There’s been a lot of talk about real estate in recent months. From the sub prime melt down to unrest in the financial markets, real estate seems to be at the center of most discussions. So does this mean real estate is a bad investment? “Not in all cases, certainly not the private REIT market,” says Jason Castellan, CEO of Guelph-based Skyline Apartment REIT.
Despite recent economic turmoil, REITs have shown remarkable stability. A December 2008 article in the Globe and Mail’s Report on Business points out, “Apartment REITs are considered to be an especially conservative type of REIT because demand for rental housing is more recession-resistant than other types of property.”
While publicly traded REITs have seen their unit prices battered in the markets, private apartment REITs have faired much better simply because the emotions in the marketplace have been removed. Even in the current economy, private apartment REIT unit holders are enjoying modest growth as well as stable and predictable monthly distributions. “The truth is our unit price is established by factual data, not the fear or uncertainty that exists in public markets,” says Castellan. “It’s not as if our vacancy rate climbed over night because the markets started falling. It’s just not how the apartment industry works.”
The fact is there has never been a better time to invest in the stability of multi-unit residential real estate in Canada. As lending markets tighten in the short-term, the move from rental to new home ownership will be substantially slowed. This in turn will continue to drive down vacancy rates, which are already good to begin with, to levels not seen in the last 7 or 8 years. Lower vacancy rates are helping improve the REITs bottom line creating strong returns back to investors.
Private REITs rely solely on raising their capital one investor at a time. While it can be a more tedious road to travel, Castellan says he prefers it that way as he feels it keeps the company as connected as possible to each and every investor. Like any private company, if it’s doing well and providing strong returns for its investors, raising new capital is generally easy to do. Castellan adds, “We’ve done exceptionally well since becoming a Private REIT and our investors have rewarded us accordingly by referring others. It’s humbling to me when people refer our REIT to others and in turn we take that trust they place in us very seriously as we rely on those referrals to continue to grow.”