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Sliding Fundamentals | National Real Estate Investor
 
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Canadian Real Estate StreetSmartREI   August 18, 2017   139   0   0   0   0   0
The outlooks for both occupancy rates and rents eroded considerably in this year’s survey compared to the past two years. Overall, 46.0 percent anticipate no change in regional occupancies over the next 12 months, while 22.3 percent expect occupancy rates to increase. (The percentage of respondents expecting occupancy rates to fall jumped up from 15.9 percent in 2016 and 8.9 percent in 2015). In addition, 31.7 percent expect occupancy rates to rise, a marked decline from the 41.2 percent who expected occupancies to rise in 2016 and 55.3 percent who said so in 2015. Respondent views on the national retail market were similar. Overall, the number expecting occupancy rates to rise nationally came in at 34.8 percent—down from 41.0 percent in 2016 and 61.9 percent in 2015. In addition, 27.3 percent this year said they expected no change (compared with 35.2 percent in 2016 and 25.9 percent in 2015). And the percentage expecting occupancies to fall nationally jumped to 37.9 percent—up from 23.8 percent in 2016 and 12.1 percent in 2015. The vacancy rate at U.S. regional malls stood at 8.1 percent in the second quarter 2017, up from 7.9 percent in the first quarter, according to Reis. For neighborhood and community centers, the vacancy rate was 10.0 percent in the second quarter, up from 9.9 percent in the first quarter. Respondents were also bearish on the outlook for rents. Almost one-quarter of respondents in this year’s survey (24.2 percent) said they expect rents to fall in the next...
Retail Real Estate Trends 2017, Part 4: Capital Sources Shying Away
 
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Canadian Real Estate StreetSmartREI   August 18, 2017   102   0   0   0   0   0
There is some sense in the market that both debt and equity capital is becoming less available for retail properties than 12 months ago. On the equity side, 31.7 percent of respondents answered that it is less available while 36.5 percent said debt was less available. A plurality (40.5 percent, equity; 38.4 percent debt), said the availability was unchanged. Only 18.1 percent said that equity is more widely available and just 14.5 percent responded that debt is more widely available. In terms of specific financing aspects, respondents, not surprisingly, expect interest rates to rise. Overall, 69.7 percent answered that they expected rates to go up compared with 30.0 percent that said they would stay flat and only 2.3 percent that said they would decrease. More than half of respondents (55.1 percent) also expect an increase in the so-called risk premium, the spread between the 10-year Treasury rates and retail cap rates. When it comes to loan-to-value (LTV) ratios and debt service coverage ratios, most respondents (55.4 percent and 53.2 percent, respectively) expect things to remain the same. Only 20.1 percent expect LTV ratios to rise and 24.4 percent expect them to fall. For debt service coverage ratios, nearly two-fifths of respondents (38.5 percent) expect an increase, while 8.4 percent expect them to decrease. Research Methodology: In July, NREI emailed commercial real estate professionals requesting participation in an online survey about retail real estate. Overall, the survey received 410 responses, half of whom identified as Owner/Partner/President/Chairman/CEO/CFO. In addition, 42 percent of...
Retail Real Estate Trends 2017 Investor
 
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Canadian Real Estate StreetSmartREI   August 18, 2017   172   0   0   0   0   0
The relentless rise of online sales and mounting struggles of brick-and-mortar retailers are taking their toll on retail real estate. The results from NREI’s third retail real estate survey reveal that retail operators, investors and developers show a marked turn compared from the previous two years. Sentiments on the outlook for cap rates, occupancies and retail rents all turned bearish. And respondents see retail as having the dimmest outlook of any of the major property sectors. Register below to download a full PDF version of the Retail Real Estate Trends 2017 Report.    
How to get security in a modern real estate portfolio
News Canadian Real Estate Magazine   August 18, 2017   109   0   0   0   0   0
With geopolitical risks increasing and equity valuations looking stretched, more investors are implementing real estate investment strategies into their portfolios.Achieving decent returns and broad diversification is increasingly challenging in the modern investment landscape and it is of little surprise that more Canadians are boosting their exposure to real estate assets. “Because real estate does not move in tandem with other markets, real estate investments provide a prudent third facet of portfolio diversification beyond exchange-traded assets,” says George Lawton, CEO, North American Home Finance Inc. “Traditionally, investors have been able to choose from a variety of real estate investment vehicles ranging from residential income properties to real estate investment trusts (REITs), limited partnerships, syndicated mortgages and mortgage investment corporations.” These traditional investment vehicles have served investors well up until recently, but as the world and its economies changes, so too should the way people invest.In the modern market, it’s unlikely that these traditional strategies meet every investor’s specific requirements, risk tolerance and differing priorities. “In response to those needs, real estate bonds are evolving to provide more options with unique elements that expand the potential of real estate investment,” Lawton says.“SKYIRE’s next-generation real estate bonds provide growth participation as well as mortgage security.In addition to the rate of return on the bond, bondholders also benefit from the profits generated
LaSalle Investment Management’s Rich Kleinman Talks about the Outlook
 
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Canadian Real Estate StreetSmartREI   August 18, 2017   115   0   0   0   0   0
With the unemployment rate at 4.3 percent, the U.S. office market is enjoying a long expansion cycle[1]. A dramatic shift in workplace preferences, however, has changed the way office tenants use space and elevated their expectations about building amenities. These changes are driving office owners and investors to reposition older assets to compete with new office projects coming to market. NREI asked Rich Kleinman, managing director of research and strategy for LaSalle Investment Management, the fourth largest U.S. office owner with 47,644,390 sq. ft. of office space[2], how the current office market is impacting LaSalle’s assets and what changes the company is making to attract tenants with a young workforce to its office buildings. NREI: Which markets does LaSalle Investment Management focus on? Rich Kleinman: We invest nationally and are looking everywhere. We are buying in markets with upside, where construction hasn’t ramped up and where rents are still [below] our estimates of long-term trend rents growth in those specific markets. NREI: How has the recent job growth impacted occupancy across your company’s office assets?  Rich Kleinman: Every asset and market is different. Up until the last 12 months, demand has filled new supply delivered, but vacancy has flattened out over the last year. Demand is still positive and strong enough to fill vacancy in most buildings, but office has headwinds restricting absorption. For instance, open floor plans have higher density than traditional office space, with less space allocated per employee. Law...
The best way to invest money mid-long-term
News Canadian Real Estate Magazine   August 17, 2017   176   0   0   0   0   0
Real estate is the favoured investment vehicle, according to a recent study, beating out many other popular options. Real estate is king, according to a poll by Bankrate.com, with 28% of respondents in its latest Financial Security Index poll saying it’s the best choice to invest money for 10 years or more. “If you have a long time horizon, you will win in real estate,” Abhi Golhar, a real estate investor who owns and rents out single-family homes, said in the report.   Real estate investing beat out cash (23%) by a slight margin and the stock market (17%), gold (15%) and bonds (4%) by more significant margins. It should be noted that the results are based on American investors;however, considering how many real estate investors and home owners south of the border were burned in the wake of 2008’s recession, the results are very significant. They certainly point to long-term positive sentiment about investing in real estate. Still, real estate investment does have its detractors. “One study by professors at the London Business School found that housing returned only 1.3 percent per year after inflation from 1900 to 2011, while stocks tended to perform more than four times better,” Bankrate said of the study.“Homes are costly
Alberta housing sector resurgent thanks to Edmonton and Calgary
News Canadian Real Estate Magazine   August 17, 2017   169   0   0   0   0   0
With the petroleum-centric Albertan economy gradually making a comeback, the province’s real estate sector is growing more and more tempting for buyers and investors alike—and nowhere is this more evident than the resurgence in the Edmonton and Calgary housing markets, according to industry observers. “For both Edmonton and Calgary, there are great buying opportunities right now, but there’s no rush,” Real Estate Investment Network (REIN) CEO Patrick Francey told Next Home.“That’s the good news.You’re finding the properties that cash-flow in a single-family would have preferably come from basement suites.Anything that’s in the $400,000 to $500,000 range is still very strong, but ultimately, there are good opportunities to buy.You’ve got to look for the deals, but they exist.And there are cash-flow opportunities, especially in single-family uptown suites.” Culling data from the Canada Mortgage and Housing Corp.along with latest provincial information on employment, population, and wage growth, Next Home noted that Edmonton and Calgary properties currently offer the best returns for investors who “buy, hold, and rent”. Edmonton benefited from being hardier than other provincial markets, according to local real estate professionals “The Edmonton market has been a real head-scratcher the last little while,” according to Tom Shearer of Royal LePage Noralta Real Estate, Edmonton.“Investors keep asking me, ‘When is the big drop going to happen, so I can buy
10 Must Reads for the CRE Industry Today (August 17, 2017) | National Real Estate Investor
 
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Canadian Real Estate StreetSmartREI   August 17, 2017   95   0   0   0   0   0
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 10 Must Reads for the CRE Industry Today (August 14, 2017) Aug 14, 2017 10 Must Reads for the CRE Industry Today (August 11, 2017) Aug 11, 2017
Considerations in Monetizing Retail Real Estate Real Estate Investor
 
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Canadian Real Estate StreetSmartREI   August 17, 2017   139   0   0   0   0   0
It is no secret that brick-and-mortar retailers are facing unprecedented headwinds. The headlines are filled every day with the latest updates on faltering sales and diminished fortunes. In this tumultuous environment, the real estate these ubiquitous retailers occupy may be a critical resource in fending off the competitive onslaught. The c-suites of many retailers are populated by executives who rose through the operational ranks. They have a keen understanding of consumer behavior and extensive expertise in what it takes to attract shoppers to their stores. To them, real estate is where their brands sell sweaters, cheeseburgers or grocery items. In this respect, real estate has traditionally been viewed as an operating asset that needs to be in the right location and projects the appropriate brand image to potential consumers. Given the increasingly competitive retail environment, retail c-suite executives would be well-served to shift their thinking and begin viewing real estate as a financial asset rather than just an operating location. Whether the retailer owns or leases their real estate, there are financial strategies related to those locations that could help them weather the current storm.   Retailers that own much of their real estate have far more financial options. The starting point toward identifying the most appealing path is to conduct a thorough assessment of what the owned portfolio is worth. That figure typically centers on the value of the locations as ongoing operations. But with commercial real estate values now at all-time highs[1], the valuation analysis must be...
Millennials to heavily impact real estate
News Canadian Real Estate Magazine   August 17, 2017   162   0   0   0   0   0
Gen-Y is a massive cohort that is overwhelming interested in breaking into the real estate market – but will affordably challenges and impactful mortgage rules allow them to? “Facing challenges their baby-boomer parents never encountered, peak millennials are confronted with significant obstacles that vary depending on where they live,” Phil Soper, president and CEO, Royal LePage, said.“While finding employment in our largest urban markets, Toronto and Vancouver, is relatively easy compared to other areas of Canada, buyers face limited inventory and high home values in these regions.Where prices are more affordable, job markets can be more uncertain. “The pent up demand for housing from millennials is enormous, with only a third of this large demographic currently owning a property and an overwhelming majority desiring to be homeowners.” According to a new report from Royal LePage, the number of Canadians aged 25-30 is projected to increase 17% in 2021 compared to 2016.And that cohort will have massive purchasing power. “Whether they choose to buy or rent, peak millennials will inevitably shape the housing market due to their sheer volume,” Soper said.“We expect demand from this demographic to put additional pressure on entry-level housing and investment properties being used to supplement the limited inventory of purpose-built rental buildings.” The desire to own a home is strong among
News Canadian Real Estate Magazine   August 17, 2017   107   0   0   0   0   0
One of the key features of RealIncome Bonds is right there in the name:income.That is, however, not all they offer to investors. As well as providing quarterly cash flow over a 60 month period, RealIncome Bonds also provide capital growth and profit participation. “RealIncome Bonds offer tax-efficiency and cash flow in a mid-term investment secured directly against completed single-family homes via a collateral mortgage,” says George Lawton, CEO, North American Home Finance Inc. “Profit participation comes in the form of income from rental properties and the capital appreciation of those properties once sold.” In a time where decent returns are increasingly difficult to find in the Canadian and U.S.stock markets, more investors are recognizing the value of investing in real estate.But it can be a messy business, and for those without sound industry knowledge, real estate has significant barriers to entry.Real estate bonds break down those barriers like no other investment vehicle on the market. “RealIncome Bonds offer an opportunity to earn income from residential real estate without having to purchase or maintain rental property,” says Lawton.“They combine the cash flow and growth potential of a REIT with the direct security of a registered mortgage on the homes.” Historically, capital appreciation on single-family homes has been greater than multi-family residential commercial real estate (i.e.apartment building), positioning RealIncome Bonds for faster capital
More Growth Ahead for Seniors Housing Investor
 
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Canadian Real Estate StreetSmartREI   August 16, 2017   147   0   0   0   0   0
The development boom underway in the seniors housing space has not put a damper on confidence. Exclusive survey results from the fourth annual NREI / NIC Seniors Housing Market Study indicate a more positive outlook across the board on questions related to improving fundamentals, access to capital and transaction pipeline. The steady stream of new supply being added to the market has been a hot topic of conversation across the industry, and a majority of respondents (59 percent) expect to see a further increase in construction starts over the next 12 months. That is a notable increase over the 45 percent who held that view a year ago. Overall, 26 percent of respondents believe that construction starts will remain the same, while 15 percent predict a decline. Current construction as a share of existing inventory for seniors housing preliminary maintained a robust pace of 5.8 percent in the second quarter, which is 0.8 percent below its recent high of 6.6 percent in the third quarter of 2016. Despite the new supply already added, and more on the way, 80 percent of respondents said they do not think that new construction will lead to overbuilding. Demographics continue to be a big driver for development. “As active as the market is with the product that we have today, we are looking at the tip of the iceberg in terms of boomers hitting retirement age,” says Scott Stewart, a managing partner at Capitol Seniors Housing, a private equity-backed real estate acquisition, development and investment...
10 Must Reads for the CRE Industry Today (August 16, 2017) | National Real Estate Investor
 
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Canadian Real Estate StreetSmartREI   August 16, 2017   121   0   0   0   0   0
10 Must Reads for the CRE Industry Today (August 15, 2017) Aug 15, 2017 10 Must Reads for the CRE Industry Today (August 14, 2017) Aug 14, 2017 10 Must Reads for the CRE Industry Today (August 11, 2017) Aug 11, 2017 10 Must Reads for the CRE Industry Today (August 10, 2017) Aug 10, 2017
Do Office Tenants Prefer the City or the Suburbs? Real Estate Investor
 
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Canadian Real Estate StreetSmartREI   August 16, 2017   155   0   0   0   0   0
Office building owners and developers pondering how to bridge the urban-suburban gap may want to set their sights on what you might call “urb-suburban” settings. What’s urb-suburban? It’s one way to describe the mash-up of suburban office locations in walkable settings with easy access to urban-style amenities like transit, housing, restaurants and retail. Owners and developers of suburban offices that fail to embrace the urb-suburban vibe might find it harder to justify new projects or attract new tenants, industry observers say. “Suburban office submarkets with urban characteristics are in the best position to capture occupier demand, and may provide unique opportunities for occupiers to secure space at lower rents and for investors to buy at lower prices in areas that are poised for future growth,” researchers at commercial real estate services company CBRE write in a new report[1]. Examples of established submarkets that provide a wealth of urb-suburban attributes include the New Jersey Hudson River waterfront, the Los Angeles suburb of Santa Monica and the San Francisco Bay Area suburb of Palo Alto, the CBRE experts write. The Frisco-Plano area in the Dallas-Fort Worth suburbs is one of the places in the U.S. benefiting most from the urb-suburban trend, notes Andrea Cross, CBRE’s head of office research for the Americas. Among the corporate heavyweights that recently have expanded in or relocated to Frisco-Plano are AmerisourceBergen, Fannie Mae, JP Morgan Chase, Liberty Mutual, McKesson and Toyota. Frisco-Plano—which offers an array of urban-like features—exemplifies the desire of office tenants...
Eight Mistakes That Can Trip Up Borrowers | National Real Estate Investor
 
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Canadian Real Estate StreetSmartREI   August 16, 2017   119   0   0   0   0   0
Borrowers are reveling in a market where capital remains fairly readily available with lenders that are still eager to do deals[1]. At this stage of the cycle[2], one might expect to start seeing some slowdown in lending activity, notes Robert Falese, a senior vice president at mortgage banking firm Berkadia. “In all candor, we have not, because the space has performed so well, credit losses have been negligible to non-existent and there is great relative value in these spreads,” he says. According to the Mortgage Bankers Association's (MBA) Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations, second quarter 2017 commercial and multifamily mortgage loan originations were up 20 percent year-over-year and 28 percent higher compared to the first quarter. Yet there are signs that underwriting is tightening. Just how eager a lender is to do a deal varies depending on the individual entity[3] and their strategy, as well as what’s already on their books and how much of their annual allocation remains available. “The farther we get into the year, people are getting a little more careful,” says Patrick Minea, a senior vice president at financial services intermediary NorthMarq Capital. “There is still capital to be placed, but sometimes the deals are getting a little tighter on economics and a little tighter in general to execute.” Even with a competitive lending marketplace and a myriad of bank and non-bank lenders, there are any number of hurdles that can slow down a financing deal or derail a loan application completely. Some...
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