Why Canadian companies are on a U.S. property buying spree

The question  is how much steam is left in this trend? Though the Canadian companies had close to US$ 8-billion in net investments with the U.S. in 2013 as of Oct. 4, the figure is dropping. It peaked in 2012 at about $ 9-billion.

“There was a period of time when liquidity was a lot easier to get and financing was a lot easier to get in Canada than in the United States and Canadians going down to get property had an advantage because they were coming to the table with cash and financing in place,” said Mr. Potter. “You can argue some of the best deals have been done but there are still opportunities.”

The story is changing to a degree. Canadian REITs have faced a decline in their value making it tougher for them to make accretive deals. The Bloomberg Canadian REIT index has dropped by about 10% this year.

Thomas Hofstedter, chief executive of H&R REIT, one of the largest trusts in Canada with a  history of owning property in the U.S., notes there have been very few purchases south of the border this year.

“It’s an antiquated view, maybe that was happening in the first quarter of the year,” said Mr. Hofstedter. “The United States is now being bought back domestically by a lot of high net worth individuals because funding is back again.”

At a certain point it’s just too tough to grow [in Canada alone]

Ed Sonshine, chief executive of RioCan REIT, says Canadians probably won’t disappear from the U.S. landscape any time soon.

“Every forecast I’ve seen expects growth in the United States over the next two to three years to be better than here,” said Mr. Sonshine, adding a shrinking dollar has taken a bite out of the Canadian appetite for property.

Long-term he says it’s becoming more  difficult for companies like RioCan and pension funds to grow in the Canadian market place.

“As companies get better, you just can’t grow anymore,” said Mr. Sonshine. “It’s one of the driving facts, you’ve got to keep growing and at a certain point it’s just too tough to grow [in Canada alone].”

The United States, he adds, with its diversity and growth and with more like 11 or 12 times our market size and its proximity, along with the same language and similar laws, makes it more akin to a domestic market than going further afield for purchases.

“The fact they speak English drives it a lot and the proximity,” said Mr. Sonshine. “You are in Toronto or Calgary or any of our offices, you can get to the big cities very quickly. I can get to Dallas, in what two and half or three hours, big deal, and Dallas is pretty far away.”

Paul Finkbeiner, president of GWL Realty Advisors, which acts for pension funds, says there will always be an appetite for American property. “It’s easiest to go the U.S. because it is similar to Canada. Not all the opportunities are picked over. It might have been easier to get your head around them in 2012. In 2013 there are less deals. But are still better opportunities down there and abroad than there in Canada.”

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