Industrial Sector Helps Drive Total Returns of 8.5% for Canadian Institutions

Closely Watched Property Index Shows Canadian Real Estate Results

Canadian real estate investments had a total return of 8.48% over the past 12 months, led by the industrial sector.

The MSCI-RealPAC annual Canada property index, which measures existing investments of 47 institutional portfolios that make up about 40% of the real estate market in Canada, found the returns for the 12-month period that ended in June was split relatively evenly between capital growth and income.

“It is an important point of the year from the perspective of the data because we find a lot of of those 47 funds have revalued most if not all of their assets at this point,” Simon Fairchild, executive director of U.S. data analytics firm MSCI, said during an online presentation. “It’s a good indicator of what might be happening in the marketplace.”

Returns over the past year matched well with the index’s long-term historical average of 8.5% which goes back almost 40 years, Fairchild said. Returns plummeted during 2020 and 2021 below that average.

MSCI produces the closely watched quarterly index based on about $175 billion in assets with the Real Property Association of Canada, known as RealPAC. Fairchild said there was minimal capital improvement of just 0.2% in the second quarter, while income returned 1.1% in the period.

“There was a slowdown in the market over the last quarter, and that’s what we were expecting given what we know about the wider market, inflation risks, the war in Ukraine and supply chain challenges,” said Fairchild.

On a global basis, the United States led the world in the second quarter with total returns of 23.1% over the 12-month period. Canada was middle of the pack globally.

“The story of returns holding firm at least through the first half of the year is probably the story in most markets with the exception of the U.S. and the U.K.,” said Fairchild. “There was a strong acceleration through the tail end of 2021 and 2022, but recent numbers” in the U.S. and the U.K. had slowdowns.

The industrial sector bolstered the Canadian numbers with total returns of 32.7% over the past 12 months. Residential returns were 7.4%, retail had 3.1% and office had 1.4%.

“Industrial returns seem to be accelerating. It is the highest of any sector in any year,” said Fairchild. “But retail and office are the pillars of investing for pension funds for the last two decades.”

Toronto had the top total return of 10.9% out of the eight Canadian cities surveyed, followed by Halifax at 9.2% and Vancouver at 8.8%. Calgary was last at a 1.5% total return.

“Values are still falling [in Calgary], but we are at least seeing positive returns there,” said Fairchild.

With interest rates going up, people are focused on whether cap rates should follow, according to Jim Costello, chief economist with MSCI Real Estate, who was part of the presentation.

“Are the spreads too narrow? That’s been a major point of discussion with everybody,” said Costello, noting buyers don’t reveal some of their underwriting criteria, including net operating growth. “The sector is still opaque.”

Source CoStar. Click here to read a full story

Work-From-Home Trend Could Result in $500 Billion of Lost Value in Office Real Estate

Researchers from the NYU Stern School of Business and the Columbia University Graduate School of Business say the work-from-home movement will result in $500 billion of lost value in office real estate.

In a recent study, the researchers found a 32% decline in office values in 2020 and predict a 28% fall “in the longer-run.” The work-from-home shift since the pandemic has caused significant changes in lease revenues, office occupancy, lease renewal rates, lease durations, and market rents, researchers say.

Robust tools for working from home had been in place for years, but the necessities of the pandemic pushed widespread adoption of remote work. According to the researchers, office occupancy dropped from 95% in February 2020 to 10% within a month. By May 2022, it had only bounced back to 50%.

If the trend remains strong, a lot of office space might not be necessary. That would mean massive financial implications for land values and valuations in lending, nearby retail space, and tax resources for local governments.

The declines don’t fall evenly. There is “some evidence of a ‘flight to quality,’ particularly in rents,” researchers say. But rents may have yet to bottom out, as vacancy rates are at 30-year highs in many cities, and on average two-thirds of leases haven’t come up for renewals yet.

Source Building Design+Construction . Click here to read a full story

Toronto Bylaw Changes Could Permit Businesses to Open in Areas Currently Zoned for Residential Use

Toronto city council is adopting new amendments that will open the door to retail and service outlets flourishing in areas previously zoned residential.

A July 21 press release announced the acceptance of key motions that Michael Noble, project manager, City Planning with the City, said in an email would allow Toronto residents to more easily access goods, services and jobs close to home, by permitting businesses like barbershops to open in residential neighbourhoods.

Currently, according to Noble, the most notable approval from city council’s July meeting is the agreement to move forward with zoning bylaw changes that would allow barbers, hairdressers, beauticians, dressmakers, seamstresses, tailors, and health/medical offices in residential zones. While already approved, there is a 30-day period, he said, where the changes can be appealed. If by Aug. 22 there is no appeal, the amendments will go into effect.

Per the press release, further work, including a city-wide zoning bylaw that expands permissions for local neighbourhood retail and service uses is anticipated to be considered by Council in 2023.

“Zoning is going through a revolution right now across North America and we’re seeing a lot of really problematic zoning bylaws completely upended,” Jennifer Keesmaat, co-founder, Markee Developments, and former chief planner of the City of Toronto, said. “If you look at what we’re trying to do from a city-building perspective, it’s a good thing people can walk to a café in the area … it’s good for walking because less cars and it’s good for building a social fabric.”

“The opportunity [here] is to enable these types of places right in our neighbourhoods, street sides and corners.”

Zhixi Zhuang, program director at the School of Urban & Regional Planning at the recently renamed Toronto Metropolitan University, agreed.

“We talk about complete communities … if you want to improve the completeness of community life, we have to provide that kind of land use, not to separate them in a silo but to have them all mixed and allow people to do what they enjoy, get food, get services, meet other people,” she said.

James DiPaolo, associate at Urban Strategies Inc., while positive on the direction the City is moving, was curious to see how many people actually open new businesses in neighbourhoods.

He pointed toward larger forces like the rise of car ownership, decreased population density in many localities, and the rise of online shopping as factors that may impact how well these local shops do.

A Scarborough Bluffs neighbourhood resident, D. McCourt, who lives on Quentin Avenue, said that while she liked the economic boon these types of changes could provide, she was a bit unsure about having her quiet life be disrupted, having already grown accustomed to the traffic she gets as a result of living near the beach.

DiPaolo said there needs to be space for people in the community to have a say in what happens in their neighbourhoods and added businesses should be “compatible” in attributes like esthetic sense, physical scale and parking.

Noble wrote that consultations would define things like use, size and location to minimize adverse local impacts.

“As an example of appropriate locations, some options being explored include permitting establishments on TTC routes and marked bicycle routes,” he said.

“We can’t really impose a plan on communities who are the actual users of those spaces,” Dr. Zhuang said. “We have to look at whether we’ve consulted communities meaningfully … all the neighbourhoods are different, are unique, they have their own characteristics, community dynamics, histories.”

Source The Star. Click here to read a full story

UrbanToronto Pro’s June Report Shows More Office Less Space

As inflation roared and interest rates climbed in June, many property owners were under stress. Applications for new developments, however, remained strong. 

As the number of home sales tumbled in June, due to the rising costs of both inflation and interest rates, it was possible that developers would want to sit back on their proposals in order to wait out the uncertainty of the market. Yet applications for new large developments in the city of Toronto were higher in June than they were in May, and furthermore, June, 2022 applications were higher still than June, 2021.  

More still; along with the increase in the number of applications, the Gross Floor Area (GFA) proposed in June was higher than both the previous month and the previous year. Although this could indicate confidence in the future, this isn’t necessarily the case. Projects could still be canceled or majorly revised during the approval process. As the market is still dealing with the double-uncertainties of rising inflation and rising interest rates, it’s important to watch how project proposals evolve in the next few months.  

The 15 projects submitted in June were proposed across 12 Wards. The total GFA for all proposed projects is 553,754m², across a total site area of 287,271m². This implies a total Floor Space Index (FSI) of 9.17, twice the average for this year. Developers are proposing ever taller projects. 

The average residential GFA proposed per dwelling unit was 68.0m², which is the third-lowest of this year. But it is 4.7% higher than the 64.9m² proposed for June, 2021. While this doesn’t correspond perfectly with larger units, it does run counter to the narrative that developers are building ever-smaller units. With only 1 parking spot proposed for every 4 dwelling units in June, the narrative of focusing on walkability and cycling is buttressed by this report. 

There was 26% more GFA proposed in June compared to June, 2021. The distribution of the GFA across residential and commercial spaces was quite different. While the number of projects proposing some office space increased to normal levels this month, the gross floor area dedicated to them has shrunk significantly. In June, 2022, the amount of commercial GFA (which includes office and retail) proposed was only two-thirds of that proposed of the previous year. On the other hand, there was a 33% increase in residential GFA this year compared to last. 

Of the 7,593 residential units proposed this month, 5% were studios, 57% were 1-bedroom units, 28% were 2-bedroom units, and 10% were 3+ bedroom units. (Note that this is in line with the city’s “Growing Up” guidelines that at least 15% of units are 2-bedrooms, and 10% are 3+ bedrooms.) These are in line with the year-long averages of 10% studios, 50% 1-bedroom units, 27% 2-bedroom units, and 11% 3+ bedroom units. 

Will these trends continue? It’s possible that as higher interest rates push up borrowing costs, the price of land becomes more attractive for well-capitalized buyers. So long as investors anticipate that these higher rates are temporary measures in the fight against inflation, the long development cycle could prove to be an advantage for buying more land now, and continuing to develop more units for a growing population later.  

This data is two months old. If you want to track this information live as it comes in, with your ability to customize reports and maps, set up a call about getting a tour of UT Pro.​

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UT Pro is UT’s premium database service that collects and reports information on development applications across the Greater Toronto Area.

​​​​This UTPro New Development Report analyzes new development proposals for large projects submitted to the City of Toronto. (UrbanToronto defines a “large project” as anything larger than a typical detached home.) These numbers are for proposals only, and are subject to change at any time up until (and sometimes even after) completion. Due to the early stage of the development process, some documentation may be missing; the numbers for some components of the data might not add up in some cases. 

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If you would like to stay updated on the latest development news, sign up for a free trial of the New Development Insider. And if you are interested in the data used to generate this report, you can get more details about the UTPro subscription database service here or on the official UTPro page. If you require an instant report on a specific area in the city, check out our Instant Reports.

For more information about UTPro, contact Edward Skira.

Source URBAN TORONTO. Click here to read a full story

63-Storey Tower Proposed Atop Brutalist Mid-Rise on Bloor East

Osmington Gerofsky Development Corporation have submitted Official Plan Amendment and Zoning By-law Amendment applications to the City of Toronto to build a tower that would rise to 63 storeys and 209 metres atop a 6-storey Brutalist building on the northeast corner of Bloor Street East and Mount Pleasant Road.

Designed by Hariri Pontarini Architects, precast cladding is proposed for the residential tower that would complement the exterior of the 1968 to 1970-built 350 Bloor East, currently occupied by and branded with the Rogers logo. Heritage specialists ERA Architects are handling restoration of the exterior of the existing John B. Parkin Associates-designed office building, the interiors of which would be demolished and replaced with a contemporary structure.

A restaurant/retail area is proposed to be constructed within the western portion of the ground floor, overlooking Mount Pleasant Road and the Rosedale Ravine. Only the east wall of the existing building, which faces the blank wall of the residential condo building to the east, would be replaced by new construction, with then north, west, and south walls and their wedged precast concrete pillars maintained.

UrbanToronto will continue to follow progress on this development, with a more fully detailed story soon, but in the meantime, you can learn more about it from our Database file, linked below. If you’d like, you can join in on the conversation in the associated Project Forum thread or leave a comment in the space provided on this page.

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UrbanToronto’s new data research service, UrbanToronto Pro, offers comprehensive information on construction projects in the Greater Toronto Area—from proposal right through to completion stages. In addition, our subscription newsletter, New Development Insider, drops in your mailbox daily to help you track projects through the planning process.

Source Urban Toronto. Click here to read a full story

Major Lease In Hand, Granite Kicks Off Brantford Biz Park

The first major tenant, global chocolate maker Barry Callebaut, has committed to the Granite Telephone City Logistics Centre which is now under development in Brantford.

Granite REIT’s (GRT-UN-T) 1.7-million-square-foot business park, located an hour’s drive west of Toronto, used the resources of JLL to pre-lease a 409,000-square-foot building to Barry Callebaut that will become a specialty chocolate production facility.

Granite acquired the 92.2-acre Brantford site along the Hardy Road-Oak Park Road corridor for $62.2 million last August.

“We were drawn to Brantford largely by its compelling relative value proposition presented to industrial users and developers,” Granite executive vice-president of global real estate and head of investments Michael Ramparas told RENX.

“It was a node that I considered emerging compared to a lot of the other suburbs around the GTA that were getting a lot of institutional investment. We really saw a value opportunity and that’s what drew us to the region.”

Barry Callebaut will invest heavily in building

Zurich, Switzerland-based Barry Callebaut will invest more than $130 million into its Brantford building, making it its largest capital investment in a North American production facility.

“It will be a somewhat generic facility, but once the tenant is done with their outfit it will be very specific to it, as you can tell by the amount of capital they’re investing in it,” said Ramparas.

Barry Callebaut Group runs more than 60 production facilities worldwide and employs a workforce of more than 13,000. The manufacturer of chocolate and cocoa products had sales of about $7.9 billion US in its fiscal year ending in 2021.

The Brantford factory will create approximately 200 jobs after it’s delivered, which is expected in the first quarter of 2024.

“We’re very excited to be working with a tenant of this calibre and building its new home in Brantford,” said Ramparas. “It’s an obvious location as it relates to Brantford’s strategic strengths in the food and beverage manufacturing and distribution area.”

Granite Telephone City Logistics Centre is targeting a two Green Globes certification, which demonstrates a significant achievement in resource efficiency, reducing environmental impacts and improving occupant wellness.

Ramparas said efficiency and sustainability are very important factors in all buildings Granite either acquires or develops.

Brantford growing and attracting interest

The REIT plans to fill out the rest of Granite Telephone City Logistics Centre with what Ramparas called “modern, state-of-the-art distribution facilities.” He said there’s been plenty of interest from potential tenants for the site.

“We are seeing a number of larger distribution-based tenants coming out of the Toronto market,” JLL executive vice-president of sales and leasing Mitchell Blaine told RENX. “It’s relatively value-priced compared to Toronto.”

Brantford is located along Highway 403, just beyond the western edge of the Greater Toronto Area in the so-called Greater Golden Horseshoe, and has been designated an urban growth centre in the provincial growth plan.

The city’s population is approximately 100,000 and is projected to reach 163,000 by 2041.

“With the pandemic, we definitely saw a dispersion of the labour pool from the surrounding markets into Brantford and the Brant County area,” said Blaine. “We’ve seen some pretty exceptional population growth and projections.

“A real focus for the chocolate folks was access to the labour pool. When the Granite team could match that labour access and value proposition with modern, state-of-the-art facilities along a highway, it was checking a lot of the boxes. That has been a big driver.”

Brantford has a diversified manufacturing sector and a post-secondary education presence via Wilfrid Laurier University and Conestoga College campuses.

Granite is a Toronto-based real estate investment trust engaged in the acquisition, development, ownership and management of logistics, warehouse and industrial properties in North America and Europe. It owns 139 investment properties representing approximately 57.5 million square feet of leasable area.

One of those properties is a 32-acre site occupied by a 398,080-square-foot food manufacturing and distribution facility at 115 Sinclair Blvd. in Brantford that’s completely occupied by Aspire Bakeries.

That site and Granite Telephone City Logistics Centre comprises Granite’s industrial real estate presence in Brantford, but Ramparas said it’s looking at other properties in the area and called it “a big acquisition target for us.”

Other Brantford industrial development activity

There’s been plenty of industrial real estate development and transaction activity in and around Brant County over the past couple of years.

Panattoni Development Co. Canada acquired a 423-acre tract of industrial development land for $290 million in April after purchasing 100 acres along Rest Acres Road the previous year.

Two Fiera Real Estate funds acquired five industrial buildings comprising about 940,000 square feet of space for about $118 million from local developer and property manager Vicano Construction Ltd. last year.

The properties ranged in size from about 12,000 square feet to a 530,000-square-foot, one-tenant distribution centre completed in 2020.

The Lasalle Canada Property Fund bought the 527,568-square-foot Procter & Gamble national distribution centre from GWL Realty Advisors last year.

Paris, Ont.-headquartered 214 Carson Co., which focuses on mid-sized industrial developments in Southwestern Ontario, owns 26 acres of industrial land in Brant County.

It’s developing a 125,000-square-foot building and a 51,000-square-foot building, and adding 50,000 square feet to an existing building in the county.

Blaine said Brantford’s industrial availability rate was an extremely low 0.95 per cent in Q2 and the local industrial market was performing “incredibly well.”

The biggest challenge is getting facilities built and to market, but Blaine still foresees future growth.

“Servicing, timing and availability of trades still pose challenges. Will there be growth? Absolutely,” he said.

“Can it get here quick enough? Not as fast as anybody, tenants and landlords alike, would like to see.”

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

GTA Commercial Real Estate Investment Remains Strong in Q2

Commercial real estate investment in the Greater Toronto Area (GTA) saw another strong quarter, continuing the high-performing streak that began in the second half of last year.

According to Avison Young’s most recent Commercial Real Estate Investment Review, buyers’ willingness to invest in capital during the second quarter of the year “is a testament to their confidence in the market’s stability and prospects for the future amid the constantly shifting post-pandemic landscape.”

Industrial trades led the pack with $2.6B in investment activity — a full $1B more than was seen during the first quarter of the year and $1.2B more than the same time one year prior. This accounted for 36% of overall GTA commercial real estate investment volume. The GTA is well on track to obliterate pre-pandemic industrial investment volumes, with more than $4.1B in trades taking place in the first half of the year. In 2019, the full-year total was $4.3B.

Office and retail sales, on the other hand, were both down quarter over quarter. The report notes that during the previous quarter, office sales were boosted by the sale of Toronto’s Royal Bank Plaza, which was picked up by Zara founder Amancio Ortega for $1.2B. On an annual basis, however, the $1.1B in office investment seen during the second quarter of the year is up substantially from the $349M seen during the same time in 2021.

“With almost $3B in assets changing hands through the first half of 2022, the sector has already eclipsed the annual results recorded in 2020 and 2021 — and the all-time high of $4.3B set in 2019 may be within reach by year-end,” the report says.

Retail was the only sector to fall short of $1B in trades during Q2, and was not only down quarter over quarter, but year over year as well with $696M worth of assets sold. This marks a 30% decline from Q1 investment.

“At this pace as of mid-year, the retail sector’s full- year investment total may fall short of the $3.6-B result achieved in 2021,” the report reads. “Despite being the second-most active asset type by number of trades (trailing only the industrial sector), large deals were mostly absent this quarter, and the average transaction volume of $3.7M was the smallest among all asset types by a wide margin.”

Industrial commercial investment land and multi-residential properties were both up slightly on a quarterly and annual basis. ICI land hopped up 5% from the previous quarter to $1.7B, bringing the yearly total to $3.3B which exceeds every full-year total prior to 2021’s record-breaking $5.8B. Of note, the second quarter numbers were propped up by the $480M sale of 194 acres of agricultural land in Caledon to logistics operator Prologis.

Multi-residential sales grew 10% quarter over quarter to $1B, bringing the 2022 total to $1.9B. With that in mind, the report notes that the GTA is on track to meet or exceed the $3.8B investment high set in 2019. Portfolio sales accounted for 65% of the sector’s total dollar volume during Q2, with four of the five largest transactions being portfolios.

Source Storeys. Click here to read a full story

Office Vacancy Has Increased Across All Office Markets In Toronto, But The Financial District And Downtown West Markets Fared The Worst.

South Core Becomes Leading Office Node

Office vacancy has increased across all office markets in Toronto, but the Financial District and Downtown West markets fared the worst.

Toronto’s downtown office market is the largest and most important in Canada —and also one of the hardest hit by the pandemic. However, far from a situation of hollowing out, the pandemic has exposed a trend of shifting demand preferences and new development activities outside of the city’s traditional financial core.

Downtown West is home to many smaller tenants as well as tech startups that readily adopted remote work after the outbreak of the pandemic.

Meanwhile, the Financial District sits in the middle of downtown Toronto and has historically been the home to Canada’s major banks, the Toronto Stock Exchange and the corporate headquarters of many major accounting and law firms. The towers in the district are connected by the PATH, a system of underground walkways filled with shopping and dining options as well as direct connections to the region’s transit system. The market was the most affected during the pandemic, experiencing more sublease availability than any other market. In the initial uncertainty at the peak of the pandemic, several tenants put their empty office space on the sublet market in an attempt to recoup some of their leasing costs while many of their employees worked from home. Some tenants approached landlords for rent relief, but only a few received it.

In contrast, demand in other markets such as the South Core remained higher, especially due to the draw of several new buildings. The Gardiner highway at the south end of the Financial District previously demarked the end of the central business district, but with recent upgrades to Union Station providing southern walkway access, developers sought previous industrial land and parking lots primed for redevelopment in the South Core. Advancements to the Toronto transit system spurred developments in the southern area of the city to even expand to add new stations as part of mixed-use development projects in the east and west. With prime access to Union Station, the Downtown South market has brought 3.5 million square feet of new office space to the market since 2020. Noteworthy new construction, such as CIBC Tower I, LCBO Tower, West Block and 16 York have pulled many large and prominent tenants from other markets, leaving those landlords to face the challenge of backfilling vacated space.

The growing need for modern office space — including flexible layouts, connected technology and building apps and improved indoor air quality — has been drawing tenants to newer properties in the South Core for some time now. With the adoption of hybrid work during the pandemic — including highly personalized fit-outs with quality amenities as a way to offset the inconvenience of a commute downtown for their employees — the draw for newer properties compared to more dated layouts in the Financial District only seems to be intensifying.

Newer, state-of-the-art, Class A buildings have been performing well, attracting tenants out of the core and into Downtown South. Examples of this trend are Telus Harbour, RBC Centre and most recently CIBC Square.

Meanwhile the aged buildings in the Financial District are becoming increasingly harder to fill, and available spaces are sitting vacant for nine months on average in a market where blocks of space were previously leased in 4.5 months. To compete with the new construction and address rising vacancies, landlords in the Financial District are increasingly trying to redevelop or reposition properties. The Financial District’s appeal has certainly not gone away. It remains centre ice to amenities that are part of the PATH, TTC and Union Station to the south. So, landlords and owners are busy looking to reinvent some of their dated assets. For example, QuadReal has plans to reinvent its historic Commerce Court. This even includes a proposed new tower at 191 Bay St. on the southeast corner, adding 1.8 million square feet of office space to the core.

Looking ahead as tenants increasingly seek more flexibility and modern amenities in a post-pandemic world, newer towers will likely continue to see the flight to quality. With limited available land in downtown Toronto, areas surrounding the traditional financial core will likely continue to be the location for these new high-quality properties. Meanwhile, the financial core, with its exceptional historical importance and location, will likely continue to see redevelopments and potentially even full-scale new developments, where feasible.

Source CoStar. Click here to read a full story

One of Canada’s Largest REITs Pauses Spending, Suspends Talks to Buy CBC’s Headquarters

Toronto-Based Allied Properties Plans to Focus on Its Existing Operations

One of Canada’s largest real estate investment trusts is hitting the pause button on acquisitions in a decision that extends to Allied Properties’ interest in CBC’s headquarters in downtown Toronto.

Michael Emory, chief executive of Toronto-based Allied, said rising interest rates and inflation have created uncertainty for many businesses but the impact on Allied’s operations have been negligible. Still, the REIT is no longer in talks to buy CBC’s headquarters at 250 Front St.

“We don’t expect material impact over the remainder of the year,” said Emory on a call with analysts. “The impact of acquisition activity has been significant with the result we don’t expect to pursue new acquisitions of consequence in the near term.”

CoStar News reported previously that CBC had hired CBRE to value the 250 Front St. property and that Allied had the right of first refusal on any offer.

“We have suspended discussions indefinitely with respect to the possible acquisition of 250 Front Street in Toronto,” said Emory, noting the company still has rights to match any offer should it come up. “We are intent on growing our business, not shrinking it.”

The current uncertainty has Allied focusing on existing operations and developments for the remainder of the year. Allied owns about 14 million square feet of mostly office and retail properties across Canada.

Allied’s pause in acquisitions comes as some investment banks are factoring in higher cap rates for the valuations of REITs, with CBRE saying this month’s report of soaring inflation and interest rate hikes finally drove the commercial real estate investment market to a tipping point in the second quarter.

“Cap rates rose across nearly all sectors and geographies in the second quarter, driving up the national average cap rate figure to its highest level since before the pandemic,” said CBRE.

In the markets where Allied has operations — Canada’s six largest cities — Emory said he has not seen any evidence of declining valuations.

“We see no evidence of that whatsoever,” Emory said. “The intensity of interest on the part of vendors to transact now has diminished. All the vendors who own assets that could be of interest to Allied are very strong. They are not under any kind of financial pressure, and they are not about to succumb or capitulate to the fear in debt and equity capital markets.”

While some REITs have lowered the book value of their assets, Allied has no immediate plans to do so.

“We don’t expect there to be transactions in our markets that would signal the need for the cap rates applicable to our properties,” said Emory. “There are no trades of concern in our marketplaces at the point in time.”

Even Ottawa-based Shopify’s plans to lay off 10% of staff have not crossed over to Allied’s portfolio, which counts Shopify as a tenant. Shopify is finalizing its office space at Allied’s property at The Well in Toronto, Emory said.

Jenny Ma, an analyst with BMO Capital Markets, asked on the investors call what it would take to get Allied back into acquisition mode. Emory said more macro-certainty.

“If I’m honest, I expected stability [as the pandemic slowed],” said Emory.

Source CoStar. Click here to read a full story

Invesque Sells Canadian Medical Office Portfolio To Focus on Private Senior Housing Assets

Appelt Buys Nine-Building Portfolio That Is 70% Leased

Property owner Invesque, which is based in the United States but trades on the Toronto Stock Exchange, is selling more of its non-core assets, including its nine medical office buildings in Canada for 94.3 million Canadian dollars to Appelt Properties, as it focuses on private senior housing assets.

For Appelt, which owns and operates healthcare real estate across Canada, the deal adds 357,000 square feet to a portfolio of 750,000 square feet under management. The portfolio was acquired through a venture with Toronto-based Centurion Asset Management and includes seven Ontario properties with 280,000 square feet and two in Alberta with 77,000 square feet.

“As active managers who know the medical space well, we believe that finding a value-add opportunity like this is extremely rare. As a company, we are well positioned to unlock significant value in the current vacancy as well as prime development lands,” said Greg Appelt, CEO of Kelowna, British Columbia-based Appelt, in a statement. He founded the company in 2010.

The portfolio is 70% leased to medical and healthcare tenants, including general practitioners, specialists, radiology, laboratory uses and ancillary healthcare service providers.

For publicly traded Invesque, the Canadian properties were part of its reduction in assets that included the separate sale of a medical office building in Orlando, Florida, for US$9.85 million and its equity interest in two 55-and-older developments in Wheatfield, New York, that it sold for US$10 million.

On the CA$94.3 million sale in Canada, Indiana-based Invesque said the pricing was $265 per rentable square foot and represented a 5% cap rate based on trailing net operating income.

“We have been very active over the past year executing on our strategy to simplify our story, simplify our portfolio, and simplify our balance sheet,” said Scott White, chairman and chief executive of Invesque, in a statement. “The recently closed transactions allow us to continue de-levering and simplifying the balance sheet and further positions the Invesque portfolio toward being predominantly private pay seniors housing.”

Invesque’s portfolio now comprises 83 properties with 5,700 units, 7,800 beds, and 190,000 square feet of medical office buildings across 18 states and one Canadian province.

“We view positively on these dispositions as Invesque continues to progress on its portfolio optimization while deleveraging its balance sheet to focus on value creation through private pay seniors housing communities,” said Jenny Ma, an analyst with BMO Capital Markets, in a note to investors.

For the Record

BMO Capital Markets acted as financial adviser to Invesque in connection with the sale of the Canadian medical office properties.

Source CoStar. Click here to read a full story