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Another increase for agricultural real estate values in 2017

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For the fourteenth year in a row, agricultural real estate values in Alberta have increased. Ryan Furtas, input market analyst with Alberta Agriculture and Forestry (AF) takes a closer look at Agricultural Real Estate Values and Transfer for 2017.

“No surprise here,” says Furtas. “The provincial value per acre increased by $312 per acre from 2016 to nearly $2,900 per acre in 2017 – a growth of 12 per cent. The rate of growth most recently occurred in 2014 and 2012, but the $312 per acre increase to the provincial average is unprecedented in the 21 year data set.”

The higher value land is generally associated with high productivity, proximity to urban centres, or the QE2 corridor between Calgary and Edmonton. Adds Furtas, “However, counties with access to irrigation such as Newell and Warner achieved top value at approximately $5,900 per acre. “

Furtas says that the number of transactions and volume of acres sold are connected and have been steadily decreasing. “Surprisingly though, the number of acres sold and number of transactions both increased. In 2017, just over 300,000 acres were sold, up 8.5 per cent from 2016. However, the 2017 number of acres sold is very close to the 5 and 10 year average of number. Leading the way were the counties of Beaver, Flagstaff, Grande Prairie, Mackenzie and Northern Lights, and they were all trading around 10,000 acres per county.”

The 2017 average number acres trading hands for each municipality was approximately 4,500 acres, adds Furtas. “The number of transactions in 2017 was just over 2000, nearly identical to the 10 year average. It was 10 per cent greater than the 2016 number, and the counties of Beaver, Flagstaff, Grande Prairie, Northern Lights, and Mackenzie represented the upper echelon of transactions.”

“I can’t help but make comparisons to 2012 and 2014,” says Furtas. “Both years had a similar dollar per acre increase but that was matched by less acres for sale. In 2017, a strong increase in the dollar per acre amount was matched with an increase in available acres and sellers.”

“There has been very few increases in the number of acres sold and transactions. The 2017 numbers come very close to the 10 year average which points to 2016 being more of an outlier when it comes to number of acres sold and transacted,” says Furtas.

Furtas says that the dollar per acre value increase of $312 is the largest dollar per acre increase seen in the 20 year data set. “The Alberta average per acre price is creeping up on $3000 per acre mark. The number of acres and sellers – despite an uptick in 2017 – are generally decreasing when analyzing over the longer term.”

The statistic section at AF develops and publishes Agricultural Real Estate trades that occur in each of the 70 rural Alberta municipalities. This data can be beneficial for producers trying to determine agricultural land values. Says Furtas, “The regionalized data includes a per acre dollar value for all the sales in the municipality, as well as the number of acres traded and how many transactions occurred. Each transaction is classified and organized according to the Canadian Land Inventory rating system. The rating system categorizes land by its productivity, allowing producers to make comparisons to land of similar productive capability outside of the local area.”

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The Chicago real estate market in one word: meh

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When it comes to real estate, Chicago isn’t one of the cool kids anymore.

The local real estate market ranked 49th out of the 79 biggest U.S. real estate markets in the annual “Emerging Trends in Real Estate” survey, down from 42nd last year and 19th the year before. The survey of investors, developers and lenders didn’t trash Chicago but found better investment opportunities in faster-growing metro areas like Dallas, Denver and Nashville, Tenn., which were all in the top 10.

Wherever they put their money, survey respondents were cautious about the direction of the broader market, wondering how much longer the good times will last. They’re not bracing for a bust, but they can’t see the market going much higher, either.

“ ‘Coming off a peak’ seems to be a theme,” says the report by PwC and the Urban Land Institute. “One major institutional investor whose base case is for a continuation of the upcycle acknowledged, ‘We are adjusting a little bit right now.’ But most interviewees express the opinion that coming off peak does not automatically mean a sharp correction. Plateau is a word often used regarding expectations.”

After a prolonged run-up in commercial property prices, the easy money has already been made, especially with interest rates on the rise. But as long as the economy continues to expand, demand for commercial space will stay strong, supporting occupancies and rent hikes. With the exception of retail, the major property sectors are in good shape in the Chicago area, though swelling development pipelines pose a threat to the office and apartment markets.

Investors also like Chicago because properties here offer better returns than those in other big cities, like New York.

“Chicago remains an attractive gateway market for investment, and interest appears to be on the rise as other gateway markets become increasingly expensive,” the report says.

But Chicago just isn’t as exciting as the top five markets of Dallas, Brooklyn, Raleigh/Durham, Orlando and Nashville, according to the survey. The Chicago area trailed Los Angeles (14), Washington, D.C. (18), Manhattan (32), and San Francisco (41). Based on interviews with 750 people and survey responses from 1,630, the report covered 79 urban areas. Hartford, Conn., came in last, behind Buffalo.

As investors perceive a real estate boom losing momentum, many will pull back to big markets, believing their money is safer there. But the survey suggests they are more focused on growth than safety.

“As the economy and real estate expansion prepare to stretch into another year, the market does not feel the need to get overly defensive and move into markets that are often perceived as safe havens in a down market,” the report says. “In fact, the opposite is true to a certain extent. An institutional portfolio manager offered, ‘At this point in the cycle, I am willing to go out a little ways on the risk spectrum, but the turnaround needs to be relatively quick. My thought is these faster-growing markets may be the best place to find those opportunities.’”

Property values have flattened out or even dipped a bit in Chicago over the last year. Last November, Lux24, a 73-unit apartment building in the West Loop, sold for $31.3 million, 10 percent less than it fetched in March 2016. And the city and state’s fiscal problems have made some investors wary of buying here, worried that they might be hit with big property tax increases.

But Chicago scored well compared with other Midwestern cities in the survey. The area ranked fifth, with an average rating of 3.67, among 13 Midwest markets, behind Minneapolis/St. Paul, Indianapolis, Columbus and Kansas City, Mo. Investors ranked the markets on a five-point scale, with 1 being “weak,” 3 being “average” and 5, “strong.”

But respondents had little enthusiasm for the area’s homebuilding market. The Chicago area ranked 66th out of 79 U.S. markets for “homebuilding prospects,” according to the survey.

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Goldman Sachs Unit Buys its First Stake in Real-Estate Management Industry

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In the years after the 2008 financial crisis, Westbrook Partners was known for buying stakes in hotels like the Ritz-Carlton in Boston.


Photo:

Pat Greenhouse/The Boston Globe/Getty Images

A unit of

Goldman Sachs Group
Inc.


GS -2.36%

that specializes in buying stakes in alternative investment managers has made its first purchase in a firm that’s dedicated to real estate.

The unit, Petershill, acquired this month a minority stake in Westbrook Partners, a 24-year-old firm with $11 billion of property under management in the U.S., Europe and Japan, according to Paul Kazilionis, Westbrook’s chief executive. Mr. Kazilionis declined to specify the size of the stake or sale price.

Westbrook is making the move to strengthen its balance sheet and to create a new ownership structure of the firm that adds Goldman Sachs and about a half-dozen senior Westbrook executives as equity holders. The firm had previously been owned entirely by Mr. Kazilionis, who has committed to remain as Westbrook’s chief executive for at least another 10 years as part of the deal.

Mr. Kazilionis, who was a senior executive in

Morgan Stanley
’s

real-estate business before helping found Westbrook in 1994, said the deal with Goldman also is appealing because his firm will be able to avail itself of Goldman’s resources.

“It’s local information flow that drives our business in these markets,” he said.

Petershill, named after a building in London, is part of Goldman Sachs’ asset management division and has invested in more than 20 investment firms since it started in 2007.

Its deals include a stake two years ago in Littlejohn & Co. LLC, which invests in middle-market companies, and an investment earlier this year in Clearlake Capital Group LP, whose target sectors include energy and software. Petershill also acquired a 15% stake earlier this month in private-equity firm Harvest Partners, which focuses partly on management buyouts and recapitalizations of middle-market companies.

Westbrook, which is based in West Palm Beach, Fla., has about 115 employees. It also has offices in London, Paris, Munich, Tokyo and five other U.S. cities.

In the years after the 2008 financial crisis, Westbrook was known for buying stakes in hotels like the Four Seasons in Miami and San Francisco and the Ritz-Carlton in Boston. Lately, the firm has focused more on “center of the alley” property types like office and rental apartment buildings, Mr. Kazilionis said.

Write to Peter Grant at peter.grant@wsj.com

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10 reasons to visit India Real Estate Show in Dubai

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The inaugural India Real Estate Show, being organised by Khaleej Times and Indiabulls Home Loans, is set to turn out to be a magnet for the NRI community here. Over 5,000 visitors are expected at the event to be held on October 26-27 at the Crowne Plaza, Sheikh Zayed Road. More than 50 developers from India will showcase their latest real estate deals to attract the investors.

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