BURLINGTON, ONT- 06/03/09 - Images for a business story on the amount of office space that is currently available for lease. Many buildings have vacancies or are empty, and buildings are still under construction. (Photo by Peter Power / The Globe and Mail)pmpThe Globe and Mail
Multi-residential and commercial real estate is attracting myriad eyeballs south of the border as the U.S. economy continues to find solid footing.
The trend has been building for some time, with big Canadian players such as Canada Pension Plan Investment Board and RioCan REIT getting in back in 2010 and early last year. But now it seems like everyone wants a piece of the pie, and there's finally a buzz back in the industry.
"The biggest thing that we're noticing is the overall level of optimism about U.S. real estate," said Kyle Dunn of real estate private equity firm Second City Capital Partners, which is based in Vancouver. "It seems like there's been a tectonic shift."
Second City isn't big enough to compete with funds like CPPIB, which just announced a massive $1.8-billion (U.S.) investment, but it plays well in the second tier consisting of properties that are too small for massive funds like Blackstone, yet are too big for local independent players. Typically, the equity portion of their deals ranges from $5-to-$25-million.
In the past year, Second City has scooped up four different U.S assets, the largest of which was a $62.5-million commercial campus in Denver.
"There are very few people who deny that it's a very good time to buy in the U.S." Mr. Dunn said. These people he refers to aren't your typical market watchers. They're in boardrooms striking deals, and they often have the best insight.
"When things were about to get bad, the people in the industry knew they were bad before everyone [else]" Mr. Dunn said. Now the flipside is true. Among this crowd, "it's definitely cool to buy U.S. real estate again."
Yet because people are warming to it so quickly, competition is fierce. This is only made worse by the fact that there never really was a huge glut of commercial assets that hit the market.
"You read all this information that there's going to be this surplus of commercial foreclosures of distressed product, yet on this side, no one's seen the mad rush that everyone expected," Mr. Dunn said.
That means buyers have to be selective. And rather than follow the pack, it's best for them to find assets that have just hit the market, based on tips from their network of brokers and insiders.
"You still have to dig to find the good deal," Mr. Dunn said.
Tim Kiladze