National Post (Latest Edition)

REIT ex­ecs see ris­ing rent col­lec­tions

Abate­ments the same, de­fer­rals ex­pected to fall

- Chris Fournier Finance · Canada News · Investing · Real Estate · Business · Wal-Mart · Toronto Venture Stock Exchange · British Columbia

Canada’s largest com­mer­cial land­lords are see­ing some im­prove­ments in rent col­lec­tion as tenants find ways to nor­mal­ize their busi­nesses dur­ing the pan­demic.

Al­lied Prop­er­ties Real Es­tate In­vest­ment Trust,

which op­er­ates 200 of­fices and other prop­er­ties in Canada’s largest ci­ties, ex­pects to col­lect about 98 per cent of rent in its third quar­ter as some de­fer­rals roll off, ac­cord­ing to Chief Fi­nan­cial Of­fi­cer Ce­cilia Wil­liams.

That’s an im­prove­ment from the se­cond quar­ter, when Al­lied col­lected 94.5 per cent of the $164 mil­lion in rent due, de­ferred 3.6 per cent of pay­ments — mostly from store­front re­tail tenants — and for­gave 1.8 per cent in col­lec­tions un­der a fed­eral govern­ment rent- re­lief pro­gram, ac­cord­ing to a quar­terly re­port. Wil­liams said the level of abate­ments in the third quar­ter will be about the same, while de­fer­rals are ex­pected to fall.

“I ex­pect we’ll have some de­fer­rals still, but it won’t be as much as in the se­cond quar­ter,” Wil­liams said at Bloomberg’s Cana­dian Fixed In­come Con­fer­ence Tues­day.

The govern­ment ex­tended its Canada Emer­gency Com­mer­cial Rent As­sis­tance, or CECRA, to the end of Septem­ber. For busi­nesses that qual­ify, the pro­gram cov­ers 50 per cent of rent, the ten­ant cov­ers 25 per cent and the land­lord “for­gives” the re­main­ing 25 per cent. Wil­liams ex­pects the pro­gram will be re­placed.

“The govern­ment has said they are look­ing to im­ple­ment some­thing else,” she said. “Our work­ing premise right now is that what­ever that new pro­gram is — and hope­fully there will be de­tails soon — we’re as­sum­ing it won’t in­volve any fur­ther abate­ments by the landown­ers or by the prop­erty own­ers.”

Smartcen­tres Real Es­tate In­vest­ment Trust CFO Peter Sweeney an­tic­i­pates third- quar­ter col­lec­tions in the 94 per cent to 96 per cent range and “would be per­haps even higher” when ac­count­ing for de­fer­rals.

“We’re con­tin­u­ing to see busi­nesses re­turn to what­ever that new level of nor­malcy might be, at least in the in­terim,” Sweeney said.

Smartcen­tres, which op­er­ates more than 150 Cana­dian shop­ping cen­tres and whose largest ten­ant is Wal­mart Inc., was work­ing with about 850 smaller tenants un­der the CECRA pro­gram in the se­cond quar­ter, ac­count­ing for about 5.2 per cent of the to­tal $ 202 mil­lion of rent, ac­cord­ing to its lat­est fi­nan­cial re­port. While the CECRA pro­gram has been a “god­send” for many busi­nesses, Sweeney said it’s time for the abate­ments to end.

“It’s now ap­pro­pri­ate to think that that six- month time frame has lapsed and per­haps there will be an al­ter­na­tive pro­gram soon in­tro­duced and an­nounced by the fed­eral govern­ment,” he said.

“But it’s time for Cana­dian busi­nesses hope­fully to find ways of re­turn­ing to some level of nor­malcy.”

Real es­tate in­vest­ment trusts have been one of the hard­est- hit sec­tors in Canada.

While the broad S& P/ TSX Com­pos­ite In­dex re­cov­ered most of the losses from the pan­demic and is down about 5 per cent this year, the real es­tate subindex — com­prised mostly of REITS — is down 21 per cent. Al­lied has lost 32 per cent so far this year, and Smartcen­tres is 36 per cent lower.

Quadreal Prop­erty Group CFO Ta­mara Law­son said col­lec­tions across its port­fo­lios, which are more heav­ily weighted to in­dus­trial and res­i­den­tial prop­er­ties, have been “quite strong.” The per­cent­age of col­lec­tions in the multi- fam­ily port­fo­lios have been in the “high nineties,” while of­fice and in­dus­trial are in the “mid-nineties” and re­tail is about 70 per cent.

Quadreal, which is owned by the Bri­tish Columbia In­vest­ment Man­age­ment Corp. and isn’t pub­licly traded, doesn’t re­port quar­terly fig­ures. As of the end of De­cem­ber, 34 per cent of Quadreal’s as­sets were in the of­fice sec­tor, 31 per cent in res­i­den­tial and 22 per cent in in­dus­trial, with about 8 per cent in re­tail.

Law­son said Quadreal has been sup­port­ing tenants that are el­i­gi­ble for the CECRA pro­gram, which has “also helped on the col­lec­tions front for smaller tenants.”

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