Canadian Real Estate Fundamentals “Pretty Strong,” REALpac CFO says

Nancy Anderson, CFO and vice president of the Real Property Association of Canada (REALpac), joined REIT.com for a video interview at REITWise 2016: NAREIT’s Law, Accounting and Finance Conference at the Marriott Marquis in Washington, D.C.

REALpac represents Canada’s owners and managers of investment real estate. Anderson offered an overview of the health of Canada’s real estate investment market. Overall, real estate fundamentals are “pretty strong” in most regions, Anderson said.

However, she pointed out that market sentiment is being tempered by economic headwinds. Those include a Canadian dollar that is trading at its lowest level in 15 years and a significant decline in oil and commodity prices, Anderson noted.

Looking at specific market segments, Anderson pointed out that the retail sector has been “particularly challenging.” As a case in point, she noted that the failure of Target in Canada likely sent a note of caution to some United States retailers about entering the market. However, Anderson stressed that Canada “is a bit of a regional story,” with the Toronto and Vancouver markets still showing strength.

Anderson highlighted three trends likely to influence Canadian REITs in 2016:

* With REITs trading at a discount to net asset value (NAV), management teams are focused on how to grow;

* REITs will continue to undertake strategic reviews; and

* Succession planning.

Many Canadian REITs are run by their founding CEOs, which raises “sensitive questions” about how to plan ahead, she said.

Anderson also noted that a “significant” number of countries have yet to follow Canada’s lead in adopting International Financial Reporting Standards (IFRS). Those countries include the U.S., Russia, India and Japan. Anderson said this has been challenging for Canada.

“We are such a small country and we are sometimes the first movers on IFRS. We have to strike out with less guidance,” she said.

“Are we ever going to have global convergence? Probably not, but I think there will be a lot of semi-convergence,” Anderson concluded.