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A recent virtual conference in Toronto, hosted by RealCapital, discussed the issues of distressed real estate with four Canadian equity investors.
Topics such as issues that arise due to COVID-19, Canada versus U.S. real estate focus, and preferred real estate investment types by these investors and their groups were the hot topics. Participants of the virtual real estate conference included Starlight Capital, Forum Equity Partners, Fiera Real Estate and KingSett Capital. Let's discuss their strategies and viewpoints of the market.
Starlight CEO, Dennis Mitchell sees opportunity in purchasing distress retail and publicly traded seniors housing market sectors. They have $250 million in assets under management and invested $2.7 billion in 2020. Starlight Capital likes to have skin in the game when they invest. They allocate capital globally and are active across all four business units. Their preferred real estate investment type for 2021 are multifamily and residential, and they plan to invest more $2.7 billion this year.
Founder/CEO Richard Abboud of Forum Equity Partners believes that the Canadian commercial real estate industry is generally healthy. They currently own both office and retail properties; however, are poised to take advantage of distress opportunities. Their target for distress opportunities is the hotel sector. Meanwhile, they are currently targeting residential real estate; such as, student housing, workforce housing and co-living spaces.
Blair McCreadie, head of Canadian real estate and fund manager for Fiera Real Estate, expects “some asset classes will experience business failures, particularly outside Canada’s six major cities (Toronto, Vancouver, Montreal, Ottawa, Calgary and Edmonton).” Lenders seem optimistic in McCreadie opinion. They see light at the end of the tunnel following the lifting of pandemic restrictions.
Fiera Real Estate preferred real estate investment type in 2021 is multifamily property. They currently are heavily invested in industrial CRE and have no exposure to retail. They have $750 million to invest and are actively searching for opportunities.
Colin Baryliuk is the executive managing director of investments at KingSett Capital. He noted that they are not seeing distress, but believes that real estate is in a period of illiquidity.
Both Baryliu and McCreadie from Fiera Real Estate agree that some pension funds have a significant amount of retail in their portfolios that will need to be discounted and sold at some point. Kingsett Capital reportedly has $500 million in equity to deploy over the next two years. They have an interest in all major asset classes and see assets, like hotels, as risky. To help mitigate that risk, they use debt and preferred equity.
Overall, these four investors had similar strategies and viewpoints about what they will invest in next. It is not surprising that multifamily properties and distressed commercial real estate are the target real estate investments they want to pursue. These property types are commanding attention in many countries across the world, including Canada. It is a great time to take action and invest