Upon news that Canadian Tire is starting a REIT later this year, here is a look at what Canadian Tire owns and operates in Metro Vancouver and B.C.

A search indicates the following:

• as of 2012 there were 52 Canadian Tire stores in B.C. (11% of the 490 total stores nation-wide)
• there are currently 17 Canadian Tire stores in Metro Vancouver
• Canada-wide, Canadian Tire owns 358 of its stores (73%) and leases 129 of its locations from third parties (27%)
• in B.C., the ownership ratio is about the same, with 35 properties owned by Canadian Tire Corp., and 17 leased.
• only 4 of the Metro Vancouver stores are located within properties that are corporately owned, the rest are leased.
• most of Canadian Tire’s B.C. assets are in secondary markets like Kamloops, Kelowna and Prince George.

Canadian Tire Corp. is taking a page from Loblaw Cos. Ltd.’s books, unveiling plans to spin off most of  its billions in property holdings into a real estate investment trust.

The REIT would own the Canadian chain’s portfolio of some 250 properties, roughly 18 million square feet worth $3.5-billion, the company announced Thursday. Canadian Tire would hold 80 per cent to 90 per cent of the REIT, with the rest going to investors through an initial public offering planned for the fall.

The company holds more than that going into the REIT, but stores under scrutiny for replacement, development or relocation wouldn’t be included.

“We are executing a strategy that reinforces the strength of our Company while pursuing new growth opportunities organically and through acquisition,” said chief executive officer Stephen Wetmore.

Read more: http://www.theglobeandmail.com/report-on-business/canadian-tire-plans-35-billion-reit-with-ipo-in-the-fall/article11811229/

The Real Estate Board of Greater Vancouver has released stats for April which show mixed results, but cautious optimism across Metro Vancouver. A sample of selected areas in Metro Vancouver shows pricing at various trajectories as follows:

 Year over year pricing is still in decline pretty much across the board, with the exception of some of the Fraser Valley suburbs which did not exhibit significant price increases over the past two years. Pitt Meadows condos, for example, have shown a slight increase of 5.5% since May 2012. Other markets with much higher levels of new inventory, such as North Burnaby, have declined about 2.5% year over year.

Prices appear to have stabilized on the Westside of Vancouver after a solid 10-month decline that saw a drop of 8.5% in benchmark prices. Prices are actually up 3.5% since hitting a two-year low in January.

Source: REBGV Stats.

Intergulf Development Group in conjuction with the owners of the Quality Inn at 1335 Howe Street are proposing a 39 storey, 180 unit residential tower in Downtown South.  The architect for the project is Ramsay Worden.

A preliminary open house for the project was held on April 3 at the Quality Inn. 

Cue outrage from purchasers of suites in Maddox and Salt.

How much longer can values keep going up at this rate? This is a question we are asked all the time, even by savvy and experienced investors who know the Vancouver market well. As we have documented before, there are numerous factors that have driven capitalization rates to an all-time low, many of which are external to the local market.

A trend we have noticed in recent sales however, is that many of the sellers have only held the assets for a few years.

To get a glimpse of what kind of gains these sellers are achieving, we took a look at a handful of sales in each asset class over the past two years. The criteria was as follows:

• Apartment, retail and office properties (5 each) that sold since September 2011 over $5 Million
• Properties that were acquired less than 10 years before they were sold and did not experience significant capital expenditures

From this sample set of 15 sales that took place during this period, the average annual rate of appreciation is displayed below:

Some observations taken from this sample of sales activity:

• Average property was held for 5.5 years and then sold.
• The annual appreciation ranged from 4.4% to 13.1%, and averaged 8.6%.
• Notable resales in this survey included: Bentall 5, which was sold by Deka to Bentall Kennedy after 3 years and 10% gain per year. 2450 Ontario Street sold in February 2013 also after 3 years, and also after a 10% annual gain.
• Note that the above data does not even reflect the overall return to the sellers as it does not incorporate the cash flow component of the return during the holding period. While yields have been driven to all-time lows, cash flow has historically been the bigger component of real estate returns. This should be something for all owners and buyers to think about in Vancouver.

This type of resales activity isn’t unexpected in a market that is continually being inundated with capital and buyers, many of whom are new to the market. Interestingly many of the sellers in the above survey are well-capitalized and don’t need the cash, they are simply selling based upon the view that currently achievable values aren’t sustainable in the near term. Our question is (as echoed by our clients): how long can these types of gains last?

In our view, there will be more assets coming to the market as the risks to the provincial and local economic outlook begin to pressure more owners to cash out and realize gains. In most areas, cap rates have no further room to decrease.