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President Emmanuel Macron’s decision three weeks ago to call snap elections overturned any semblance of political stability in France and opened the door to the possibility of the first far-right government in the modern republic.
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Jun 27, 2024
, BNN Bloomberg
The CEO of Minto Apartment REIT says he’s constructive on Canada’s rental housing market despite the headwinds being faced by many Canadian real estate investors.
“We're really excited to own rental apartments in Canada,” Jonathan Li told BNN Bloomberg in a Thursday interview.
“About a third of Canadians rent, and that percentage is growing month by month for the following reasons: we have housing unaffordability, so it's cheaper to rent than it is to own a home, and we have a lack of housing supply in our country."
Li said Minto Apartment REIT is urban-focused and only owns properties in Canada’s major cities, which separates the trust from competitors by protecting land values across its collection of assets.
Li added that one of the REIT’s recent goals was to significantly reduce its debt load, which had reached around $260 million worth of variable rate debt at its peak, by refinancing certain assets and selling others.
“From its peak of 26 per cent of our debt stack, we reduced it down to about six per cent of our debt stack in our last quarter,” he said.
“We're actively working on other refinancing to hopefully get that pretty close to zero, and the outcome of that is it's very accretive to us and our cash flow per unit.”
Li said this strategy has helped the trust increase from negative 10 per cent growth in funds from operations (FFO) per unit in the fourth quarter of 2022 to 27 per cent growth year over year in the first quarter of 2024.
“That's really what we're focused on and we're very pleased with the results,” he said.
REIT outlook amid high rates
High borrowing costs have impacted Canadian REITs across a variety of sectors, but those focused on office real estate have been particularly hard-hit in the post-pandemic period.
Shares of TSX-listed Slate Office REIT are under pressure this week after the trust defaulted on $158 million worth of debt. The company primarily owns office properties in Canada and the U.S.
Waning demand for office space and high interest rates have negatively impacted the value of commercial real estate across North America, and countless private and institutional investors, including Canada’s largest pension plans, have felt the sting.
Li said that while demand in the rental housing sector remains strong, elevated interest rates impact “every single minute of every single day of our job,” but added that he’s focused on the things he can control.
“Things like our balance sheet, things like our operations, things like capital allocation, things like cost containment – our heads are down focused on that, and I think that has resulted in some of the cash flow growth that we've been enjoying,” he said.
“As the interest rates go up, we go down, and as interest rates go down, we go up. We are not immune to that… but we're really excited about what we own and where we're going.”
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