Fiera Real Estate has completed the divestiture of its closed-ended GPM Real Property (11) Limited Partnership fund for $249 million after a series of asset sales which began in 2019.
“We’re very pleased with the results and that we were able to move that portfolio out at the valuations we did,” Fiera Real Estate senior vice-president and fund manager David Pappin told RENX. “I think our investors are extremely happy. That’s the key.”
The fund was the 11th in a series of 12 closed-ended investment funds focused on small to mid-sized industrial assets across Canada which have raised $857 million. The previous 10 have also all been sold.
Twelve institutional investors provided an initial equity base of $148.5 million for the fund in 2008. A three-year acquisition period followed and netted 36 assets. The fund’s value grew by about 73 per cent during the ensuing nine-year investment holding period.
The fund’s total net return to investors of 10.9 per cent exceeded the initial investment target return of seven to nine per cent.
Pappin said the fund’s portfolio was primarily comprised of industrial assets in Quebec, Ontario, Alberta and British Columbia.
There were some single-tenant properties, while most were multi-tenanted. They varied in size from 12,000 to more than 150,000 square feet.
Opportune time to sell
Fiera Real Estate executives decided midway through last year the time was right to start considering its divestment strategies for the fund.
“We were seeing continued rental growth and we were seeing continued cap rate compression,” said Pappin.
“We just decided that we wanted to move forward on a real strategic approach and get out in front of it and capitalize on the valuations that we were enjoying in the marketplace and the liquidity we were enjoying in the marketplace.”
The properties in the portfolio could have been sold as a large single block, in smaller clusters or individually.
Pappin said a considerable amount of market reconnaissance was done before a decision was made on what approach to take.
When all was said and done, some properties were sold individually, some were divested in small portfolios, and the largest block was nine Alberta assets.
Institutional investors, private capital investment syndicates and end-users were among the purchasers.
Pappin said interest in the Ontario and Quebec portfolios was very strong. While interest wasn’t as deep in Alberta, he confirmed there were multiple bidders for each asset.
No major COVID-19 impact
The divestiture was completed in April. All of the deals were either closed or under contract before the COVID-19-related economic shutdown, so it had no impact on the process.
Fiera Real Estate employees are working from home due to COVID-19 and Pappin said the business continues to operate well. He noted some tenants are having greater challenges than others when it comes to rent payments.
“Some tenants are open, some tenants are closed, some tenants are considered essential businesses and some are not,” said Pappin, who added the pandemic hasn’t affected Fiera Real Estate’s overall business strategy.
“We’re all hopeful that this is a moment in time. The focus at the moment is to get through this pandemic and service our investors and service our tenants as best as we possibly can.”
Fiera Real Estate Small Cap Industrial Fund
Fiera Real Estate continues to offer investment exposure to the Canadian industrial and logistics sector through the open-ended Fiera Real Estate Small Cap Industrial Fund.
The fund’s portfolio — 61 single-tenant and multi-tenant assets encompassing approximately three million square feet in Atlantic Canada, Quebec, Ontario and Alberta — provided a total return of more than 16 per cent for the 12 months ended March 31.
While Pappin said the goal is to grow the fund over time, he acknowledged certain assets may be sold.
“You can prune portfolios as you grow them and maintain allocations, and take advantage of opportunities in the market when they present themselves.”
Fiera Capital Corporation and Fiera Real Estate
Fiera Real Estate is a global real estate investment management platform serving investors in Canada and the United Kingdom.
It has offices in Toronto, Montreal and Halifax and was managing more than $6 billion of office, industrial, retail and multi-family assets through its investment funds and accounts at the end of 2019.
Despite the challenges, Edmonton area real estate values 'have held up extraordinarily well' – Edmonton Journal
I have to say the Edmonton area real estate market has surprised me.
When you consider the onslaught we have had in the past five years — oil price crash, more than 100,000 job losses, fires, floods, domestic and international trade disputes and then COVID-19, I would say the Edmonton and area real estate values have held up extraordinarily well.
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Since 2014, we’ve only seen modest declines in prices, with single family homes declining the least. Edmonton remains Canada’s most affordable major city with one of the highest average incomes.
Other Canadian cities have seen significant price gains in the same time period creating a bigger difference in real estate values between regions. We have had clients who can work anywhere and chose Edmonton as they can afford much nicer living quarters here for the same money.
Given the lower prices and interest rates combined with rising rental demand, it is easier for investors to get positive cash flows. We are seeing investors looking at condos for their positive cash flow. This fact will help to support our real estate values.
Toronto and Vancouver Real Estate Inventory May Get A Boost From AirBNB Slowdown – Better Dwelling
Canadian real estate markets may be getting another inventory headwind soon. National Bank of Canada (NBC) research estimates AirBNB hosts may contribute to oversupply later this year. As the slowdown impacts hosts, many may be incentivized to sell. By their estimates, just a quarter of hosts selling would cause inventory in cities like Toronto and Vancouver to swell.
AirBNB and Housing Inventory
AirBNB helps homeowners take existing housing stock and convert it to short-term rentals. Rather than staying in hotels, travelers can now stay in existing non-hotel stock. At first, it wasn’t a big issue when just a few people were doing it. As the platform expanded, people began buying additional housing just to operate short-term rentals. By repurposing housing that would otherwise be long-term units, cities now need additional housing. Basically, short-term rentals lead to an inventory squeeze, pushing rents and prices higher. Temporarily at least, for as long as the squeeze persists. That squeeze could end as quickly as travel did.
The Travel Industry Expects A Big Slowdown
The travel industry doesn’t expect travel to recover quickly from the pandemic. The US has approved some routes cutting plane traffic up to 90% until September. The IATA, the trade association for international airlines, also doesn’t see traffic returning to 2019 levels until at least 2023 – at the earliest. What does this mean? Fewer users of short-term rentals, and more competition from hotels for those travelers. All of this can have a big impact on real estate inventory, according to NBC numbers.
Canada’s Biggest Real Estate Markets May See Inventory Spike
If just a quarter of AirBNB inventory is sold off, NBC sees a lot more real estate listings on the market. In Vancouver, the bank estimates real estate listings would rise 12%. Montreal would see an increase of 27% in resale listings. Toronto is another story though, with inventory forecasted to rise a whopping 34%. That’s with just 25% of AirBNB exiting as hosts.
AirBNB Boost To Canadian Real Estate Inventory
The potential increase in real estate listings if 25% of AirBNB properties were listed for sale.
Source: National Bank of Canada, Better Dwelling.
The boost is another headwind for inventory rising later in the year. Inventory was already expected to rise in the coming few months. NBC economists believe this would be “exacerbating oversupply in the coming months.”
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How Is The Real Estate Market In Muskoka Post COVID19 – Hunters Bay Radio
In a brand new video podcast series, Gerry Lantaigne with Sutton Group – Muskoka Realty discuses the world of real estate in Muskoka during the Coronavirus pandemic.
Join Gerry every month as he updates you on The State of Real Estate
Watch the inaugural episode here:
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