The interim chief executive officer at Slate Office REIT SOT-UN-T is determined to get ahead of an expected flood of distressed office building sales.
Earlier this month, Brady Welch put $120-million worth of properties up for sale – roughly 10 per cent of the company’s portfolio. The REIT also sold a two-tower complex in Mississauga for $25.6-million.
Slate, like many commercial real estate owners, is scrambling to pay down debt taken on when interest rates were far lower and office buildings far fuller. The Toronto-based REIT owes lenders a total of $1.2-billion.
“We are trying to be a first mover in those things,” Mr. Welch said on a Feb. 16 conference call. “I’m not trying to say that it’s the most robust market to sell assets. We’re realistic on where we are, but I think we want to be ahead of it and move forward.”
The price of Slate REIT’s units fell by 81 per cent over the past year. In the face of serious headwinds, Mr. Welch has made the tough decision facing many REIT operators. Slate is well down the road on selling office properties in a weak market.
Other CEOs are determined to gut out the downturn, on expectations of lower rates and an increasing number of employees returning to offices in the not-too-distant future. The executives run REITs that are cutting cash distributions to unit holders, but holding off on property sales.
Get this call right, and the sell-off in REITs over the past year will be viewed as a buying opportunity – a time when units dropped in price, then bounced back. Make the wrong decision, and lenders could end up owning the portfolio, while equity investors get nothing.
Mr. Welch’s background makes his an informed voice. He’s been something of a contrarian as co-founder of the office REIT’s parent, Slate Asset Management, consistently buying properties when others were selling to build a $13-billion portfolio of retail, residential and office properties over two decades. He’s also a veteran distressed real estate investor who spent seven years at New York-based hedge fund Fortress Investment Group.
Slate is in talks with potential buyers of several office buildings and is likely sell one property at a time. Mr. Welch said the company is trying to manage the sales in a “prudent and a functional manner,” adding that “if you did a large transaction, that would be difficult.”
Other office property owners have revealed plans for potentially large transactions. Last week, Edmonton-based Melcor REIT suspended its monthly distributions and started a strategic review of the entire company, overseen by investment bank DLA Piper (Canada) LLP. Melcor REIT owns 38 properties across Western Canada – with half the portfolio made up of office buildings – and owes lenders $420-million.
“We do see current macro uncertainty and interest rate volatility as factors which introduce some complexity to the execution of potential transactions,” said Tom Callaghan, analyst at RBC Capital Markets, in a report on the REIT, which is controlled by Melcor Developments Ltd.
Market dynamics make it easy for REIT CEOs to do anything possible to avoid selling properties. Buyers will have the upper hand in the commercial real estate market for the foreseeable future. Private equity funds such as Crown Realty Partners, which bought Slate’s buildings in Mississauga, can have their pick of properties and push for bargain prices. Crown Realty raised a $260-million fund in 2021 to invest in office properties, just as the real estate market began to roll over.
Right now, even experienced executives are struggling with the basic question of what an office tower is worth.
“There’s uncertainty in every level of the market,” said Michael Cooper, Dream Office REIT president, in a conference call earlier this month. “It’s a very unusual environment.”
As first-movers such as Slate Office REIT continue to sell buildings, the rest of the industry – and lenders – will get a sense of property values, and the best path forward.
“The market is starting to move, office buildings are trading,” Mr. Cooper said.
He said once a few more deals get done, “we will have certainty around valuation.”
Has Slate’s Mr. Welch made the right call? Here’s one way to judge the move to sell office buildings in a tough market: Even if he’s made the wrong decision, Mr. Welch is likely to be a survivor.
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.
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.
VANCOUVER – Voters along the south coast of British Columbia who have not cast their ballots yet will have to contend with heavy rain and high winds from an incoming atmospheric river weather system on election day.
Environment Canada says the weather system will bring prolonged heavy rain to Metro Vancouver, the Sunshine Coast, Fraser Valley, Howe Sound, Whistler and Vancouver Island starting Friday.
The agency says strong winds with gusts up to 80 kilometres an hour will also develop on Saturday — the day thousands are expected to go to the polls across B.C. — in parts of Vancouver Island and Metro Vancouver.
Wednesday was the last day for advance voting, which started on Oct. 10.
More than 180,000 voters cast their votes Wednesday — the most ever on an advance voting day in B.C., beating the record set just days earlier on Oct. 10 of more than 170,000 votes.
Environment Canada says voters in the area of the atmospheric river can expect around 70 millimetres of precipitation generally and up to 100 millimetres along the coastal mountains, while parts of Vancouver Island could see as much as 200 millimetres of rainfall for the weekend.
An atmospheric river system in November 2021 created severe flooding and landslides that at one point severed most rail links between Vancouver’s port and the rest of Canada while inundating communities in the Fraser Valley and B.C. Interior.
This report by The Canadian Press was first published Oct. 17, 2024.
