As Giant Funds Become Lenders Will Canada Cash In?
As gigantic private equity firms and hedge funds become conduits for lending to real estate investors will Canada cash in?
In a stunning turnaround in strategy this week several of the world’s largest funds announced moving into a new niche. So will Canada and Canadian commercial real estate investors win as more cash is plowed into markets?
Led by Colony, Blackstone, Cerberus and other mega billion dollar funds changed direction last week according to a report from Bloomberg News. Breaking away from buying foreclosure properties in distressed U.S. cities to renovate and convert them into rental homes, they are now getting into the lending business.
This puts tens of billions of dollars up for grabs for real estate investors and investment firms that can use this working capital to make new acquisitions with terms reportedly below market rates.
So if these finance giants aren’t that big on U.S. residential property anymore, perhaps those in the position to borrow from them won’t be either. Commercial property and Canada could make a lot of sense for them. And the language, style, and proximity is a great fit, complimented by a market heading up, and cities like Edmonton offering lots of room to grow.
On the street investors are increasingly looking to Canada, and commercial property too. According to the media there are few real deals left in the US, and returns are not panning out as appetizing as thought, so why pay good money to borrow to invest in what those with the money couldn’t profit from with billions of their own dollars?
Converting thousands of REOs to rentals was a ‘nice’ idea, but all those single family acquisitions and rehab work and property management ended up to be a lot more work than they could handle – as predicted. Warren Buffett warned of this before they even began, and these firms were sorely unprepared for the vastness of the operational and logistical challenges, not to mention soaring renovation costs, that now top an average of $60,000 a pop in destinations like Baltimore, MD.
In contrast Edmonton, Alberta is hot, is enjoying lots of building activity, is heading up on the world stage, boasts a startup scene that is sizzling, solidified by strong energy backbone, and retail is very healthy and going up.