What a gorgeous day in Kitchener Waterloo – it’s sunny, warm(ish), and dry!
Earlier this week we looked at the strength in the investment, student (Student Rental Market Update – Waterloo, Ontario) and commercial real estate (Commercial Real Estate Market Update – Kitchener Waterloo & Cambridge) markets in Kitchener Waterloo, Ontario.
It’s not just KW – the commercial real estate (CRE) market is gearing up all over. Let’s take a look at a few stories from the Canadian CRE world.
On Thursday, the New Brunswick Business Journal had a story about Kilam Properties Inc (listed on the TSX as KMP) looking to acquire up to $150 million in new properties this year. Kilam is a major owner of apartment buildings in Atlantic Canada, and is looking to potentially expand into areas including Kitchener Waterloo, Ontario
Fraser said the plan for Killam is to spend up to $150 million on acquisitions in each of the next five years.
The Halifax-based company is already one of the country’s largest residential landlords, with 118 apartment buildings in Atlantic Canada’s six major urban centres.
The company also runs 55 so-called manufactured home communities across Canada, with the majority of those trailer parks located in Ontario.
Overall, Killam owns and operates 18,150 units in 173 properties, representing total real estate assets of roughly $720 million.
But in 2009, the company’s pursuit of new properties came to a halt, largely because of the sagging economy.
On Wednesday, Fraser again said the company is examining the Toronto, Ottawa and Kitchener-Waterloo markets for buildings to pull under the Killam banner.
“We continue to see opportunities for Killam to grow in Ontario by focusing on high-quality properties, including newer buildings and more established properties in prime locations,” he said.
Thursday’s National Post has a story about $500 million worth of Real Estate Investment Trust (REIT) IPOs coming to market this year, including one by a landlord with significant holdings of apartment buildings in Kitchener Waterloo, Transglobe:
It’s been four years since the real estate investment trust sector last saw an initial public offering on the Toronto Stock Exchange but that is about to change, with IPOs worth about $500-million expected in coming weeks.
The Financial Post has learned TransGlobe Property Management will be the latest private company to go public, with an IPO estimated to be worth between $200-million to $250-million, in a deal led by CIBC World Markets. The TransGlobe deal will likely wait in the wings as the market consumes a $150-million IPO from Northwest Healthcare Properties that has already filed with regulators.
There are a couple of interesting tidbits about Transglobe throughout the article, including: “It’s not clear whether all of its buildings would be included because some of its properties may have too much leverage to be palatable for a REIT.”
This has caused some people to say:
“We will sit down and listen to the story and see what happens, but these really are not of the quality I am looking for,” said Sandy McIntyre, chief investment officer of Sentry Select, about the current deals on the table. BPO Properties is another story. “I’d rather see a big industrial portfolio or office portfolio come forward. The BPO conversation could be used as an opportunity by Brookfield to sell down its position.”
Looking at why we’re seeing these offerings come to market now, and why the public will likely show alot of interest in them:
As it stands now the S&P/TSX 60 has no real-estate companies, something Mr. McIntyre figures could change.
“As we go into the next decade, real estate with yield is going to be a beneficiary.”
For now, the sector will have to be happy with some mid-priced initial public offerings.
The NorthWest deal, which includes 45 health care-related buildings, has been priced to yield 7.25% to 8.25%.
LeisureWorld is being priced in the 8%-to-9% range. Investment banking sources say both deals are attracting plenty of interest.
It’s not hard to understand why there would be demand for REIT product, when you consider the dearth of IPOs. Crombie REIT was the last TSX offering, in early 2006.
“I think real-estate investment trusts proved their worth in this dry spell. They kept their vacancy rates [low] and most of them continued their distribution,” said John O’Bryan, vice-chairman of CB Richard Ellis.
Also in the news: Tim Horton’s is renovating and expanding many of its stores, as well as adding new-format locations:
The iconic Ontario-based company known for its coffee, doughnuts and light meals says it expects 900 new stores of various formats by 2013.
They would include 600 stores in Canada where Tim Hortons already has more than 3,000 locations under its banner.
Up to 60 locations in Canada will be converted to include the Cold Stone Creamery concept in partnership with an American ice cream chain.
The restaurant operator says it plans to spend $180 million to $200 million this year to support its growth initiatives.
That’s a pretty big investment in commercial real estate infrastructure!
If you have questions or comments on the commercial real estate market, leave a comment below, or email me at Benjamin@BenjaminBach.com, or call me now at 519-772-4376