Hazelview Investments, a private money manager that specializes in commercial real estate, has halted redemptions on its $1.4-billion Four Quadrant fund, a move that prevents its retail investors from cashing out,even as Hazelview’s new private equity backer earns a fixed 7.95-per-cent annual return.
Hazelview raised $200-million from Ares Capital in late 2022 by creating a new class of preferred share units for the global private equity firm. Unlike the fund’s ordinary units – which target an annual yield, meaning their returns vary – the preferred units promise Ares 7.95 per cent annually for three years, cash that Hazelview could otherwise have used to fund redemptions or distributions. Hazelview has the option to extend the investment for two more years, but must pay a fee to do so.
Until recently, retail investors in the Four Quadrant fund earned a yield similar to the one earned by Ares.Their average annual return has been8.1 per cent since inception. But, with the commercial real estate market wobbling, the fund has lost 1.1 per cent in 2023, leaving investors with negative returns so far this year. They gained only 0.8 per cent in 2022.
The Four Quadrant fund, which Hazelview has managed for 12 years, offers investors exposure to a mix of private and public real estate investments. It owns commercial properties, lends to real estate companies, buys public debt and corporate bonds, and invests in shares of publicly traded companies. Despite this mix – which makes up the “four quadrants” of investments – the fund is largely illiquid. Roughly 80 per cent of the portfolio is made up of assets that are hard to sell in a flash when investors want out.
Previously, redemptions were limited to 5 per cent of the fund’s total value each quarter, but in October all pending redemption requests were suspended until the end of March, according to an investor presentation. That means retail investors are now not only making much less than Ares, but they also can’t get their money out for 120 days, the maximum length of time for which Hazelview can suspend redemptions, according to the fund’s terms.
Hazelview has faced surging redemption requests for much of 2023. In June, the company told investors that the requests had jumped to $188-million, according to a client memo obtained by The Globe and Mail, and by early July they were hovering around $250-million, according to someone familiar with the company’s operations. The Globe is not identifying the source because they were not authorized to speak publicly.
Multiple private debt and real estate funds have halted or limited redemptions over the past year,often because their borrowers are grappling with higher interest costs on variable rate debt, or because investors are looking to cash out and buy ultrasafe investment products that now pay around 5 per cent annually. But Hazelview has the added difficulty of managing two investor classes that earn different returns – and also have different rights.
Under the financing terms for the $200-million fundraise from Ares last year, Ares ranks senior to all other investors “with respect to rights on distributions, liquidation, winding-up and dissolution,” according to Four Quadrant fund documents. Existing investors, despite their subordination, were not given the option to vote on bringing Ares on as an institutional backer.
In an e-mailed statement to The Globe, Hazelview said no vote was required because the fund’s limited partnership agreement provides the general partner – Hazelview – with the right to create new classes of units and fix the provisions attached to those units without the prior approval of the limited partners – that is, the retail investors.
Hazelview said it is only required to provide notice to existing investors after an amendment. It said in this case that notice was sent.
As for the redemption halt, Hazelview said the decision was made because of responsibilities “relating to liquidity management.”
Hazelview said increased volatility in Canadian government bond yieldshas “caused a wide-spread pause of capital flow in the real estate market and these market conditions have restricted Four Quadrant from exiting private investments in order to fund redemptions.”
The bulk of the Four Quadrant fund’s assets– $1-billion – are invested in what Hazelview calls private equity, which includes investments in real estate development projects. Eighty-three per cent of the assets are invested in Canada, and the projects include the T3 commercial office campus in Toronto. Within this private-equity portfolio, 52 per cent of the debt incurred by the projects has fixed interest rates, and 48 per cent has floating-rate interest.
The fund’s second-largest quadrant is made up of public equities, with $255-million invested in publicly traded real estate companies, the majority of which are in the United States. Rising interest rates have hurt real estate company valuations. The MSCI U.S. REIT index, which tracks the performance of real estate investment trusts in the U.S., is down 6.3 per cent this year.
The third quadrant is private debt, often direct mortgages, with $195-million in assets. Fifty-six per cent of these assets are loans with floating rates, and the weighted average interest rate across the entire private debt portfolio is 10.4 per cent. The fourth and final quadrant is public debt, with only $8.9-million in assets.
Investors in the fund pay a 1.5-per-cent annual management fee, plus a performance fee of 20 per cent on any earnings above a certain threshold. Retail advisers who invest their clients’ money in the Four Quadrant fund earn a trailer fee of between 0.5 per cent and 1 per cent each year.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
MONTREAL – The Quebec Professional Association of Real Estate Brokers says Montreal-area home sales rose 9.3 per cent in August compared with the same month last year, with levels slightly higher than the historical average for this time of year.
The association says home sales in the region totalled 2,991 for the month, up from 2,737 in August 2023.
The median price for all housing types was up year-over-year, led by a six per cent increase for the price of a plex at $763,000 last month.
The median price for a single-family home rose 5.2 per cent to $590,000 and the median price for a condominium rose 4.4 per cent to $407,100.
QPAREB market analysis director Charles Brant says the strength of the Montreal resale market contrasts with declines in many other Canadian cities struggling with higher levels of household debt, lower savings and diminishing purchasing power.
Active listings for August jumped 18 per cent compared with a year earlier to 17,200, while new listings rose 1.7 per cent to 4,840.
This report by The Canadian Press was first published Sept. 6, 2024.
In the quest to find cities where renters can enjoy the best of all worlds, a recent study analyzed 24 metrics across three key categories—Housing & Economy, Quality of Life, and Community. The study ranked the 100 largest cities in Canada to determine which ones offer the most to their renters.
Here are the top 10 cities that emerged as the best for renters in 2024:
St. John’s, NL
St. John’s, Newfoundland and Labrador, stand out as the top city for renters in Canada for 2024. Known for its vibrant cultural scene, stunning natural beauty, and welcoming community, St. John’s offers an exceptional quality of life. The city boasts affordable housing, a robust economy, and low unemployment rates, making it an attractive option for those seeking a balanced and enriching living experience. Its rich history, picturesque harbour, and dynamic arts scene further enhance its appeal, ensuring that renters can enjoy both comfort and excitement in this charming coastal city.
Sherbrooke, QC
Sherbrooke, Quebec, emerges as a leading city for renters in Canada for 2024, offering a blend of affordability and quality of life. Nestled in the heart of the Eastern Townships, Sherbrooke is known for its picturesque landscapes, vibrant cultural scene, and strong community spirit. The city provides affordable rental options, low living costs, and a thriving local economy, making it an ideal destination for those seeking both comfort and economic stability. With its rich history, numerous parks, and dynamic arts and education sectors, Sherbrooke presents an inviting environment for renters looking for a well-rounded lifestyle.
Québec City, QC
Québec City, the capital of Quebec, stands out as a premier destination for renters in Canada for 2024. Known for its rich history, stunning architecture, and vibrant cultural heritage, this city offers an exceptional quality of life. Renters benefit from affordable housing, excellent public services, and a robust economy. The city’s charming streets, historic sites, and diverse culinary scene provide a unique living experience. With top-notch education institutions, numerous parks, and a strong sense of community, Québec City is an ideal choice for those seeking a dynamic and fulfilling lifestyle.
Trois-Rivières, QC
Trois-Rivières, nestled between Montreal and Quebec City, emerges as a top choice for renters in Canada. This historic city, known for its picturesque riverside views and rich cultural scene, offers an appealing blend of affordability and quality of life. Renters in Trois-Rivières enjoy reasonable housing costs, a low unemployment rate, and a vibrant community atmosphere. The city’s well-preserved historic sites, bustling arts community, and excellent educational institutions make it an attractive destination for those seeking a balanced and enriching lifestyle.
Saguenay, QC
Saguenay, located in the stunning Saguenay–Lac-Saint-Jean region of Quebec, is a prime destination for renters seeking affordable living amidst breathtaking natural beauty. Known for its picturesque fjords and vibrant cultural scene, Saguenay offers residents a high quality of life with lower housing costs compared to major urban centers. The city boasts a strong sense of community, excellent recreational opportunities, and a growing economy. For those looking to combine affordability with a rich cultural and natural environment, Saguenay stands out as an ideal choice.
Granby, QC
Granby, nestled in the heart of Quebec’s Eastern Townships, offers renters a delightful blend of small-town charm and ample opportunities. Known for its beautiful parks, vibrant cultural scene, and family-friendly environment, Granby provides an exceptional quality of life. The city’s affordable housing market and strong sense of community make it an attractive option for those seeking a peaceful yet dynamic place to live. With its renowned zoo, bustling downtown, and numerous outdoor activities, Granby is a hidden gem that caters to a diverse range of lifestyles.
Fredericton, NB
Fredericton, the capital city of New Brunswick, offers renters a harmonious blend of historical charm and modern amenities. Known for its vibrant arts scene, beautiful riverfront, and welcoming community, Fredericton provides an excellent quality of life. The city boasts affordable housing options, scenic parks, and a strong educational presence with institutions like the University of New Brunswick. Its rich cultural heritage, coupled with a thriving local economy, makes Fredericton an attractive destination for those seeking a balanced and fulfilling lifestyle.
Saint John, NB
Saint John, New Brunswick’s largest city, is a coastal gem known for its stunning waterfront and rich heritage. Nestled on the Bay of Fundy, it offers renters an affordable cost of living with a unique blend of historic architecture and modern conveniences. The city’s vibrant uptown area is bustling with shops, restaurants, and cultural attractions, while its scenic parks and outdoor spaces provide ample opportunities for recreation. Saint John’s strong sense of community and economic growth make it an inviting place for those looking to enjoy both urban and natural beauty.
Saint-Hyacinthe, QC
Saint-Hyacinthe, located in the Montérégie region of Quebec, is a vibrant city known for its strong agricultural roots and innovative spirit. Often referred to as the “Agricultural Technopolis,” it is home to numerous research centers and educational institutions. Renters in Saint-Hyacinthe benefit from a high quality of life with access to excellent local amenities, including parks, cultural events, and a thriving local food scene. The city’s affordable housing and close-knit community atmosphere make it an attractive option for those seeking a balanced and enriching lifestyle.
Lévis, QC
Lévis, located on the southern shore of the St. Lawrence River across from Quebec City, offers a unique blend of historical charm and modern conveniences. Known for its picturesque views and well-preserved heritage sites, Lévis is a city where history meets contemporary living. Residents enjoy a high quality of life with excellent public services, green spaces, and cultural activities. The city’s affordable housing options and strong sense of community make it a desirable place for renters looking for both tranquility and easy access to urban amenities.
This category looked at factors such as average rent, housing costs, rental availability, and unemployment rates. Québec stood out with 10 cities ranking at the top, demonstrating strong economic stability and affordable housing options, which are critical for renters looking for cost-effective living conditions.
Québec again led the pack in this category, with five cities in the top 10. Ontario followed closely with three cities. British Columbia excelled in walkability, with four cities achieving the highest walk scores, while Caledon topped the list for its extensive green spaces. These factors contribute significantly to the overall quality of life, making these cities attractive for renters.
Victoria, BC, emerged as the leader in this category due to its rich array of restaurants, museums, and educational institutions, offering a vibrant community life. St. John’s, NL, and Vancouver, BC, also ranked highly. Québec City, QC, and Lévis, QC, scored the highest in life satisfaction, reflecting a strong sense of community and well-being. Additionally, Saskatoon, SK, and Oshawa, ON, were noted for having residents with lower stress levels.
For a comprehensive view of the rankings and detailed interactive visuals, you can visit the full study by Point2Homes.
While no city can provide a perfect living experience for every renter, the cities highlighted in this study come remarkably close by excelling in key areas such as housing affordability, quality of life, and community engagement. These findings offer valuable insights for renters seeking the best places to live in Canada in 2024.
