As British Columbia throws up taxes to stem the flow of foreign property buyers, Canadians are among the most eager – and largest – foreign investors in U.S. real estate.
Janet LePage, general partner and CEO of North Vancouver's Western Wealth Capital, as one example, is now the third-largest landlord in Phoenix. In the past six years her company has bought 31 multi-family properties in the Arizona capital, representing 5,125 rental units worth more than US$375 million.
“We are generating annualized returns of more than 20%,” the 36-year-old mother of two told Business in Vancouver.
LePage is not alone in finding U.S. real estate opportunities.
A Jones Lang LaSalle (JLL) report on global capital flows underscores the leading role investors from Canada have played in recent U.S. deals.
The first quarter of last year alone saw a fivefold increase in aggregate deal values from the same quarter a year earlier, with US$3.6 billion worth of trades to Canadians.
Highlights include Ivanhoé Cambridge’s US$2.2 billion purchase of 1095 Sixth Avenue in Manhattan and, a few blocks away, Bentall Kennedy’s US$360 million purchase of 757 Third Avenue, as well as the Canada Pension Plan Investment Board’s acquisition of 1455 Market Street in San Francisco and a host of lesser deals by Vancouver investors Pure Multi-Family Real Estate Investment Trust (TSX-V:RUF.U) and Nicola Crosby Real Estate.
In June, Pure Multi-Family, which concentrates on U.S. rental buildings, bought a 264-unit multi-family complex in Phoenix for US$47.5 million. In all, Pure Multi-Family now owns 19 multi-family properties in the U.S. with 6,209 rental units.
The U.S. multi-family attraction may be fading, according to JLL, but it sees “strong growth” continuing in Sun Belt markets, including Phoenix.
The overall U.S. multi-family market “could be reaching an inflection point for the cycle in some respects, as it comes off a historic run of several consecutive years of record performance, even exceeding office volumes in 2016 for the first time,” JLL noted in its report on global capital markets for the first quarter of 2017.
Vancouver investors do not seem too concerned.
In the first quarter, Nicola Crosby Real Estate, with partners, bought three U.S. multi-family properties, all in the south, for a total of US$59.4 million.
Canadian investors “continue to look for diversification and capital preservation,” said Lucy Fletcher, senior vice-president, international portfolio management, QuadReal Property Group. “The U.S. is the largest market globally, and it still offers a good return proposition on a relative basis to the domestic [Canadian] market.”
