Canada

Garry Marr,  Financial Post 

Brett Gundlock, National Post

Ugo Bizzarri’s Timbercreek Asset Management Inc. already owns 9,000 apartment units, mostly in southern Ontario, but also in Ottawa, Halifax and Montreal. The firm is in expansion mode, but the last place you’ll see it raising money is in the public markets.

“Apartments are very predictable and very stable,” says Mr. Bizzarri, who has been investing in the apartment sector for about 10 years on behalf of institutional investors.

While stock markets have been anything but stable, apartment buildings generally held their value through the recession because of steady financing, low vacancy rates and a supply-constrained environment created by government regulations.

All the water-cooler talk may be about the red-hot housing market, but as apartment owners are quick to point out, about one-third of Canadians still don’t own.

Apartment vacancy rates across Canada remain relatively low — 2.7% in April 2009, according to Canada Mortgage and Housing Corp. That was slightly up from the 2.6% of apartments vacant a year earlier.

“Unlike an office building, you don’t have one big tenant like a bank that goes away, you have 1,000 tenants with a thousand leases. They are not going to all leave at once,” says Mr. Bizzarri.

At the same time, government rules such as rent control mean few apartments will be built, leaving the existing stock in high demand. Moreover, mandated rent increases are part of the landscape in most rent-controlled environments. The average two-bedroom apartment was renting for $827 a month in April, up about 2.9% from a year ago.

“But it’s also hard to find product because they don’t often come up for sale,” says Mr. Bizzarri, who recently bought a 10-building portfolio in London, Ont.

Derek Lobo, chief executive of Burlington, Ont.-based Rock Apartment Advisors Inc., says the apartment sector has quickly turned into a seller’s market with multiple offers and, in some cases, buyers even pre-inspecting property so they can go in with firm offers.

Statistics back up his claim. Research firm RealNet Canada Inc. said the apartment market has seen four straight quarters of increases in transactions of more than $1-million, based on total dollars. The fourth quarter of this year has already seen $277-million in deals, a sharp jump from the $117-million in activity in the first quarter, but a far cry from the peak of $799-million in fourth quarter of 2006.

Mr. Lobo said some landlords don’t want to sell in this environment because of the steady cash flow. “Apartments trade less because of their stability,” said Mr. Lobo, who has spent the past two years building a massive database of apartment buildings across the country partially for the purpose of approaching landlords to sell. His company wants to hit the sellers even before they list their properties.

Although there are large, publicly traded entities in the game, such as Boardwalk Real Estate Investment Trust and Canadian Apartment Properties REIT, approximately 90% of the apartment buildings in the country are still in the hands of “mom and pop” owners.

CMHC has made it relatively easy to finance the ownership of an apartment building for Canadians. The agency backs loans for individuals who sign a personal guarantee with as little as 15% down. That mean you can buy a small $1-million building with just $150,000.

Availability of credit is one thing, but it’s the cheap money that makes most transactions work. The interest rate on a CMHC-backed loan is as little as 3.5% for a five-year mortgage or 4.5% for a 10 year. A conventional mortgage, if you could find one, would be about 200 basis points higher for both terms. If you are borrowing at 3.5% and your return on that cash is 6% to 7% — the average in the Toronto area — that spread is making you money.

“During this whole credit crisis we’ve been quite busy because we are one of the only ones to have funds available,” says Peter Cook, assistant vice-president of commercial lending of First National Financial LP. “From a company standpoint we’ve had our biggest year ever.”

© 2009 The National Post Company. All rights reserved. Unauthorized distribution, transmission or republication strictly prohibited.

Real estate agents see return of foreign buyers

Dollar’s plunge coupled with faith in eventual economic recovery helps sales

The Associated Press

updated 12:46 p.m. PT, Sun., Nov . 22, 2009

Canadian investor Arthur Wong is buying condos in Las Vegas and Phoenix like a shopper at Costco: In bulk, with slashed prices.

Wong, president of Optimus U.S. Real Estate Fund, has bought 60 condos at heavy discounts from developers in financial trouble. Wong paid about $62,500 each for 18 Las Vegas condos that once were priced at about $250,000 apiece.

“This could be a once-in-a-generation opportunity for real estate investment,” said Wong, whose Calgary, Alberta-based fund has already invested $5 million cash and will spend millions more in the U.S. Southwest over the next several months.

While foreign real estate investment in the first six months of 2009 was lower than last year’s level, real estate agents from New York to Las Vegas say purchases have increased rapidly in recent months.

Foreign investors have long been attracted to U.S. residential real estate, drawn by the market’s stability compared with other countries. But the dollar’s descent in the past six months has made makes homes even cheaper for foreigners, and prices are showing signs of stability.

International investors bought 154,000 homes and condos in the 12-month period ending in May, down nearly 10 percent from 170,000 for the same period a year earlier, the National Association of Realtors reports.

But since June, the dollar has tumbled by 9 to 11 percent against currencies like the Japanese yen, the European euro and the Canadian dollar. The Brazilian real has gained 17 percent against the dollar in the past six months.

Buyers from Brazil, Canada, France and the Netherlands, for example, have paid mostly cash for second homes ranging from $6 million to $15.5 million in condo buildings like 40 East 66th Street, a stone’s throw from Central Park and steps from shopping, restaurants and nightlife.

“(Foreign investors) love to have everything available to them once they walk out their front door,” said Barbara Russo, an agent with The Corcoran Group Real Estate in Manhattan.

Manhattan real estate agent Cynthia Crowley recently spoke with three different Israeli investors who have complained about rising real estate prices at home.

“They want to buy,” said Crowley, an agent with Olshan Realty in New York. “This is not tire kicking.”

Foreign investors love floor-level prices and the limp dollar but also are confident in a long-term recovery of the U.S. economy and the housing market’s resurgence. Some want vacation homes, while others are looking for rental income.

Buyers from Canada, India, the Middle East, Mexico, and Venezuela like Houston’s neighborhoods and its economy, which benefits from strong oil and health care industries.

“They also like to gravitate to where they have friends or family,” said Bill Gottfried, managing director of Gottfried International Estates.

Foreign investors often pay cash, or offer down payments of 40 percent or more, because financing is difficult to get. Nearly half paid cash in the 12-month period ending in May, the Realtors group reports.

Florida leads the country in the amount of international buyers, accounting for nearly a quarter of foreign purchases. The Sunshine State was followed by three gateway states with warm climates — California, Texas, and Arizona.

Miami home prices are down by half from the peak period of late 2006 due to foreclosure sales and a glut of unsold units. With the dollar hitting a 15-month low this week against the euro, the bargains are enticing. Investors are buying single-family homes or condos for two-thirds the cost three years ago.

Peter Zalewski, a Miami-based real estate agent, said at least seven bulk deals involving foreign condo buyers have taken place in downtown Miami alone, with investors coming from Argentina, Canada, Colombia, Italy, Norway, and Venezuela. Similar deals also have taken place in heavily-populated Broward County and ritzy Palm Beach County.

Claudia Bacelar, an Esslinger Wooten Maxwell real estate agent, has seen more South Florida inquiries from Brazilian, Canadian and British buyers of second homes, many of whom gravitate to condos with great views in the $800,000 range. And they pay cash.

Argentina native Marco Bordoni bought a $860,000 house on a deepwater canal in the Golden Isles neighborhood last month. An importer-exporter of perfumes, he plans to spend half his time in South Florida on business.

Bordoni is spending $450,000 to remodel the house, which was valued at $1.2 million four years ago, said his agent, Scott Patterson.

“Prices fell enough that I could buy a property I would not be able to buy two years ago,” said Bordoni, 30.

 

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Feds will contribute $30M to Alberta CO2 pipeline

Dave Cooper

edmontonjournal.com

Tuesday, November 24, 2009

CREDIT: Aaron Lynett/National Post Lisa Raitt, Minister of Natural Resources

EDMONTON – The federal government said Tuesday it is contributing about $30 million to the Alberta Carbon Trunk Line project through the Clean Energy Fund.

The money is in addition to $33 million contributed earlier from its ecoENERGY Technology Initiative.

On Tuesday, Alberta will sign a Letter of Intent with Enhance Energy, committing the province to spend up to $495 million over 15 years to build the world’s largest carbon dioxide collection system, which will move the greenhouse gas to depleted oilfields in central and southern Alberta for enhanced oil recovery.

The trunk line will be hooked to large-scale CO2 capture projects, initially at the Redwater Agrium fertilizer plant and the nearby North West Upgrader facility.

Natural Resources Minister Lisa Raitt said in a statement that “our government’s economic action plan is investing in projects that are creating jobs now when they are needed the most, while supporting our environment and stimulating the economy.”

She added that “this innovative project further demonstrates Canada’s international leadership in carbon capture and storage (CCS) technology.”

At full capacity, which could take at least 20 years to achieve, the carbon trunk line project will transport and store 14.6 megatonnes of CO2 annually. The oil and gas reservoirs accessed by the project could have the capacity to store up to two billion tonnes of CO2, providing a much needed solution for Alberta’s large emitters, including power plants, petrochemical industries and refining facilities.

As a major component in Canada’s Economic Action Plan, Raitt said the $1-billion Clean Energy Fund is advancing Canada’s leadership in clean energy technologies and the reduction of greenhouse gas emissions from energy production.

The ecoENERGY Technology Initiative was launched in 2007 to help Canada strengthen its position as a world leader in clean energy technologies through an innovative partnership with the private sector.

According to the Canada–Alberta ecoENERGY CCS Task Force report released in 2008, CCS technology could allow Canada to cut its greenhouse gas emissions by as much as 600 million tonnes a year by 2050 – an amount equal to almost three-quarters of Canada’s current annual emissions.

dcooper@thejournal.canwest.com

© The Edmonton Journal 2009