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DoubleLine Says It Is ‘Perfect Time’ for New Real Estate ETF

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(Bloomberg) — DoubleLine Capital LP sees opportunity in the commercial real estate market despite mounting fears over the industry.

A darkening outlook for office properties, looming debt maturities and regional bank upheaval has spurred a dramatic repricing in commercial mortgage-backed securities. As concern continues to spread, that’s created an attractive entry point for higher quality credit, according to Morris Chen, who manages the DoubleLine Commercial Real Estate exchange-traded fund (ticker DCMB), which launched last week.

“It’s a perfect time, because with all this negative sentiment, you’re seeing a lot of unique opportunities,” DoubleLine portfolio manager Chen said in a phone interview. “By no means are we ignoring it, but there’s a lot of devil in the details as to what’s going on with specific properties. As an active manager, we’re able to pick and choose where we want, do what we like, what we don’t like.”

DCMB, which charges 39 basis points, invests in short duration debt that ranks highly in the capital structure, Chen said. While offices are risky, industrial and multi-family properties have held up well, he said, in addition to retail properties such as shopping centers.

Much of the current worry in the commercial real estate landscape center on the nearly $1.5 trillion worth of debt coming due for repayment before the end of 2025. Morgan Stanley estimates that office and retail property valuations could plunge as much as 40%, potentially fueling defaults.

While rising interest rates at the hands of an aggressive Federal Reserve and default fears have already crimped CMBS deals, those refinancing woes are mainly confined to more recently issued debt, Chen said.

“I’m most concerned about loans done in 2021. That’s largely because those borrowers borrowed at ultra-low rates,” he said. “If you borrowed in 2013 or 2014 or some of the vintages or years that have already had some seasoning and underlying performance growth over the years, there I think there’s a little bit less pressure.”

DoubleLine isn’t alone in finding bright spots among the rubble. Investors such as GMO and Sun Life’s institutional asset management arm say that the volatility in the CMBS market is overdone, and there are bargains to be found among higher quality debt.

Read more: GMO, Sun Life Arm Are Drawn to the Widest CMBS Spreads In Years

Compounding the anxiety is the state of small and regional banks, which have been battered by deposit outflows following the sudden collapse of Silicon Valley Bank last month. Given that regional banks are the biggest source of financing for commercial property owners, it remains to be seen whether the stress will hamper their ability to lend.

But should small and regional lenders step back, it’s likely that players such as private credit funds will step in to fill the void, according to Chen. Additionally, it’s very unlikely that smaller banks will halt their lending entirely, he said.

“The private credit environment will be ripe,” Chen said. “This is the time for private credit to come in and shine.”

In addition to DCMB, the DoubleLine Mortgage ETF (DMBS) which invests in investment-grade residential mortgage-backed securities also launched last week. The new funds arrived just a year after the $92 billion asset manager debuted its inaugural ETFs.

Mortgage-backed securities-focused funds are still a niche corner of the $6.9 trillion ETF industry. The largest CMBS-tracking fund, the $561 million iShares CMBS ETF (CMBS), is passively managed and has dropped roughly 2.7% on a total return basis over the past year, according to data compiled by Bloomberg. DCMB will likely appeal to investment advisors and family offices, in addition to institutional investors looking for exposure to the market, Chen said.

“This is not an equity investment, this is a debt investment,” Chen said. “We get it, there’s a lot of questions surrounding commercial real estate, but I think the market tends to overcorrect in some instances.”

–With assistance from Scott Carpenter.

(Updates with details on other investors eyeing opportunity in the market in 8th paragraph. A previous version of this story corrected size of iShares CMBS ETF and added performance of the fund in penultimate graf.)

 

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Greater Toronto home sales jump in October after Bank of Canada rate cuts: board

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TORONTO – The Toronto Regional Real Estate Board says home sales in October surged as buyers continued moving off the sidelines amid lower interest rates.

The board said 6,658 homes changed hands last month in the Greater Toronto Area, up 44.4 per cent compared with 4,611 in the same month last year. Sales were up 14 per cent from September on a seasonally adjusted basis.

The average selling price was up 1.1 per cent compared with a year earlier at $1,135,215. The composite benchmark price, meant to represent the typical home, was down 3.3 per cent year-over-year.

“While we are still early in the Bank of Canada’s rate cutting cycle, it definitely does appear that an increasing number of buyers moved off the sidelines and back into the marketplace in October,” said TRREB president Jennifer Pearce in a news release.

“The positive affordability picture brought about by lower borrowing costs and relatively flat home prices prompted this improvement in market activity.”

The Bank of Canada has slashed its key interest rate four times since June, including a half-percentage point cut on Oct. 23. The rate now stands at 3.75 per cent, down from the high of five per cent that deterred many would-be buyers from the housing market.

New listings last month totalled 15,328, up 4.3 per cent from a year earlier.

In the City of Toronto, there were 2,509 sales last month, a 37.6 per cent jump from October 2023. Throughout the rest of the GTA, home sales rose 48.9 per cent to 4,149.

The sales uptick is encouraging, said Cameron Forbes, general manager and broker for Re/Max Realtron Realty Inc., who added the figures for October were stronger than he anticipated.

“I thought they’d be up for sure, but not necessarily that much,” said Forbes.

“Obviously, the 50 basis points was certainly a great move in the right direction. I just thought it would take more to get things going.”

He said it shows confidence in the market is returning faster than expected, especially among existing homeowners looking for a new property.

“The average consumer who’s employed and may have been able to get some increases in their wages over the last little bit to make up some ground with inflation, I think they’re confident, so they’re looking in the market.

“The conditions are nice because you’ve got a little more time, you’ve got more choice, you’ve got fewer other buyers to compete against.”

All property types saw more sales in October compared with a year ago throughout the GTA.

Townhouses led the surge with 56.8 per cent more sales, followed by detached homes at 46.6 per cent and semi-detached homes at 44 per cent. There were 33.4 per cent more condos that changed hands year-over-year.

“Market conditions did tighten in October, but there is still a lot of inventory and therefore choice for homebuyers,” said TRREB chief market analyst Jason Mercer.

“This choice will keep home price growth moderate over the next few months. However, as inventory is absorbed and home construction continues to lag population growth, selling price growth will accelerate, likely as we move through the spring of 2025.”

This report by The Canadian Press was first published Nov. 6, 2024.

The Canadian Press. All rights reserved.

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Homelessness: Tiny home village to open next week in Halifax suburb

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HALIFAX – A village of tiny homes is set to open next month in a Halifax suburb, the latest project by the provincial government to address homelessness.

Located in Lower Sackville, N.S., the tiny home community will house up to 34 people when the first 26 units open Nov. 4.

Another 35 people are scheduled to move in when construction on another 29 units should be complete in December, under a partnership between the province, the Halifax Regional Municipality, United Way Halifax, The Shaw Group and Dexter Construction.

The province invested $9.4 million to build the village and will contribute $935,000 annually for operating costs.

Residents have been chosen from a list of people experiencing homelessness maintained by the Affordable Housing Association of Nova Scotia.

They will pay rent that is tied to their income for a unit that is fully furnished with a private bathroom, shower and a kitchen equipped with a cooktop, small fridge and microwave.

The Atlantic Community Shelters Society will also provide support to residents, ranging from counselling and mental health supports to employment and educational services.

This report by The Canadian Press was first published Oct. 24, 2024.

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Here are some facts about British Columbia’s housing market

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Housing affordability is a key issue in the provincial election campaign in British Columbia, particularly in major centres.

Here are some statistics about housing in B.C. from the Canada Mortgage and Housing Corporation’s 2024 Rental Market Report, issued in January, and the B.C. Real Estate Association’s August 2024 report.

Average residential home price in B.C.: $938,500

Average price in greater Vancouver (2024 year to date): $1,304,438

Average price in greater Victoria (2024 year to date): $979,103

Average price in the Okanagan (2024 year to date): $748,015

Average two-bedroom purpose-built rental in Vancouver: $2,181

Average two-bedroom purpose-built rental in Victoria: $1,839

Average two-bedroom purpose-built rental in Canada: $1,359

Rental vacancy rate in Vancouver: 0.9 per cent

How much more do new renters in Vancouver pay compared with renters who have occupied their home for at least a year: 27 per cent

This report by The Canadian Press was first published Oct. 17, 2024.

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