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What Would Equitable Real Estate Finance Look Like? – Non Profit News – Nonprofit Quarterly

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The Art of RE-Membering How to Be Human,” Lola Audu

“Real estate is a defining issue of America,” noted Avery Ebron, who directs operations at The Guild in Atlanta. Ebron made those remarks at a press briefing last month at the release of the Inclusive Capital Collective (ICC)’s first “black paper,” titled Building Community Wealth: Shifting Power and Capital in Real Estate Finance. Ebron coauthors that paper, along with The Guild’s CEO, Nikishka Iyengar, and Chicago Trend CEO Lyneir Richardson. The report provides an important framework for not only identifying how structural racism disadvantages real estate development by and for BIPOC communities, but also identifying specific changes that could greatly reduce those barriers.

ICC defines itself as a “growing network of community fund managers and entrepreneur support organizations who have been designing and developing shared technical and financial infrastructure for aggregating and deploying financial capital and other resources to entrepreneurs and communities of color in the US.” Founded in the fall of 2019 at a gathering in Denver, the group is being incubated by Zebras Unite Cooperative, which formed in 2015 and seeks to promote capital access for socially minded businesses, especially businesses owned by women and people of color.

Often, discussion of real estate focuses on residential property and the gap between Black and white rates of homeownership. Here, however, the focus is less on residential real estate and more about the actual business of real estate development. As Amanda Abrams wrote in the New York Times earlier this year, “Commercial real estate remains a field in which the vast majority of developers are white.” Abrams noted that a 2013 industry survey found that only 4.4 percent of commercial real estate professionals were Black. A more recent 2020 survey from the Urban Land Institute finds that only five percent of its members were Black, while 82 percent were white.

In their paper, the authors note that, “Current community development practices and institutions tend to focus on outputs (notably affordable housing units) over outcomes that create structural change.” In their report, Iyengar and her coauthors contend that a commercial real estate industry in which Black and other real estate entrepreneurs of color played a larger role would not simply be more diverse and inclusive but would place the goal of community wealth building at its center. A “community centered” real estate market would, according to the authors:

  • Prioritize affordable operating space for local BIPOC-owned business
  • Be more democratic and involve community organizers, small business owners, and residents in the development process
  • Focus on providing space for key community goods, such as groceries and community meeting space
  • Use infill development to support affordable rental and homeownership that stabilizes existing BIPOC neighborhoods
  • Create opportunities for Black, Indigenous, and other residents of color to have an ownership interest in commercial real estate
  • Better link residents and businesses to public resources such as technical assistance, financial literacy programming, and business grants

Redesigning Real Estate for Equity

An important contribution of the report is that it provides a thoughtful list of both obstacles to equitable real estate development and potential solutions. As Joe Neri, CEO of IFF, a leading Chicago-based community development financial institution (CDFI), has explained, one of the many ways structural racism impacts real estate is that appraisals in BIPOC neighborhoods are lower than in white neighborhoods, making it harder to finance projects (since loans max out at a percentage of appraised value), requiring a developer to raise more cash.

As Neri put it, “Old government-sanctioned bank regulations drove down the property/land value for decades, and now current bank regulations prevent investment in those areas where appraised-values are low.” Building on Neri, the ICC report calls for “income-based lending” (i.e., lending based on a percentage of income the project is expected to generate), which is forward-looking, rather than appraisals, which bake in past discrimination.

The authors describe specific loan products that could bring down the cost of financing for BIPOC real estate developers. This includes “patient equity,” which the report authors define as having long time horizons (e.g., 10 years), low interest rates (zero to five percent), and provisions that protect development projects from early costs (such as having interest-only payments for the first 12 to 24 months of the loan). Foundations, the authors indicate, would be the likely providers of such financing, and this funding might be five percent of the project’s value. Another 20 percent of the financing structure could be “friendly debt,” such as low-interest loans from CDFIs. The remaining 75 percent could be standard bank loans. In other words, while the need for philanthropic support is clear, the report also shows how limited philanthropic dollars can leverage more standard commercial financing.

The authors also describe additional steps to overcome barriers—for example, easier access to lines of credit, reduction of zoning restrictions, loan guarantees (perhaps provided by CDFIs or foundations) to reduce interest costs, and partnerships with public land banks to help BIPOC real estate developers obtain low-cost land.

In the report’s conclusion, the authors note that “there are an abundance of Black developers creating equitable and contextualized real estate solutions for their communities—transforming the way real estate development is done and turning it into a vector for wealth creations for all Americans.” In the report’s appendices, the authors document this through case studies of BIPOC-led real estate ventures in four cities—Philadelphia, Chicago, Atlanta, and Florida’s Fort Myers.

At the report launch, Kevin Williams, a member of the Black Squirrel Collective in Philadelphia, spoke to the urgency of the work. “You see a lot of studies and research being done about the plight of minorities in America,” Williams observed. “But you don’t see any follow-up. Somebody writes a paper and says Black people are poor. Yeah, we know that. But has anyone done a follow-up to see what has been done to address that problem?… We need to continue to be vocal…and we have to continue to drive the point that equity has to occur.”

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Artis REIT puts Calgary office portfolio up for sale | RENX – Real Estate News EXchange

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IMAGE: Artis REIT is marketing the remaining six buildings in its Calgary office portfolio. (Courtesy Artis REIT)

Artis REIT is marketing the remaining six buildings in its Calgary office portfolio. (Courtesy Artis REIT)

Artis Real Estate Investment Trust is selling the remainder of its Calgary office portfolio which includes six buildings comprising close to 700,000 square feet.

It is part of the REIT’s overall strategy of divesting Calgary office property, which began in late 2016, to concentrate on other real estate assets.

At its peak in mid to late 2016, just prior to its shift in its strategy, Artis (AX-UN-T) owned in excess of 2.5 million square feet of office property in Calgary across approximately 20 properties.

“Artis pursued a significant portfolio shift away from Calgary office to prioritize capital allocation to higher-growth strategies, particularly emphasizing the U.S.A. industrial development program,” said Corey Colville, head of strategy, real estate, at Artis.

The Calgary portfolio for sale includes:

Canadian Centre, 156,772 square feet;
417 14th Street building, 17,517 square feet;
Alex Building, 61,847 square feet;
Campana Place, 49,123 square feet;
Heritage Square, 315,152 square feet;
– and Hillhurst Building, 63,394 square feet.

Colville said the present occupancy of the Calgary office portfolio is about 70 per cent.

“Strategic decision” to exit Calgary office sector

“We still have a very robust portfolio of retail and industrial properties in Calgary, but we’ve made this strategic decision to market our remaining Calgary office buildings,” said Colville.

Artis has five retail properties in Calgary of over 343,000 square feet and six industrial properties with over 362,000 square feet.

“Over the past trailing few years, Artis has marketed and successfully transacted on much of their Calgary office portfolio. These remaining six assets, we’re of the view that there’s a terrific opportunity for the market to capitalize on a substantial discount (to) replacement cost and create significant value,” said Colville.

“We’ve had interest from owner/user investors, from repositioning and converter investors as well as office investors.

“With these properties, we think with the amount of potential there’s just fundamentally an opportunity in the market for local investors to capitalize on.”

Colville said Artis has held some of the Calgary office assets for more than a decade. On balance, they’ve been longer-tenured assets for Artis.

“At the peak, (Calgary office) was a really significant component of Artis’ total valuation. At this point of time, the remaining assets in relation to our gross book value is actually quite immaterial and the contributory cash flows from them,” he said.

“We’re looking to focus our efforts in a more strategic way. We think that we’ll be very dominant long-term and competitive landlords and we don’t feel that this is going to be the case now that we’ve reduced our position so much in the Calgary office market.”

Downtown vacancy about 30 per cent

IMAGE: Corey Colville, head of strategy, real estate, at Artis REIT. (Courtesy Artis)

Corey Colville, head of strategy, real estate, at Artis REIT. (Courtesy Artis)

Calgary’s office market has struggled for the past seven years since the collapse of oil prices in late 2014. That led to massive layoffs, particularly in the city core where many energy companies had their corporate head offices. Obviously, fewer people has meant less need for office space throughout the city.

The downtown Calgary office vacancy rate has hovered around the 30 per cent mark for some time.

“You know, we’re not quite as pessimistic as some of the news headlines would indicate. Naturally, and quite obviously, there’s been a struggle in the market, but we are confident that Calgary is one of the most important cities in Canada and that Canada is a phenomenal country to invest in,” said Colville.

“In time, we believe that Calgary will make a strong resurgence and comeback and we believe that Calgary will benefit from the wave of immigration to come and the rejuvenation to the energy markets over time.”

The Artis REIT property portfolio

In Q2 2016, Artis had 260 properties of about 26.6 million square feet overall; 191 properties in Canada with about 17.1 million square feet and 69 properties in the U.S.A. with about 9.5 million square feet.

At that time, it owned 73 properties in Alberta with about 6.7 million square feet. By the end of Q2 2021, that number had decreased to 40 properties with about 2.7 million square feet.

At the end of Q2 2021, Artis had 133 Canadian properties with about 10.4 million square feet and 70 U.S. properties with about 11.6 million square feet for an overall total of 203 properties and 22 million square feet.

The REIT’s portfolio at the end of the second quarter was 42.7 per cent office, 38.2 per cent industrial and 19.1 per cent retail.

Its overall occupancy was 92.3 per cent in Canada; 97.7 per cent for industrial, 83.3 per cent in office and 90.8 per cent in retail. In the U.S., its overall occupancy was 91.8 per cent comprising 94.3 per cent for industrial and 87.4 per cent for office.

Colville said the third quarter will feature a further and material shift of the portfolio following the sale of 27 of 28 of its Greater Toronto Area industrial properties. The 28th property is also for sale.

Other recent portfolio activity

– Acquired a parcel of industrial development land in Minnesota’s Twin Cities Area, for US$1.5 million.

– Disposed of an office property in Calgary, three retail properties in Regina  and a portion of a retail property in Fort McMurray, Alta., for an aggregate price of $62 million.

– On June 30, Artis entered into an agreement to sell the GTA Industrial Portfolio, comprising 28 industrial properties located in the Greater Toronto Area. On July 15, the REIT closed on 26 of the 28 properties for $696.7 million. One of the remaining properties is expected to close in Q3 2021 and generate gross proceeds of $26.7 million. The remaining property will be actively marketed for sale.

– Subsequent to June 30, it also disposed of the King Edward industrial portfolio, comprised of two properties in Winnipeg, for $3.2 million.

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Reopening of borders may fuel a fresh round of Canadian real estate madness – Calgary Herald

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New arrivals may further stress Canada’s already tight housing markets

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Just when you thought you could catch a break from pandemic-fuelled housing madness, experts are predicting the reopening of the U.S.-Canada border, and Canada’s commitment to boost immigration, could fuel even higher levels of demand. All those new arrivals, students and family members rejoining loved ones will need places to live. And Canada’s housing supply is tight.

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“If you think it’s expensive now, just wait,” says Tom Storey, a real estate agent with Royal LePage in Toronto. “The numbers tell us that prices should go up because there’s a lot of people coming here and we’re not building enough new properties.”

Canadian government raising immigration targets

Exactly when new arrivals will impact housing markets is vague. Border entry is limited to those who can show they’re fully vaccinated.

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But, once the pandemic’s threat has largely passed, the U.S. and Canadian governments have both expressed hopes that border traffic will return to normal.

Likewise, while Canada’s immigration goals call for 401,000 new permanent residents this year (reaching 1.2 million by 2023), dates aren’t specific and COVID-19 will continue to delay things in the short term.

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Canada’s borders have been closed to most immigrants for much of the pandemic. But as the country’s population ages, economic immigration from workers and employers who ultimately become permanent residents has become more important.

“The key to both short-term economic recovery and long-term prosperity is immigration,” Marco Mendicino, Canada’s Minister of Immigration, Refugees and Citizenship, said at a news conference where he revealed the country’s goals through 2023.

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The newcomers will put pressure on housing — either as homebuyers or renters.

In addition to new permanent residents, the number of international students in Canada is also rebounding. Those numbers were rising sharply before the pandemic, growing to 402,500 in 2019 — a 15 per cent increase from 2018, according government data.

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Those with temporary work permits will also grow the population. Almost 70,000 more people were issued work permits in 2019 (a total of 404,000) and 63,020 people with temporary work permits were granted permanent residency.

Newcomers will need housing

Home prices were rising pre-COVID-19, due to a lack of housing supply combined with low mortgage rates and strong consumer demand.

Amid the new immigration policies, a growing student population and a proposed childcare system that’s expected to give families room to save more of their income, demand for housing will only grow, according to a recent report from Scotiabank.

Yet, home construction hasn’t kept up with demand for several years.

This year, as fewer newcomers have entered the country, the ratio of home completions to population has improved slightly. That’s likely to worsen as the government meets its immigration targets, the report says.

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To avoid a continued rapid acceleration in home prices, experts argue immigration targets should align with housing policies that help meet the demand.

“Our federal government’s decision to raise immigration targets today without making the corresponding supply-side housing policy changes needed to increase supply is a decision to inflate home prices out of reach of most Canadians tomorrow — including many of our newest fellow citizens,” John Pasalis, the president of Toronto-based Realosophy Realty, says in a recent market report.

Immigration to impact the resale and rental markets

While Canada’s major cities have seen double-digit home price growth in recent years, the market overall appears to be calming.

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July sales slipped 3.5 per cent on a month-over-month basis, according to the Canadian Real Estate Association, and sales are down a cumulative 28 per cent from a March 2021 peak.

Home sales in Canada fell a significant 14 per cent year over year in August, the Canadian Real Estate Association (CREA) said Sept. 15. Still, the association says, home sales in this country remain historically strong. And a lack of supply of homes for sale is pushing prices to record levels in Canada’s most populous cities.

The rental market, too, has been down from its high — in part due to restrictions on Airbnb units, which released bundles of short-term rentals into the traditional leasing market.

“When the borders open and [people] go back to university, you’re going to see an increase in the rental market,” Storey says. “Then it will flood into the sale market.”

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But analysts say the property market is facing headwinds — namely inflation and the specter of rising interest rates.

And many of the Canadians who wanted to buy a home in order to get more space amid the pandemic, or even downsize, have already done so, says Adil Dinani of the Dinani Group for Royal LePage West in Vancouver. That may help cool off prices in the months to come.

Building more housing also will help.

“Supply is the common denominator in most of these major markets,” Dinani says. “There’s a shortage of quality inventory.”

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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Skyline to sell Deerhurst, Horseshoe, Blue Mountain land – Real Estate News EXchange

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IMAGE: Deerhurst Resort in Huntsville is being sold by Skyline to Freed Corp. (Courtesy Skyline)

Deerhurst Resort in Huntsville is being sold by Skyline Investments to Freed Corp. (Courtesy Skyline)

Freed Corp. will pay $210 million to acquire Ontario’s Deerhurst Resort, Horseshoe Valley Resort and development lands at Blue Mountain Resort from Skyline Investments Inc., the firms announced Monday morning.

The transaction involves the creation of a new subsidiary by Toronto-based Freed, to be called Resort Communities LP. Skyline will take a 29 per cent equity stake in Resort LP, which represents about $33 million of the purchase price.

The transaction is expected to close on or about Oct. 31.

“This is a milestone for Skyline that provides significant new liquidity to capitalize on our stated strategy to redeploy our investment and operational focus from resorts and development lands into hotels,” Skyline CEO Blake Lyon said in the announcement.

“This transaction represents one of the largest resort sales in Canada in the last 15 years, according to Beechwood Real Estate Advisors who advised Skyline on the transaction, and we are excited to be a 29 per cent partner in Resort LP along with Freed, who will now own an expanded portfolio of premier, drive-to resorts in Ontario, Canada.”

Well-known Ontario resorts

The properties are among the best-known resorts in Ontario, all located in prime vacation regions; Blue Mountain is at Collingwood; Deerhurst in Huntsville; and Horseshoe Valley is just outside Barrie.

“This transaction allows us to realize the full net asset value of our Canadian resorts, while still participating in the value creation that Freed’s proven development team can produce,” Lyon said in the release.

“Skyline’s investment partner in Blue Mountain, Serruya Private Equity, also expressed their satisfaction and support for this transaction.”

As part of the transaction, Freed will roll its existing interest in Muskoka Bay resort into Resort LP, at a $90 million valuation.

Muskoka Bay is an 869-acre four-season luxury resort community in Gravenhurst, between Horseshoe and Deerhurst. Muskoka Bay has 65 hotel rooms and villas owned or managed by Freed and one of Canada’s top-10 golf courses, as ranked by ScoreGolf.

“The acquisition of these iconic resort properties will allow us to execute our strategy of modernizing the traditional resort community market to the highest and best use through design-driven development and benefits of world-class amenities with all season access,” said Freed’s founder and CEO, Peter Freed, in the release.

“In addition, the acquisition of these resorts further stimulates the growth in the hotel and resort sectors for Freed.”

Financial details of the transaction

Other financial details of the transaction involve several components in addition to the equity stake in Resort Communities LP.

Upon closing, Skyline will receive a cash payment of approximately $109 million, and after debt and bond repayments, taxes and minority interest payouts, is expected to have approximately $30-$35 million.

A further $80 million in payments (including approximately $12 million in interest) is expected to follow over the ensuing 24 to 48 months. Net income before tax relating to the transaction on closing is expected to be $35-$45 million.

After tax, net income is expected to be $25-$35 million and the net impact on the company’s equity is expected to be $15-$25 million.

The deal also includes options for Resort LP to acquire Skyline’s 29 per cent interest in December 2022, and put and call options for Skyline and Freed at the end of years four and five following the transaction.

Skyline will host an investor call to discuss the transaction on Sept. 30 at 9:30 a.m. (Israel time).

About Skyline, Freed and Serruya

Skyline is a Canadian company that specializes in hospitality real estate investments in the U.S. and Canada. It owns 18 income-producing assets with 3,266 hotel rooms and 85,238 square feet of commercial space and development lands with rights for approximately 2,315 residential units located in three main areas north of Toronto.

The company is traded on the Tel Aviv Stock Exchange (SKLN) and is a reporting issuer in Canada.

Freed Developments was founded over 25 years ago and has grown to become one of the largest private developers operating in the City of Toronto.

Freed has completed over 30 projects and has expanded to include vertical operating divisions in construction management, real estate and Freed Hospitality, a lifestyle-experience hotel, resort, restaurant and nightlife portfolio.

Serruya Private Equity is a global private equity firm in a broad range of asset classes with an emphasis on retail and consumer packaged goods.

SPE’s principals have developed brands including Weight Watchers, Tropicana, Godiva Ice Cream, Cold Stone Creamery, Round Table Pizza, Great American Cookies, Marble Slab Creamery, Hot Dog on a Stick, Taco Time, Blimpie Subs, and Pretzelmaker.

SPE’s platform currently includes global brands Yogen Früz, Pinkberry and Swensens with over 1,300 stores across 40 countries.

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