If only we charged a Community Revitalization Levy in Vancouver….(tongue in cheek).  It’s amazing how Vancouver has been addicted to Community Amenity Contributions (CACs) for almost 30 years but some cities are just starting to figure it out.   

Novel funding plan could kick-start southeast LRT.

While REITs were active buyers in the Vancouver market 5 to 10 years ago, they have been fairly quiet over the past several years as a result of yield compression and few attractive opportunities relative to other markets. Canadian REITs showed strong returns of over 15% in 2012 (more than double that of the TSX), primarily through operating gains throughout their portfolio, but in terms of acquisitions, most have been challenged to find deals in Vancouver.

Here we take a look at 10 of the larger REITs that own assets in Vancouver (in no particular order):

1. RioCan (TSX: REI.UN)

Grandview Corners

Riocan is Canada’s largest REIT, focusing solely on retail. They own two properties outright in Metro Vancouver including the Best Buy/Canadian Tire building on Cambie Street (acquired in 2004), and Impact Plaza in Surrey (acquired in 2006). They also have a 50% ownership interest in a handful of shopping centres in the Fraser Valley, including Abbotsford Power Centre, Grandview Corners in South Surrey and Riocan Langley Centre. They have been pretty quiet here, and recently announced that they are “toning-down” acquisitions Canada-wide in the near term.

2. Boardwalk REIT (TSX: BEI.UN)

Horizon Towers

Boardwalk is an open-ended REIT that is active in Canada’s major markets in Multifamily apartments. Boardwalk’s B.C. portfolio reported occupancy at 98.23% in 2012. They own several large scale apartment complexes including Horizon Towers in Burnaby and Surrey Village in Surrey.

3. KEY REIT (TSX: KRE.UN)

KEY REIT is a small-box retail property owner that specializes in niche business model, leases, quality properties and a focus on a handful of name brand tenants (primarily KFC/Taco Bell and Shoppers Drug Mart). Among their few B.C. assets are an A&W at 4605 East Hastings in Burnaby, and two KFC’s on Kingsway and East Broadway in Vancouver.

4. Calloway REIT (TSX: CWT.UN)

Calloway is a well-known retail REIT with focus on larger name brand centres. While they have a strong presence in Western Canada, their ownership in Metro Vancouver is limited to two centres: Langley SmartCentre (acquired in 2004) and New Westminster Smartcentre (bought in 2005).

5. Artis REIT (TSX: AX.UN)

Willingdon Green

Artis REIT is a diversified REIT that is active in several markets in retail, office and industrial. They have been one of the more active buyers in Vancouver in recent years. They own several sizeable office assets in Metro Vancouver including: 1045 Howe Street in Downtown Vancouver, as well as the Kincaid Building, Willingdon Green, and Production Court in Burnaby. They also own retail assets such as King Edward Centre and Delta Shoppers Mall.

6. CAP REIT (TSX: CAR.UN)

Georgian Towers

CAPREIT is a multifamily focused investment trust that owns interest in 36,683 apartment units across Canada. The REIT owns 15 apartment properties in Metro Vancouver including highrises such as: International Plaza in North Vancouver, Georgian Towers Downtown and Ocean Park Place in the West End. They also own larger scale apartment complexes in Coquitlam, New Westminster and Richmond.

7. Dundee REIT (TSX: D.UN)

Dundee REIT’s focus is on central and suburban office assets in Canada’s major markets. In Vancouver their ownership covers ten buildings in suburban markets such as Surrey, Burnaby, Richmond and New Westminster.  One of their larger assets is Station Tower, one of Surrey’s few ‘A’ class highrise office buildings.

8. Allied Properties REIT (TSX: AP.UN)

840 Cambie St.

Allied REIT was incorporated in 2003, but is relatively new on the scene in Vancouver.  Allied owns and manages what they refer to as ‘Class I’ office properties in urban markets.  Their target acquisitions are older office buildings in established areas.  In just the past 18 months in Vancouver, Allied has acquired: 1040 Hamiltion, The Sun Tower, 1286 Homer Street, 840 Cambie Street and 948 Homer Street, for a total portfolio of 244,704 SF. Their focus continues to be on the Gastown and Yaletown areas.

9. Canadian Real Estate Investment Trust (CREIT) (TSX: REF.UN)

1185 W. Georgia St.

CREIT is a diversified REIT focusing on quality retail, industrial and office properties throughout Canada. In Vancouver their largest interests are in core office assets at 1185 West Georgia, and 1508 West Broadway (the Chapters Building).  They also have assets in Maple Ridge, and a total portfolio interest of over 1 Million SF in B.C.

10. Pure Industrial REIT (PIRET) (TSX: AAR.UN)

Pure Industrial REIT invests in and manages income producing industrial properties in primary Canadian markets, including Vancouver. They have been active in the Vancouver market recently with the acquisition of several properties and they now have a portfolio of 13 properties in the Lower Mainland, including Burnaby, Delta, Richmond and Surrey. Just last week they announced the acquisition of 16111 Blundell Road in Richmond, a 280,000 SF facility for $32,300,000. PIRET is one of the few REITs that is finding opportunities in Vancouver currently.

Other REITs with significant holdings in Vancouver include: Chartwell Seniors Housing REIT, Loblaws (which is spinning its real estate into a REIT, owns several properties in Metro Vancouver.

After numerous nights of discussion, Vancouver City Council approved the Beach Towers proposal (view it HERE) this morning.  The project will add 133 units and nearly 100,000 square feet of density to the property. 

Council will get back at it on Wednesday night when a proposal for 633 Main Street by Blue Sky Properties (view it HERE) is contemplated.  The proposal is for 188 units over 16 storeys with retail at grade. 

NOTE: OMERS is the parent company of Oxford Properties, owners or part owners of the Marine Building, Gusiness Tower, Oceanic Plaza, 1021 West Hastings Street, 1133 Melville Street, 800 Burrard Street and 401 West Georgia in Vancouver.

OMERS Net Assets Surpass $60 Billion in 2012 With 10% Investment Return.

“TORONTO, ONTARIO–(Marketwire – Feb. 22, 2013) – OMERS, one of Canada’s largest pension plans, today announced its 2012 financial results. OMERS net assets grew to $60.8 billion, rising by $5.7 billion in 2012 and by over $17 billion since the 2008 global credit crisis. Now in its 50^th year, OMERS is an active, diversified investor, pension innovator, and an engine of economic growth and employment in Ontario and Canada.

OMERS total Plan investment return of 10% was driven by strong performance in its private market portfolio and solid public market performance in line with expectations and current market conditions. “OMERS had a strong year in 2012. The $5.7 billion increase in our net assets demonstrates the strength and robustness of OMERS business model with the capacity to generate growing investment cash yields and more than ample liquidity to withstand market shocks under stressed financial conditions,” said Michael Nobrega, OMERS President and CEO.

OMERS private market portfolio had a 13.8% investment return – with returns of 19.2% (OMERS Private Equity), 16.9% (Oxford Properties), 12.7% (Borealis Infrastructure) and negative 10.1% (OMERS Strategic Investments). OMERS Strategic Investments, which represents less than two and a half per cent of OMERS net investments, has its principal assets in Alberta’s oil and gas sector. The year-end valuation of these assets was negatively impacted as oil and gas prices fell to their lowest levels in five years.

OMERS Capital Markets, which manages the public market portfolio including public equities, fixed income and debt investments, generated a 7.5% return. “

Of course for most involved in the Vancouver commercial real estate industry since the NDP were last in power, the answer is a resounding “yes!”, but what will the real impact be on the market in Vancouver if there is a change in government and Adrian Dix and the B.C. NDP are elected on May 14, 2013? To answer that question one needs look back to the 90’s…

Firstly, for those who don’t follow provincial politics, there is an election less than 90 days away. The governing Liberal party, led by Christy Clark, has been in power since 2001, and most polls conducted since the HST fiasco of 2011, have shown support for the Liberals below 30%. The latest polls show the NDP lead hovering around 15%, a lead that is generally viewed as insurmountable by political experts, and much of the commentary has already moved on to discuss how Adrian Dix will implement policy change.

Source: BC Election 2013 Blog

An informal poll of real estate industry experts yields similar commentary about the ‘doom and gloom’ of the Glen Clark led NDP of the 90’s, a period in which B.C. became a ‘have-not’ province and more people were leaving B.C. than coming. Since 2001 when the Liberals took power, Vancouver has gone on an incredible run.

While much of the influence has been due to external forces outside the province, a look at some market indicators yields some interesting observations and shows the contrast between each party’s stay in power. Each chart has been divided to show the two parties’ terms in power (since 1995), as follows:

Cap Rates

Capitalization rates take into account many more external factors (federal interest rates, for example), and have shown compression in other markets in Canada, but Vancouver has witnessed cap rates drop moreso than others amid continued strength in the local and provincial economy since the early 2000’s.

Housing Starts

Developers will appreciate this one. After a stagnant housing market in the late 90’s, construction in Vancouver (and B.C.) went on an unprecedented run between 2002 and 2008 shortly after Gordon Campbell was elected in 2001. Of course, the global downturn in 2008/2009 put the brakes on the market, but it has bounced back relatively well despite recent forecasts of a prolonged slowdown (perhaps due to lack of confidence and risk in the provincial outlook for 2014 and beyond?)

Source: Statistics Canada

Office Vacancy Rates and Rents

Many will remember a period in the early 2000’s when new office construction wasn’t a topic of conversation in the local commercial real estate industry. In fact, confidence was so bad in 2002 with the vacancy rate hovering around 15% that Bentall decided to halt construction of Bentall 5, now one of Vancouver’s most valuable towers, at half of its height and wait for the office market to improve.

Of course, the office market has always been cyclical irrespective of the political climate. It is largely impacted by macroeconomic factors; however, a look at the Downtown Vancouver office market in terms of rents and vacancy from 1995 to 2013 shows some marked contrast between the NDP and Liberal’s reign on the province.

A Market Forecast  Under Adrian Dix?

While we won’t go so far as to suggest that there will be any immediate negative impact as a result of an NDP government getting elected, there is obvious reason to be concerned about the economy moving forward, and not just because of the NDP’s awful track record when it comes to the economy. The most immediate impact could be increased vacancy among Vancouver’s retail, office and industrial buildings, with a prolonged period of flat rents to follow. If the NDP’s policies follow their traditional model, the economic picture could become cloudy and an attendant decline in such metrics as population, employment, housing starts and retail sales will all negatively impact every facet of Vancouver investment and development activity.

And that could just be Dix’s first term….