Scotiabank makes surprise choice for new CEO

Kevin Orland
other

Big name announces plans to step down

 Bank of Nova Scotia chief executive officer Brian Porter is stepping down and handing the reins to Finning International Inc. CEO Scott Thomson, a rare selection of an outside executive to run one of Canada’s largest banks.

Thomson, 52, will become Scotiabank’s president on Dec. 1, then take the helm on Feb. 1, the Toronto-based bank said Monday. Thomson has been a Scotiabank board member since 2016.

As CEO, Porter overhauled the bank’s Latin America-focused international business and pulled off major acquisitions in its wealth-management business. The selection of Thomson as his successor ends his tenure with a surprise twist, with Canadian banks tending to pick their CEOs from among their top executives. The current heads of the country’s other five large lenders spent much of their careers inside those banks before rising to the top job.

“Our initial reaction to this announcement is one of surprise followed by anticipation,” Darko Mihelic, an analyst at Royal Bank of Canada, said in a note to clients. “The landmark decision from the board of directors to bring in someone from the outside to run a large Canadian bank clearly suggests to us that perhaps some significant changes may be on the way.”

Thomson has an investment-banking background and experience in Latin America, Mihelic said. Combined with his experience on the board, “he is clearly coming into the role with eyes wide open,” Mihelic said.

Thomson will exit Finning on Nov. 15. The company, based in Vancouver, sells, finances and services equipment from Caterpillar Inc. 

Porter’s main task after taking over Scotiabank was reorganizing its sprawling international business by pulling it out of markets such as South Korea, Dubai and Puerto Rico, where it was either underperforming or saw little long-term value, and doubling down in countries where it had thrived, such as Mexico, Chile, Peru and Colombia.

Porter, 64, also transformed Scotiabank’s wealth-management business from a relative weak position among its peers into a sizable player with the acquisitions of MD Financial and Jarislowsky Fraser Ltd. for a combined CA$3.5 billion ($2.6 billion).

The sudden changes in the company’s business mix made it difficult at times for analysts to predict earnings and for investors to value the company, weighing on its shares.

Scotiabank’s stock had risen 9.2% from when Porter became CEO in November 2013 through last week, the worst performance among Canada’s six largest banks for the period.

Scotiabank shares fell 2.5% to CA$67.60 at 9:37 a.m. in Toronto, making it the worst performer in the S&P/TSX Commercial Banks Index, which slipped 0.5%.

Porter said in an interview with Bloomberg in December that the work to reposition the international division was largely done and that the market would see the benefits over this year. At the time, he declined to say how much longer he planned to stay but said that the bank had identified as many as four internal candidates, whom he declined to name, as potential successors.

While the choice of new CEO from outside the industry is surprising, Thomson’s experience in Latin America was likely attractive to the board’s search committee, according to John Aiken, an analyst at Barclays Plc. Thomson led Finning through challenging market conditions and improved its earnings capacity, particularly in Latin America, during his nine years as CEO there, Aiken said.

“We do not expect the transition to be jarring,” Aiken said in a note to clients, “and the move leads us to believe that there should not be an immediate shift in Scotia’s strategy as Mr. Thomson has been involved in developing it at the board level.”

 

Copyright © 1996-2022 KM Business Information Canada Ltd.

Ten cheapest places to buy a house in Canada

Jonathan Russell
other

Four cities on this list are found in one province

 Vancouver and Toronto are not the only white-hot housing markets that are out of reach for the average Canadian homebuyer. While the housing market is cooling slightly, buying a home remains a dream for many. There is hope, however—if you are willing to move. Here are the 10 cheapest places to buy a house in Canada.

Saguenay, Quebec

The price of an average home in Saguenay, Quebec, is just $267,353—the cheapest average cost of a home on this list. That number comes from the Canadian Real Estate Association (CREA), which researched the cheapest areas to purchase a property in Canada at the moment.

Situated in the middle of northern Quebec, on the Saguenay River in the valley of Saguenay Graben, Saguenay is surrounded by rivers, valleys, lakes and hills, making it a top destination for tourists and anyone who loves the outdoors. Within the community, there are aquariums, zoos, museums and parks to explore, as well as world-renowned cheeses.

Newfoundland and Labrador

Throughout the entire province of Newfoundland and Labrador, whose capital city is St. John’s (not to be confused with Saint John, New Brunswick), the average price of a home is $280,200. That figure represents a year-over-year increase of 10.8%.

Saint John, New Brunswick

Saint John, New Brunswick, is the third cheapest place buy a house in Canada, with an average home price of $294,900, according to the CREA. In fact, up until recently, Saint John was the most affordable city in the entire country to purchase a property.

Full of historic architecture, a great music scene, and plenty of parks, Saint John is located on the famed Bay of Fundy, and is known for the reversing rapids. And due to its location, Saint John offers everything from an urban to rural lifestyle, including both the modern and historic.

Provincially, New Brunswick recently lost out as the most affordable province in Canada. (Saskatchewan now holds that designation.) The average home price in New Brunswick shot up nearly $142,000 in the last three years. The calculated benchmark of the cost of a home in N.B. last spring—which includes townhouses, condos, and homes—hit nearly $314,000, according to CREA. Compared to three years ago, that is nearly double the price and is over 34% higher than just year prior.

Regina, Saskatchewan

The average price of a home in Saskatchewan’s capital city of Regina, otherwise known as the Queen City, is $322,800, a year-over-year decrease of 3.5%. The second-largest centre in the province, Regina serves as Saskatchewan’s commercial centre and is ideal for students and families who love modernity, culture, and history.

Regina is also a very green city with a plethora of parks and recreational facilities, as well as top-tier health-care centres and shopping malls. It is also easy to get around, with driving times almost anywhere within the city taking about 20 minutes, which not only saves you time but gas money as well. For these reasons, Regina has a cheaper cost of living than most other metropolitan areas in the entire country.

Quebec City

The average price of a home in the census metropolitan area (CMA) of Quebec is $325,600. That figure represents an annual increase of 11.6%, according to CREA. In fact, of the top 20 cheapest places to purchase a property in Canada, CREA found that six are located in the province of Quebec.

Trois-Rivières, Quebec

Trois-Rivières, Quebec, has an average home price of $330,431, which is a year-over-year increase of 29.5%. With a nearly 400-year history, Trois-Rivières is this region of Quebec’s cultural and economic hub, offering its residents a low cost of living, a scenic outdoors economic optimism. Another major perk for Trois-Rivières is its proximity to a couple of Canada’s biggest commercial and cultural hubs—Montreal and Quebec City. For its location and its affordability, however, you may have to put up with higher taxes and freezing cold winters.

Thunder Bay, Ontario

Don’t count out Thunder Bay, Ontario—it is known as the sunniest city in Eastern Canada, enjoying nearly 2,200 hours of sunlight each year. With an average home price of $358,051 and a year-over-year increase of 12.5%, Thunder Bay offers high levels of employment, good commute times, enthusiastic arts and sports communities and great access to health care. While it is the most affordable housing market in Ontario, experts predict a significant rise in the real estate market value.

Saskatoon, Saskatchewan

The second city on this list based in Saskatchewan, and the largest centre in the province, Saskatoon comes in at number eight on our list. The average cost of a home here is $376,100, with year-over-year increase of 5.4%.

Edmonton, Alberta

The only city in Alberta on this list (although Calgary came in at 13th on CREA’s top 20), Edmonton’s average home price is at $402,800. That figure represents a year-over-year increase of 8.4% in Alberta’s capital city.

Sherbrooke, Quebec

Rounding out the top 10 of CREA’s list of most affordable cities to buy a house in Canada is Sherbrooke, Quebec. The average price of a home here is $435,525, a year-over-year increase of 12%.

 

Copyright © 1996-2022 KM Business Information Canada Ltd.

Tech demand continues to drive West Coast office markets

Peter Mitham
Western Investor

Industrial absorption rises during Q3 despite economic jitters

Amazon will take occupancy of the south tower of The Post at 349 West Georgia Street later this year, a sign of ongoing demand from tech tenants in the Vancouver market, says Colliers International.QuadReal Property Group
Strong absorption in both the office and industrial market is keeping B.C. real estate humming despite economic worries.
Third-quarter stats from Colliers International indicates that uptake of office space in Metro Vancouver slowed to 214,808 square feet in the third quarter, pushing vacancies down to 5.8 per cent, while industrial absorption strengthened to 1.5 million square feet driven by new offerings that lifted vacancies from their historic lows to 0.2 per cent.
Demand for office and lab space by tech companies including Abcellera Biologics Inc., Omnisolu Technology Inc. and Archiact Interactive Inc. drove activity in both the Vancouver and Victoria markets.
“They seem to be on a growth curve,” said Susan Thompson, associate director of research at Colliers. “Yes, we have heard of some budget cuts and layoffs, but that’s not consistent across the board. We’ve also got a number that are growing and expanding. There still seems to be demand, and of the active tenant mandates out in the market looking for space, 34 per cent downtown [in Vancouver] is from the tech sector.”
Tech companies will be among the firms taking space in new developments later this year, the fulfilment of earlier commitments but also bringing fresh activity to the downtown Vancouver market. These include Amazon’s occupancy of south tower at The Post, 349 West Georgia Street, which will add 517,375 square feet to the downtown inventory.
“Amazon saw huge growth, obviously, during the pandemic, thanks to e-commerce, and that’s maybe backed off in the last little while, but we’re seeing a lot more demand for technology and equipment, analysis, lab work in the healthcare-life science sector because it’s become a lot more important,” Thompson said.
While the Vancouver market has several options available to life science companies, strong demand has put pressure on the short supply of lab space in Victoria, where office vacancies average 5.9 per cent.
The industrial market offers even fewer options, with almost any space quickly snapped up. While rising construction costs and slowing demand prompted PC Urban to hit pause on IntraUrban Cornerstone, a 167,000-square-foot strata industrial development in Langford, absorption in the third quarter has been high.
“Rents have increased in Q3 and will likely continue to climb for the remainder of 2022. Users will likely want to still get their foot in the door sooner rather than later, because nobody knows when or even if a price reduction will come. Cash is still king and continues to help offset the increased cost of borrowing,” Colliers said of the Victoria industrial market, where vacancies are the lowest in North America at 0.1 per cent.
“Demand still seems pretty high in the B.C. industrial market. Vacancy is so low,” Thompson added. “In Vancouver, we’re talking 0.2 per cent vacancy, which means there’s still less than 400,000 square feet available as options and that’s scattered between 22 buildings. … So if you’re a larger company, you’re still having to do a pretty heavy-duty search to find options that are suitable.”
This has supported strong absorption despite growing economic jitters as companies jockey for what space becomes available, with spillover effects from the tight West Coast markets continuing to buoy Alberta markets where demand also continues to be strong.
“We’re now starting to see companies work through the calculus on, ‘If I take something off a cargo ship in Vancouver, can I move it to Alberta and use that as my distribution hub?’”
The demand has been good for both Calgary and especially Edmonton, where vacancies continue to fall. Despite having the highest industrial vacancy rate of any major market in Canada at 4.2 per cent, Edmonton’s industrial vacancy rate is down from 5.4 per cent at the end of 2021 even as millions of square feet continue to be delivered.
The third quarter, for example, saw 3.4 million square feet of new construction complete in Edmonton, while absorption totalled nearly 3.8 million – more than any other market in Canada.

© 2022 Western Investor

Seniors housing portfolio closes at more than $300 million

Western Investor Staff
Western Investor

Eight senior residences sold include five in B.C. | Newmark Canada

In a deal valued at more than $300 million, a portfolio of eight senior’s residences across British
Columbia and Alberta were purchased September 15 in a transaction handled by Vancouver-based brokerage Newmark Canada.
The Hamlet portfolio traded from H&H Total Services Inc.– a family-owned business based in Surrey, B.C.  – to a joint venture partnership between Axium Infrastructure, an independent portfolio management firm with offices in Canada, the U.S. and the U.K. and Optima Living, a Western Canada-focused owner/operator.
The B.C. Hamlet residences are located in Duncan, the Fleetwood area of Surrey, Penticton, Vernon and the Westsysde community of Kamloops, while the Alberta residences are in the Cedarwood Station area of Airdrie, the Deer Park neighbourhood of Spruce Grove, and Red Deer.
Newmark executive managing director Mark Gallagher, senior managing director BJ Bhal and managing director Dave Kalinowsky represented the seller, H&H, in the transaction.

© 2022 Western Investor

Canada cuts home price outlook

Ari Altstedter
other

The drop is expected to be deep…
Canada’s national housing agency plans to revamp its forecasts to call for a drop of as much as 15% in home prices, as higher mortgage rates threaten to cause a protracted slump in real estate.
Canada Mortgage & Housing Corp. said in July that national housing prices could slide 5% by mid-2023, compared with levels earlier this year. It’s now revising those projections to allow for a 10% to 15% decline, Chief Executive Officer Romy Bowers said in an interview Thursday at the Bloomberg Canadian Finance Conference.
“We’ve seen that inflation has been more persistent than we originally anticipated and the Bank of Canada is taking more aggressive action, so we’re in the process of revising our forecasts,” Bowers said, adding that the new projections would be released soon.
Since CMHC’s July forecast, the central bank has stepped up what was already one of the most aggressive rate-hiking cycles in its history. It shocked markets by increasing the policy rate a full percentage point on July 13 — the biggest since 1998 — then raised the rate again by three-quarters of a point in September.
Variable-rate mortgages at Royal Bank of Canada, which were offered at less than 2% in February, are now over 5% and poised to go even higher if the central bank lifts rates in October, as expected. The abrupt rise in borrowing costs has had an immediate impact, prompting benchmark home prices to fall for six straight months.
CMHC’s new projections would bring its forecasts closer to those of private sector economists. Still, Bowers said price declines must be viewed against the historic gains in home values over the last two years.
“It’s very important when thinking about this price decrease to think about the rapid, sort of unsustainable, levels of house price increases that occurred during the pandemic,” she said, adding that shelter will remain unaffordable for many Canadians.
In fact, even though prices have dipped since February, it has never been harder for Canadians to buy a home, according to a new report by RBC economists. Total ownership costs, including mortgage payments, now soak up 60% of a typical household’s income, higher than the previous record of 57%. 

Copyright © 1996-2022 KM Business Information Canada Ltd.

More Vancouver residents spending less income on housing: census

Peter Mitham
Western Investor

Renters most likely to spend more than 30 per cent of income on shelter A greater proportion of Vancouver residents are spending less than 30 per cent on shelter costs, according to census data. | Chung Chow photo
High housing costs have repeatedly won Vancouver top spot among the least affordable cities in Canada. The status was solidified in the most recent RBC Economics report, which indicated the average household in Vancouver required 82 per cent of its monthly income to buy a home. (An apartment was the most affordable option, requiring just 44.7 per cent of monthly income.)
But census data released this week shows that a lower percentage of homeowners and renters are spending more than 30 per cent of their income – the standard threshold when it comes to affordability – on shelter costs.
Within the city of Vancouver, fully two-thirds of households spent less than 30 per cent of their income on shelter in 2021, up three percentage points from 2016.
Provincially, 74.5 per cent of households spent less than 30 per cent of their income on shelter, up 2.5 percentage points from 2016.
This isn’t to say housing is within reach. Census data indicates that home ownership is more expensive in Vancouver, averaging $2,084 a month versus the national average of $1,498. This compares to $1,660 a month for rented accommodation.
But surprisingly, just 26.3 per cent of Vancouver homeowners spend more than 30 per cent of household income on shelter compared to 39.4 per cent of renters.
Rents are so daunting that the census estimates that nearly 26 per cent of tenant households are in “core housing need.” This is more than twice the proportion of homeowners in a similar predicament.
Statscan defines “core housing need” as when “a private household’s housing falls below at least one of the indicator thresholds for housing adequacy, affordability or suitability, and would have to spend 30 per cent or more of its total before-tax income to pay the median rent of alternative local housing that is acceptable.”
The challenges facing renters is even more severe in Metro Vancouver as a whole, with more than 27 per cent of tenant households in core housing need. The national average is 20 per cent.
While the challenges facing first-time homebuyers are well-known, rental housing remains a stubbornly entrenched issue. Starts peaked in 2016 at 6,841 units, according to Canada Mortgage and Housing Corp. statistics, a positive shift from 1,277 units in 2012 but not yet matched.
Despite the strong market for purpose-built rental units and the interest developers such as Adera Development Corp., Cressey Development Corp. and Mosaic Homes – which recently launched a dedicated rental division – have taken in building rental, starts last year totaled 6,683 units.
This year could come close, however, with 5,644 units started through the end of August.
Nevertheless, significant hurdles exist as projects face lengthy approval processes and opposition from communities. This has slowed the delivery of units, leaving many builders hoping for stronger measures on the part of government to encourage new rental units.
“Demand is far and away outstripping supply, and that’s affecting both rental – below-market and market housing,” said Ron Rapp, CEO of the Homebuilders Association Vancouver (HAVAN).
Government intervention could improve conditions, however, assisting affordability across the housing spectrum.
Hani Lammam, executive vice-president with Cressey, recently told Western Investor he expects the federal government will step in with incentives.
Ottawa recently pledged $1.4 billion to support construction of 3,000 rental homes at Squamish Nation’s Sen̓áḵw development at the south foot of the Burrard Street bridge, for example. The low-interest loan is from a five-year-old fund managed by CMHC aimed at building 71,000 rental units nationwide.
“We think the province will take the necessary steps to grease the wheels on the municipal front, make approvals easier,” Lammam added.

© 2022 Western Investor

Victoria eight-unit multi-family rental sells for $3.6 million

Western Investor Staff
Western Investor

Well located and well-maintained apartment building, built in 1949, with stunning ocean views along desirable Crescent Road, Victoria, B.C.

William Wright Commercial, Victoria, B.C. for Western Investor

 

Type of property; Multi-family

Location: 1860 Crescent, Victoria, B.C.

Number of units: 8

Property size: 14,857 square feet (approx.)

Sale price: $3.6 million

Brokerage: William Wright Commercial, Victoria

Brokers: Connor Braid and Harry Jones

 

© 2022 Western Investor

7.7 acres of Langley agriculture land sells for $4.1 million

Western Investor Staff
Western Investor

Flat Agricultural Land Reserve land with highway exposure has future potential close to golf course.

Varing Marketing Group | Homelife Advantage Realty Co. Ltd., Abbotsford, B.C., for Western Investor

 

Type of property: Agricultural land

Location: 24680 Fraser Hwy, Langley, B.C.

Property size: 7.77 acres

Zoning: ALR (Agricultural Land Reserve)

Sale price: $4.13 million

Brokerage: Varing Marketing Group | Homelife Advantage Realty Co. Ltd., Abbotsford, B.C.

Broker: Joe Varing

 

© 2022 Western Investor

Homeownership slips despite increase in household incomes

Shantae Campbell
other

Vancouver investment deals strong in Q2 as headwinds increase

Peter Mitham
Western Investor

Cap rates set to rise as values reset following interest rate hikes

 The 115 Place housing co-op on Cardston Court in Burnaby ranked among the largest property deals of the second quarter at $85.5 million. The two towers sold to the Community Land Trust as part of a portfolio deal worth $140 million.Photo: Jennifer Gauthier

Metro Vancouver commercial real estate sales were down just 2 per cent in the second quarter versus a year ago, Altus Group data reveals, but recent interest rate hikes by the Bank of Canada could dampen activity in the latter half of the year.

“It’s pens down,” says Colin Johnston, president of research, valuation and advisory with Altus. “Do you want to buy in this market, knowing that maybe next month you can buy something cheaper? Do you want to sell in this market knowing that you may not get the price that you wanted?”

Johnston believes people are taking stock of the situation, with the result that less capital will be placed this fall while parties wait to see how things shake out.

“We’ve got this period of price discovery that’s going to happen for a few months,” he said. “[It’s] akin to the early days of the pandemic, where people didn’t know what was going on and it was hard to get some metrics because nothing was trading.”

According to Altus, the uncertainties will deepen in the coming months.

“With core inflation remaining elevated, ongoing geopolitical volatility and further interest rate hikes from the Bank of Canada continuing to push up financing costs, investor confidence is likely to erode with investment activity in the [Vancouver market] resultantly slowing substantially through the back half of 2022,” it said.

But that wasn’t the case in the second quarter, where $4 billion worth of properties changed hands in 671 transactions. This was a minor decline from $4.1 billion worth of deals in 678 transactions a year earlier.

It added up to a 26 per cent increase during the first half of the year versus 2021, with nearly $9 billion in assets trading during the period.

Residential land deals led the way, increasing 68 per cent in the second quarter versus a year ago, and 152 per cent in the first half of the year. Retail and industrial assets also performed well, with retail sales up 29 per cent in the quarter while industrial sales increased 4 per cent.

While industrial activity slowed, it was due to a lack of product rather than a lack of demand.

“Industrial assets were most desired by investors with more than $1.65 billion disbursed for 292 properties in the first half of 2022,” according to an Altus Group analysis.

Demand is driven by strong rental growth and a shift in institutional allocations away from retail and office assets. Metro Vancouver office assets saw a 32 per cent drop in sales value in the second quarter, and acceleration from the first quarter for a total decline in the period of 14 per cent.

“Ongoing discussions around hybrid work and a slow and cautious implementation of return-to-office mandates continue to project an aura of uncertainty around office assets in the estimation of some investors, which is applying a hindering effect on transactional momentum,” according to Altus Group.

Suburban office space is outperforming more central office properties, according to Johnston, because people are returning to offices but avoiding commutes where possible. The closer a workspace is to where workers live, the better for occupancy and in turn market value.

But he expects uncertainties around what those values might be until interest rates, occupancies and the economic environment as a whole stabilizes.

“I wouldn’t be surprised to see, November, December, a few deals happening, but in the next six weeks I don’t expect to see a lot of activity,” he said. “I think the fall will be quiet, but the real estate market continues to surprise me with its ability to rebound and I do know that people want to place capital.”

CBRE Ltd.’s recent second-quarter cap rate report indicated little change year-to-date on cap rates, but forecasted increases for later this year.

“Vancouver is well positioned to outperform through this transitional economic period,” Jim Szabo reported. “Despite this strong foundation, we expect cap rates will begin trending towards the high side of our ranges, and likely beyond, should interest rates continue to rise.”

The more recent analysis by Altus Group, based on a Canada-wide survey of 126 commercial real estate leaders as well as recent sales data, reinforces this prognosis.

Sixty per cent of survey respondents “indicated that they had adjusted both their cap rate and internal rate of return (IRR) expectations as a result of interest rate increases by the Bank of Canada.”  

“Capitalization rates and internal rates of return are going to have to increase, just because between 2017 and 2022 they fell consistently. So they just have to go up,” Johnston said.

 

 

© 2022 Western Investor