concerns are what they call the continued underperformance of the REIT compared to its peers and the markets, and in particular they have criticized the decision to divest a portion of First Capital’s 100 King West high-rise property. That move is part of the optimization plan.

In mid-2022, FCR announced an agreement to divest its interest in the residential portion of the three-tower property, known as King High Line, while retaining the retail and commercial segments. Segal claims the property is a “generational core asset” and has essentially been liquidated at a below-replacement cost for $149 million.

The deal was slated to close in Q4 of 2022.

Sandpiper and its entities have invested about $300 million in First Capital REIT, which Manji said in the release is “almost 30 times more than the cumulative investment held by all nine of the incumbent trustees.” It represents about nine per cent of First Capital units.

Sandpiper has retained Morrow Sodali (Canada) Ltd. as its strategic shareholder services advisor. The Special Situations Group at Norton Rose Fulbright Canada LLP is acting as legal counsel.

FCR has engaged Kingsdale Advisors as its “strategic shareholder advisor”. Gagnier Communications is its communications advisor; Stikeman Elliott LLP is acting as legal counsel to the board; and RBC Capital Markets is its financial advisor.

Source Real Estate News EXchange. Click here to read a full story

HOPA Expands Industrial Inventory At Thorold Port Lands

The Hamilton-Oshawa Port Authority (HOPA) and Bioveld Canada hope to capitalize on the region’s tight industrial real estate leasing market by adding up to 500,000 square feet at the sprawling Thorold Multimodal Hub, Bioveld Complex.

“We have ways of transloading, we have warehouse storage, we have ship repair and maintenance, and on the original site we have a lot of bulk handling,” said Ian Hamilton, CEO of the Hamilton-Oshawa Port Authority.

The Thorold Multimodal Hub, Bioveld Complex, sits alongside the Welland Canal and is zoned for heavy industrial uses. It currently accommodates units ranging from 5,000 to 100,000 square feet, includes over 100 acres of exterior space and has an on-site water filtration plant.

The former automotive plant sits on 170 acres and offers multimodal services, plus greenfield lands for redevelopment and new construction. Its facilities have access to CN’s rail network via a local railway operator.

HOPA partnered with Bioveld Canada subsidiary BMI Group in its latest acquisition.

Q4 2022 Canadian CRE Investment Trends

Q4 2022: Rising interest rates prompt continued caution and scrutiny in investor sentiment The latest results from Altus Group’s Canadian Investment Trends Survey (ITS) for the four benchmark asset classes, show that the Overall Capitalization Rates (OCR) rose to 5.36% in Q4 2022. This compares to the previous quarter which was recorded at 5.17% and 4.95% for the fourth quarter of 2021. According to Statistics Canada, the labour market remained unchanged for the most part in November after adding 108,000 jobs in October. The unemployment rate declined slightly from October, sitting at 5.1% as of November 2022. Gains in employment were noted in the finance, insurance, real estate, rental and leasing, manufacturing, as well as the information, culture, and recreation industries. While these industries saw gains, losses in employment were noted in several industries including the construction, wholesale and retail trade sectors. Figure 1

The Bank of Canada bond rate as of December 2022 was recorded at 3.29%, increasing by over 180 bps since Q4 2021. As the central bank continues to focus on inflationary control measures, the average OCR rates were seen increasing the most in the single-tenant industrial asset class when looking quarter-over-quarter. This may be attributed to the potentially falling demand for industrial assets as demand for product housed by these assets may be impacted by the growing unaffordability and the rising cost of borrowing. However, there is also sentiment that industrial assets have done very well for some time, even during the pandemic, and a slowdown in activity and rise in cap rates is inevitable.

According to Altus Group’s Investment Trends Survey for the fourth quarter of 2022, the three most investor preferred markets across all asset classes were Vancouver, Toronto, and Ottawa (see figure 2) respectively, akin to the previous quarter. Impacted by the anticipation of continually rising interest rates, the location barometer reported a downturn in the momentum ratio (percentage of investors looking to buy/percentage of investors looking to sell) across most markets.

With Q4 concluding, the impact of the rising rates has resulted in a downturn of momentum ratios across all markets except for Edmonton and Calgary, where momentum ratios rose, and Ottawa, which stayed the same as the previous quarter.

Despite a downturn in their momentum ratios, the top four markets, Toronto, Vancouver, Ottawa, and Montreal, have maintained a positive momentum ratio, indicating that investors would prefer to continue buying versus selling in these areas.

Figure 2

$2.7B Concert Fund Gets New Name, Diversifies Into Multires

Concert Properties’ management will diversify the CREC Commercial Fund LP by adding multiresidential rental properties to its mix of industrial and office assets, and has renamed it Concert Income Properties LP to reflect the shift.

The fund was created in 2016 with a billion-dollar portfolio. It has since grown to 77 assets with nearly 12 million square feet of leasable area valued at more than $2.7 billion and leased to more than 500 commercial tenants.

Seventy per cent of the value is comprised of industrial properties with the remainder being office.

Forty-seven per cent of the properties owned by Concert Income Properties are in Ontario, 37 per cent are in British Columbia, 12 per cent are in Alberta and four per cent are in Quebec.

The industrial and office properties have a combined 97 per cent occupancy, but the fund’s pension plan and institutional investors have been interested in broadening the mandate to include high-rise, purpose-built rental apartments.

“In the long run, we think that makes sense,” Concert Properties chief investment officer and Concert Income Properties managing director Andrew Tong told RENX.

Fund is affiliated with Concert Properties

Concert Income Properties is affiliated with Vancouver-headquartered Concert Properties, a diversified Canadian real estate corporation launched in 1989 and wholly owned by union and management pension plans representing more than 200,000 Canadians.

Concert Properties’ overall portfolio includes condominiums, seniors’ active aging communities, industrial, commercial and residential rental properties, and public infrastructure projects across Canada.

The creation of Concert Income Properties was sponsored by Concert Real Estate Corporation and Concert Properties retains a majority interest in the fund. It’s supported by Canadian pension funds and institutional investors and managed by Concert Realty Services Ltd., a wholly owned subsidiary of Concert Properties.

“Our multifamily rental program will come under the wing of the fund,” said Tong. “The idea is this will be the long-term ownership platform for our multifamily rental moving forward.”

No acquisitions to announce yet

It’s very early days for the diversification strategy and no multifamily acquisitions have been announced, but Tong anticipates at least one apartment building to be purchased within the next 18 months.

Acquisitions could also include mixed-use buildings, combining purpose-built rental housing with office or retail space, according to Tong.

Apartments have remained resilient through the pandemic in the fund’s multifamily target markets of Vancouver and Toronto and Tong said it will be open to acquiring both market-priced and affordable housing rental apartments.

“We can do development, but also we have the other entity, Concert Real Estate Corporation, that could build a master-planned community where there may be a condo and a multifamily rental building,” said Tong. “It’s possible that the fund can be involved with development and we can potentially have the opportunity to purchase the completed rental building, once it’s leased up, from the development side of the company.”

It hasn’t yet been determined what ratio multifamily will eventually comprise in the overall Concert Income Properties portfolio. Tong said those decisions will depend on such factors as available locations, returns and risk profiles.

Open-ended fund with cash to deploy

Concert Income Properties is open-ended and has 30 per cent leverage, which could be increased if required.

“We have a fair amount of cash reserves to deploy and can take advantage of opportunities, which we think is advantageous right now in the market,” said Tong. “Because of our current cash-flow position, we probably need to deploy more of that before we go out for more capital raising.”

Concert Income Properties declared a distribution for investors on Sept. 30 at a time when other real estate funds were discussing halting the payments.

There are no plans for any portfolio dispositions at this point. Tong said the Concert Income Properties is in growth mode and well-positioned to make deals in all three of its preferred asset classes.

He noted the company has almost always grown during downturns in the economy during the 28 years he’s been with Concert Properties, as he said vendors want to do business with companies they can trust.

“We’re prepared to buy something at a certain price. It may not be the highest price, but it’s going to be a very fair price and we’re going to treat somebody fairly,” he said.

“That has worked well in a down market where we’re seeing fewer players at the table and that’s why right now we’re very active on multiple potential opportunities.”

The fund acquired a 90 per cent stake in a 519,000-square-foot Amazon distribution centre in Whitby, Ont. from Broccolini last month. Amazon has signed a 15-year lease at the newly built facility.

Source Real Estate News EXchange. Click here to read a full story

Supreme Court Limits Governments’ Ability To “Constructively Take” Land

In a long-awaited decision, the Supreme Court of Canada has ruled on de facto expropriation of land.

In Annapolis Group Inc. v Halifax Regional Municipality, the Supreme Court provided guidance for situations in which the government essentially takes away land rights from property owners without formally expropriating the lands.

Although there is still a ways to go before the law in this area is settled, this decision is definitely a positive decision for developers’ and landowners’ rights in general.

Background and facts
Annapolis Group Inc. is a Halifax-based land developer which has been accumulating vacant land since the 1950s.

It had eventually amassed nearly 1,000 acres with the intention of developing it.

The Halifax Regional Municipality set out a new planning strategy in 2006 which identified part of the lands for possible use for a park in the future and denoted them as “Urban Settlement” and “Urban Reserve”, meaning the lands may be developed by the municipality within, or after a 25-year period.

Also, as part of the strategy, Annapolis was prohibited from developing the lands before the municipality adopted a “secondary planning process”.

Annapolis began seeking approvals to start developing the lands in 2007. In response, the municipality passed a resolution stating that it refused to initiate the secondary planning process “at that time”.

In the years that followed, the municipality encouraged the public to use the lands for outdoor activities such as hiking and camping.

Ten years later, Annapolis commenced legal proceedings against the municipality, seeking over $120 million in damages.

Annapolis alleged the municipality had effectively turned parts of the lands into a public park by encouraging members of the public to use them for outdoor purposes and therefore claimed damages based on de facto expropriation, unjust enrichment and abuse of/misfeasance in public office.

The municipality brought a summary judgment motion to dismiss Annapolis’ de facto expropriation claim, which was initially dismissed.

The Nova Scotia Court of Appeal later sided with the municipality and summarily dismissed Annapolis’ claim without allowing it to go to trial.

The court ruled the municipality did not commit de facto expropriation of the lands because no land was actually taken from Annapolis and the municipality therefore did not acquire a “beneficial interest” in the Lands.

It was also ruled that encouraging the public to use the lands and failing to adopt a development plan did not mean the lands were expropriated on a de facto basis.

The new test for “constructive taking” of land
The Supreme Court of Canada, however, saw things differently. The Supreme Court referred to de facto expropriation as “constructive taking”, as it applies to situations where a land owner alleges the state takes its land without formally expropriating it.

In other words, the state does not exercise its statutory authority to acquire an interest in the land and compensate the owner, but it does take steps to claim the land by other means.

In its decision, the Supreme Court held that, in order for “constructive taking” to occur, it is necessary to look at the intention of the government in exercising its regulatory authority and the owner’s loss of the use of the property. As such, the courts must look at what advantage the state obtained by the acquisition of the land and its effect on the property owner.

Therefore, in order for an “acquisition” by the government to occur, the property does not actually have to be acquired. If the government takes steps to acquire a beneficial interest in the property and the owner loses its reasonable use of the land as a result, the land can be deemed to be expropriated on a de facto basis (or “constructively taken”).

In applying the test in the Annapolis case, the Supreme Court held that there were more issues to unravel and therefore the Court of Appeal decision was overturned and the matter is to be determined by trial.

What this means
Although the law in this area is not yet settled, the Annapolis decision is being hailed as great news for developers and property rights holders in general.

It should be kept in mind the test for constructive taking is still onerous.

The court emphasized in this case that in order for it to occur, private property rights must be “virtually abolished”. And even where that is deemed to have occurred, it is not yet clear what it means for the government to gain a beneficial interest in the land.

In the Annapolis case, the court accepted that the government essentially using the land as a public park can constitute such an interest. Therefore if the public benefits from the land, that could be deemed to be a benefit to the state as well for the purposes of the test.

It will be interesting to see what will become of this decision going forward.

But for now developers should take note, as this case is definitely a step in the right direction.

To be clear, governments still have the power to expropriate land if the proper channels are followed. However, the Annapolis case shows courts may not have tolerance for the state using back-door means to deprive property owners of the benefits of their land.

Source Renx.ca. Click here to read a full story