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Private Equity Raises Real Estate Money Too Fast to Spend It – BNN

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(Bloomberg) — Private equity real estate investors are raising money faster than they can spend it.

U.S. funds have amassed a record $287.8 billion for commercial-property deals, according to Preqin. That’s up 11% from a year earlier and 57% more than at the end of 2019. 

The pileup of capital affirms the bet that real estate’s rally will continue while inflation rises, stocks wobble and bond returns lag — and despite new Covid-19 variants that could threaten a comeback for offices, hotels and malls. U.S. property investment volume is expected to rise by 5% to 10% next year as firms try to spend down their dry powder, according to CBRE Group Inc.

Private equity giant Blackstone Inc. raised $33.5 billion for real estate deals in the first three quarters of this year while deploying only $25.3 billion. The challenge is that clients — pensions, endowments, high-net-worth individuals — are hungry for more.

“Investors view real estate as a safe place to be in an inflationary and low-rate environment,” Nadeem Meghji, Blackstone’s head of America’s real estate, said in an interview.

The volume of cash chasing deals helped drive up U.S. commercial-property prices an average of 18% in the 12 months through November, led by a 22% jump in warehouses and other industrial real estate, according to Real Capital Analytics Inc. An expected surge of distressed deals hasn’t materialized, freezing deployment of more than $91 billion in dry powder.

Sales have already set an annual record, with $614 billion booked in the first 11 months of 2021, Real Capital data show. Some of the increase stems from pandemic-delayed deals that finally closed. But many sellers also moved to reap profits. 

GTIS Partners unloaded $1.6 billion of real estate this year and is routing capital to construct new single-family rental homes, apartments and warehouses, which can generate higher returns than existing buildings. 

“Our trade is to sell old and build new,” said Tom Shapiro, president of GTIS, a New York-based real estate investor with $4.2 billion in assets. “Our focus is on putting money to work versus raising money.” 

While stepping up direct investment, private equity is also contributing to the record $4 trillion of debt outstanding for real estate, lending as much as $100 billion this year, according to the Mortgage Bankers Association. The private equity money is funding construction, remodeling and other relatively short-term borrowing that’s often too risky for banks, charging higher interest rates in exchange for more generous terms, such as greater loan-to-value ratios and no prepayment penalties. 

“We are getting paid to take risks,” said Warren de Haan, co-chief executive officer of Acore Capital. He expects to lend $10 billion next year, up from $7 billion in 2021.

So far, it’s been hard to make bets far out on the risk spectrum. Acore announced a $1 billion fund for hotel rescue financing in February but has only deployed $200 million, and de Haan said he doesn’t anticipate more deals unless new Covid variants topple the the travel rebound. 

As the pandemic drags on and remote work becomes more acceptable, office buildings may be the next big target for investors seeking discounted properties. Current owners are reallocating money to other real estate sectors, said Kristin Gannon, managing director at investment bank and brokerage Eastdil Secured.

“Several institutional investors are unwinding office,” she said.

Blackstone is targeting property types with higher demand than supply, based on demographic and technological trends — life-science labs instead of traditional offices, warehouses rather than malls. This week, the firm agreed to buy apartment landlord Bluerock Residential Growth REIT Inc. in a deal valued at $3.6 billion. 

“In an inflationary environment, if you own assets with pricing power,” Meghji said, “they should outperform.”

©2021 Bloomberg L.P.

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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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