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Triple Net Lease Buyers Are Willing to Pay Premiums for New Assets
 
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Canadian Real Estate StreetSmartREI   August 23, 2017   77   0   0   0   0   0
A growing number of 1031 exchange buyers are paying a premium to buy newly constructed triple net lease retail and restaurant locations. But some of those investors may be in for a rude awakening when it comes time to calculate returns on an exit strategy. The sweet spot for 1031 investors has typically been assets priced below $6 million, and demand is pushing prices higher and cap rates lower in that segment of the market. Buyers have an especially big appetite for newly constructed assets with long-term leases and high credit tenants. For example, a newly constructed Walgreen’s in Valley Stream, N.Y. with 24 years left on its lease term sold in May for $14 million or $1,055 per sq. ft. and a cap rate of 5.3 percent. “Cap rates are the lowest that I have ever seen, especially the demand for newly developed product,” says Jason Maier, a senior director at the Stan Johnson Co., a brokerage that focuses on net least transactions, in New York City. During 2016 and early 2017, transaction volume in the sector slowed due to uncertainty surrounding the presidential election. Sales activity came roaring back in the second quarter, and cap rates have since compressed by 25 to 50 basis points for newly constructed properties, he adds. Given the current pricing, the question is what will those returns be for investors when it comes time to sell or refinance properties? “That is really a big problem and an ongoing conversation that we have all the...
10 Must Reads for the CRE Industry Today (August 22, 2017) | National Real Estate Investor
 
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Canadian Real Estate StreetSmartREI   August 22, 2017   93   0   0   0   0   0
10 Must Reads for the CRE Industry Today (August 21, 2017) Aug 21, 2017 10 Must Reads for the CRE Industry Today (August 18, 2017) Aug 18, 2017 10 Must Reads for the CRE Industry Today (August 17, 2017) Aug 17, 2017 10 Must Reads for the CRE Industry Today (August 16, 2017) Aug 16, 2017
Real estate association lobbies for tougher regulation
News Canadian Real Estate Magazine   August 22, 2017   117   0   0   0   0   0
The Ontario Real Estate Association released the first of four industry white papers Tuesday, arguing in favour of more stringent regulation. OREA effectively lobbied Queen’s Park to review the Real Estate and Business Brokers Act, 2002 (REBBA) and the government has committed to do so.The white papers are the next step in that advocacy. “Ontario needs much stronger deterrents for unethical behaviour and a regulator that isn’t afraid to throw the book at violators,” Ettore Cardarelli, OREA President said in the white paper. In the white paper, entitled Better Enforcement and a Regulator that Works, OREA argues in favour of heftier fines for breaching REBBA’s Code of Ethics. The maximum fine is $25,000 for agents and $50,000 for brokerages;those figures were set in 2002 when the average resale home cost $211,000.With the average price more than doubling to $619,000, OREA argues the effectiveness of those fines has been reduced. OREA is suggesting the maximum fines be raised to $50,000 and $100,000 respectively. “This White Paper is a bold first step towards modernizing Ontario’s real estate rules,” said Ettore Cardarelli, OREA President.“The rules governing Ontario Realtors were established 15 years ago – it’s time to update them to keep Ontario’s real estate market strong for consumers.OREA is committed to raising the bar
A Close Look at Urban Core Apartment Market Performances | National Real Estate Investor
 
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Canadian Real Estate StreetSmartREI   August 22, 2017   113   0   0   0   0   0
The U.S. apartment completion volume across the country’s 100 largest metros has accelerated to more than 80,000 units per quarter in 2017, up from around 60,000 units a quarter in the previous couple years. That aggressive new supply tally is creating a more competitive leasing environment[1] for top-of-the-market product, especially in urban core settings where so many communities are coming on the market within blocks of each other. Digging deeper into the story, urban core results obviously vary quite a bit from one spot to another due to factors that range from how many new apartments are being built to how many jobs are being added. Measuring health in terms of annual rent growth for new resident leases, results range all the way from spectacular—a 7 percent rent escalation in downtown Seattle—to dismal—a 5 percent rent loss in downtown Houston. The Stars Among the country’s especially active building centers, Seattle now ranks as the leader for urban core apartment performance by a huge margin. Annual rent growth is running at 7.2 percent in the heart of downtown, and similar pricing momentum exists in adjacent urbanized zones like South Lake Union, Queen Anne and Capitol Hill. So far in this economic cycle, urban Seattle has managed to digest some 19,600 units of new supply, and the downtown job base continues to expand very rapidly. Ongoing construction in the urban core tallies about 10,400 units, further putting absorption capacity to the test. Even with this new supply likely to slow urban...
Mnuchin Hints at Keeping Carried Interest Break for Some Firms
 
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Canadian Real Estate StreetSmartREI   August 21, 2017   121   0   0   0   0   0
(Bloomberg)—U.S. Treasury Secretary Steven Mnuchin said Monday that President Donald Trump may keep the carried interest tax break for firms that create jobs, while eliminating it for hedge fund managers. “We will close the loophole for hedge funds in carried interest,” Mnuchin said at an event in Louisville, Kentucky, where he appeared alongside Senate Majority Leader Mitch McConnell. “What we are focused on is there are many other types of funds that do create jobs and we want to make sure we don’t discourage investment.” The so-called carried interest loophole enables investment-fund managers to pay a tax rate as low as 20 percent -- roughly half the top rate for ordinary income -- on much of their income. Trump highlighted the carried-interest tax break during his populist presidential campaign, labeling some hedge fund managers as “paper pushers” who are “getting away with murder.” The White House referred questions about Mnuchin’s remarks to the Treasury Department, where a spokesman didn’t immediately respond to a request for comment. McConnell said Monday the carried-interest tax break would be considered during tax negotiations among congressional and White House officials. He added that aside from tax incentives for charitable giving and home-mortgage interest, “there’s no point doing tax reform unless we look at all these preferences.” Carried interest is the portion of a fund’s profit -- usually a 20 percent share -- that’s paid to private-equity managers, venture capitalists, hedge fund managers and certain real estate investors. Currently, tax authorities treat that...
10 Must Reads for the CRE Industry Today (August 21, 2017) | National Real Estate Investor
 
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Canadian Real Estate StreetSmartREI   August 21, 2017   117   0   0   0   0   0
10 Must Reads for the CRE Industry Today (August 18, 2017) Aug 18, 2017 10 Must Reads for the CRE Industry Today (August 17, 2017) Aug 17, 2017 10 Must Reads for the CRE Industry Today (August 16, 2017) Aug 16, 2017 10 Must Reads for the CRE Industry Today (August 15, 2017) Aug 15, 2017
What Will Be the Impact of the Invitation Homes/Starwood Merger?
 
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Canadian Real Estate StreetSmartREI   August 21, 2017   97   0   0   0   0   0
As Invitation Homes and Starwood Waypoint Homes announced an agreement to merge recently, the single-family home rental (SFR) industry is contemplating how the emergence of a giant new entity will impact the sector. Once the merger is complete, the combined company would own and manage about 82,000 SFR properties around the country. The merger “shows that the single-family home rental market is strong, vibrant and deep,” says Diane Tomb, executive director of the National Rental Home Council, an industry advocacy group. “We have proven this is a sustainable business model, capable of producing strong operating margins and financial results while providing exceptional customer service,” says a spokesperson for Starwood Waypoint. “Now that scale has been achieved and operating results have stabilized, growth through this merger is a natural next step.” Institutional SFR owners are currently making far fewer acquisitions than they did a few years ago. Instead, they appear focused on improving operations and selling off underperforming assets. Now, it seems like mergers and acquisitions are also on the table. The merger leaves only a few giant companies in the business of owning and managing SFR assets, including a few potential acquisition targets. “Prominent rental platforms still in the market include Progress Residential, a private owner of roughly 20,000 properties, and Tricon American Homes, a unit of Tricon Capital Group Inc.” according to an analysis by Standard & Poor’s. Tricon holds more than 16,000 properties. Room to grow, eventually The vast majority of rental houses...
Manhattan Gets $20,000-a-Month Homes for New Breed of Seniors
 
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Canadian Real Estate StreetSmartREI   August 21, 2017   106   0   0   0   0   0
(Bloomberg)—Manhattan is about to become a testing ground for what could be the next luxury real estate boom. Well, maybe mini-boom, considering the rather narrow target group: frail urban seniors with fat bank accounts. Developers are spending hundreds of millions on high-end assisted-living apartment projects, one on the Upper East Side and one in Midtown, and aiming for more in the area and across the U.S. The bet is that there are sufficient numbers of the affluent and aging in big cities who won’t want to leave their neighborhoods, even as they suffer cognitive decline. It is, of course, a rather small group of any age or mental ability that can handle the monthly rents these kinds of places will command. They’ll start at $12,000 at the complex that Maplewood Senior Living and Omega Healthcare Investors Inc. are putting up on Second Avenue and 93rd Street. Some will top more than $20,000 at the building Welltower Inc. and Hines are about to break ground for on the corner of 56th Street and Lexington Avenue. They’ll boast the usual luxury frills like uniformed doormen and lush landscaped gardens. But they’ll also incorporate special features for the elderly and memory impaired, such as sharply contrasting wall colors in bathrooms to help those with poor eyesight identify fixtures and hallway lighting designed to encourage sleep at night. “The risk is that you’d be the anti-Field of Dreams -- you build it and they don’t come,” said Michael Knott, managing director at Green...
Calgary market to undergo “process of recovery” for rest of 2017
News Canadian Real Estate Magazine   August 21, 2017   122   0   0   0   0   0
The Calgary real estate market is expected to undergo a “process of recovery” for the rest of the year as oil prices improve, according to a recent report by the Calgary Real Estate Board (CREB). CREB expects annual sales to hit 18,491 units, a 3.3% rise from 2016.“While this is a slightly faster pace than originally anticipated, these levels are still well below long-term trends.” “We saw many of those consumers who delayed any purchasing decisions willing to re-enter the market as concerns regarding the economy eased,” said CREB president David Brown.“More potential buyers on the market helped move some of the product in inventory and started to create some price stability.” An early boost in demand this year helped ease pressure on supply levels.The report said inventories will remain “slightly elevated” for the rest of the year, but this is not expected to significantly bring down prices. CREB warned that difficulties continue to exist in the condo-apartment ownership market as rising sales cannot keep pace with the growth in new listings.It said this specific area of the market will likely continue to face challenges well into next year, as it will take time to absorb additional inventory in the resale, new and rental markets. “Economic challenges continue to exist, as high unemployment rates, weak
Affordable housing project for single parents underway in Regina
News Canadian Real Estate Magazine   August 21, 2017   134   0   0   0   0   0
by Francis Monfort A rental housing project targeted for single parents who need support to secure and maintain housing is underway in Regina, Saskatchewan. Ground-breaking for the project was announced on August18.The project is a four-level apartment building that will be built on land owned by Gabriel Housing.It will consist of six one-bedroom and six two-bedroom units. The Government of Canada, through Canada Mortgage and Housing, and the Province of Saskatchewan, through Saskatchewan Housing, are jointly contributing up to $1.63 million to the project.The contribution is pursuant to the Canada-Saskatchewan Investment in Affordable Housing 2014-2019 agreement. The city of Regina will contribute $240,000 to the total funding as well as incentives towards the project.Meanwhile, $1.1 million will come from Gabriel Housing through cash/land equity and mortgage financing.The project will be leased to Aboriginal Family Services, who will provide the tenants and support services. "Our government is working hard to provide Canadians with safe and affordable housing, which is the foundation of strong, productive communities.We are proud to support the creation of these new affordable rental housing units which will help improve the well-being of single parent families here in Regina," said Ralph Goodale, minister of public safety and emergency preparedness. "These homes will enable single parent tenants and their children to live in a
News Canadian Real Estate Magazine   August 21, 2017   181   0   0   0   0   0
Taking the time to work out your short, mid and long-term goals and priorities is essential before making any type of investment.Historically, real estate investments have presented either limitations or risks for investors who want to customize their strategy to achieve a specific outcome, like quarterly income, maximum growth or tax efficiency, for example.But real estate bonds are changing all of that. For investors whose priority is secure, short-term growth, SKYIRE’s HomeBuild Bonds represent a solid solution.HomeBuild Bonds typically have a time horizon of 30 months and interest at a fixed rate of 7.75%.“Invested funds are placed in trust and bonded during the construction phase,” says George Lawton, CEO, North American Home Finance Inc.“Once homes are completed, bondholders are secured directly against the homes via a collateral mortgage, ranked behind the bank’s mortgage, but in front of any unsecured creditors and shareholders.Profit participation derives from proceeds of home sales.” HomeBuild Bond projects are located in major urban areas and usually involve the construction of new single family homes (mostly condominiums) by proven developers.The structure of HomeBuild Bonds provides the security of a bond with real estate development returns, while eliminating the development risk and unpredictability of returns associated with more traditional real estate investments.Unlike REITs, development limited partnerships and MICs, HomeBuild Bonds have a contracted minimal return and priority payouts
Retiring early with real estate
News Canadian Real Estate Magazine   August 20, 2017   107   0   0   0   0   0
Let your portfolio work for you:One investor gives his tips to become completely financially independent at any age. By Sve Pavic, fulltime investor Millennials have it tough financially- we’ve been told if we go to a respected University, study hard and get good grades we will land a great paying job.The reality?You graduate with loads of debt with no assistance or prospects of getting a great job and you return for more schooling thinking it will solve the problem.To add salt to the wound, house prices and rent keep increasing beyond reasonable affordability.As a millennial, I’m here to tell you that you can create your own financial freedom and you don’t need to settle and live in your parent’s basement into your 30s.In fact, I’m here to show you how we purchased our first house at 24, live for free by “house-hacking” and create passive cash flow for life. What is house-hacking?The concept is simple yet powerful:purchase a house, create an income suite (e.g.basement apartment) and rent it out for passive income.The rental income from the apartment can either pay for the majority of your mortgage and living expenses, or you could even get paid to live for free.If you live in the main/ upstairs unit and rent out the basement, you can have
The Fed's Timidity Helps No One at This Point: Komal Sri-Kumar
 
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Canadian Real Estate StreetSmartREI   August 18, 2017   129   0   0   0   0   0
(Bloomberg Prophets)—The U.S. Federal Reserve believes it faces a dilemma. Despite more than quintupling its balance sheet from about $800 billion in September 2008 to $4.5 trillion in an effort to stimulate the economy, growth continues to be subpar. A federal funds rate at near zero up until December 2015 did little to encourage consumers to borrow and spend. And although the surge in equity prices boosted consumer wealth, it didn’t lead to increased spending, higher incomes or “a virtuous circle (to) further support economic expansion,” as former Fed Chairman Ben Bernanke wrote in a Washington Post op-ed article in November 2010. Hand-wringing at the Fed got more intense last week as inflation numbers for July showed that the target of 2 percent annual inflation hasn’t been attained despite years of easy monetary policy. The consumer price index in July rose only 0.1 percent from the prior month, well below consensus expectations. Even more distressing to the central bankers, the monthly inflation rate measured by the producer price index was negative, which could be transmitted to consumer prices in coming months. It isn’t surprising that, in a speech this month Federal Reserve Bank of Minneapolis President Neel Kashkari likened his colleagues’ concern about accelerating inflation to a “ghost story.” Why haven’t wages surged and inflation picked up despite the economy being in the ninth year of economic recovery, and the unemployment rate matching a 16-year low of 4.3 percent? Are the low inflation rates in recent months just a transitory factor resulting from...
Trump Is Said to Abandon Plan for Council on Infrastructure | National Real Estate Investor
 
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Canadian Real Estate StreetSmartREI   August 18, 2017   123   0   0   0   0   0
(Bloomberg)—President Donald Trump will not move forward with a planned Advisory Council on Infrastructure, a person familiar with the matter said Thursday. The infrastructure council, which was still being formed, would have advised Trump on his plan to spend as much as $1 trillion upgrading roads, bridges and other public works. Its cancellation follows Trump’s announcement Wednesday that he was disbanding two other business advisory panels. Corporate chief executive officers this week had started to quit both the American Manufacturing Council and the Strategic and Policy Forum in protest over Trump’s remarks that appeared to confer legitimacy on white supremacists following a violent rally Aug. 12 in Charlottesville, Virginia. Trump had tapped New York developers Richard LeFrak and Steven Roth, whom he described as friends, to lead the infrastructure panel, which he established by an executive order on July 19. But he had not announced any formal appointments to it. Through a spokeswoman, LeFrak declined to comment. Roth didn’t respond to a request for comment. The council, which was supposed to have no more than 15 members representing real estate, finance, labor and other sectors, was designed to study and make recommendations to the president regarding the funding, support and delivery of infrastructure projects. Trump reignited controversy about his response to the violence in Charlottesville during a press conference on Tuesday that was supposed to be about his infrastructure plans. He signed an executive order this week that’s intended to accelerate the review and permitting...
Chinese Pullback Won't Dent Real Estate Prices, Brookfield Says
 
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Canadian Real Estate StreetSmartREI   August 18, 2017   153   0   0   0   0   0
(Bloomberg)—Commercial real estate prices, hovering at record highs in the U.S. following a six-year boom, are sustainable even as Chinese regulators tighten restrictions on overseas investment, according to Brookfield Property Partners LP. There is enough capital pouring into real estate from multiple regions -- including Europe and the Middle East -- to counter any potential slowdown in Chinese investment, Brookfield Property Chief Executive Officer Brian Kingston said in a Bloomberg Television interview. While Asian buyers are often part of the equation, a global shift from low-yield fixed-income holdings to real estate will drive property values for the foreseeable future, he said. “There was a lot of headlines around how much capital was coming out of Asia,” said Kingston, a senior managing partner at Brookfield Asset Management Inc., the parent company of Brookfield Property. “The reality is it’s broad-based. It comes from a lot of places.” Price growth for U.S. commercial buildings such as office towers and apartment buildings has leveled off over the past year, according to research firm Green Street Advisors LLC, and a growing disconnect between buyers and sellers is putting a damper on new deals. In Manhattan, one of the biggest beneficiaries of a foreign-capital influx in recent years, transaction volume plunged 39 percent to $18 billion in the first half from a year earlier, according to the Real Estate Board of New York, a trade organization. Still, there have been a handful of blockbuster transactions. In March, Chinese conglomerate HNA Group Co. agreed to buy...
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