Canada’s real estate investment trusts (REITs) are mixing portfolios as managers seek yields and safety in a more volatile real estate market.
For commercial-weighted REITs, the strategy involves using multi-family as a hedge.
“Residential REITs are considered to have lower operating risk than commercial REITs which are impacted to a great extent by general economic conditions,” Keystone Financial said in a Canadian REIT report in late 2016.
While stating that REIT fundamentals are “reasonably strong,” Keystone added a geographical qualifier. “Canadian REITs with high exposure to Alberta and Western Canada have felt pressure from the energy patch downturn.”
But some big REITs are hedging against that warning.
In November, RioCan Real Estate Investment Trust of Toronto announced a joint venture with Calgary-based landlord giant Boardwalk Real Estate Investment Trust to develop a mixed-use, 11-storey residential rental tower on part of RioCan’s Brentwood Village Shopping Centre in Calgary.
RioCan’s first residential rental in Calgary is “an example of just one of the many urban intensification projects that RioCan has on hand within its portfolio of high-quality urban locations in Canada’s six major markets,” said REIT CEO Edward Sonshine in an announcement of the joint venture.
Earlier this year, RioCan linked with Vancouver-based Embassy Bosa on a mixed-use Calgary development that includes retail, office space and approximately 500 high-rise condominiums.
RioCan, traditionally focused on retail real estate and one of the largest REITs in Canada, has 50 other commercial sites it “considers to be strong possible intensification opportunities,” according to Sonshine.
RioCan has already obtained planning approvals for nine mixed-use projects with a total of more than 10 million square feet of rental housing and condominiums. While most are in Greater Toronto, other mixed-use sites are in Victoria and Edmonton.
Another REIT on a similar two-lane track is Allied Real Estate Investment Trust, which is involved in four Toronto joint ventures to blend housing with commercial properties. This includes King Portland Centre in Toronto, a joint project with RioCan, that includes retail, office space and high-end residential.
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