On September 25, 2025, Canadian Family Offices hosted an online panel discussing real estate. Our expert panel looked at what Canadian regions are of specific interest for family offices today, and what the risks are to portfolios in today’s environment. It was an engaging conversation, moderated by CFO managing editor Joe Chidley, that also dug into the economy as whole—including tariffs and other factors that are straining the Canadian economy.
The panel featured:
Fred Cassano, Partner & National Real Estate Leader, PwC Canada
Michael Beaupré, Managing Director, Institutional Mortgage Capital (IMC)
Quinntin Fong, Senior Vice President & Fund Manager, Fiera Real Estate
This panel discussion is part of our special report, “Real Estate.” To see more content in the series, click here.
Transcript
This transcript is provided for convenience and is based on the audio recording of the video. While efforts have been made to ensure accuracy, minor errors are possible.
Joe Chidley: Hello and welcome. I am Joe Chidley, Managing Editor of Canadian Family Offices, and it’s my pleasure to be moderating today’s panel discussion.
We brought together three leading experts today to talk about real estate, which is a matter of keen interest to many, if not most Canadians, and particularly to family offices for whom it has long been a core portfolio asset.
When we look broadly across real estate as an asset class today, it’s fair to say that a lot has changed in only the past couple of years. Higher interest rates, work from home and return to work, immigration, demographics, trade tensions — they’ve all come together to create what we could call an unsettling or unsettled environment.
The days when a rising tide lifted all boats in the real estate market seem to have passed, and as a result, in-depth knowledge and expertise matter now more than ever. Our panelists today, hello gentlemen, have certainly got knowledge and expertise in abundance, and they’ve graciously agreed to share their insights with us.
They are Fred Cassano, Partner, National Real Estate Leader for PwC Canada; Michael Beaupré, Managing Director, Institutional Mortgage Capital, or IMC as it will be referred to in future; and Quinntin Fong, Senior Vice President at Fiera Real Estate and Fund Manager of the Fiera Real Estate Industrial Fund.
So, to get us started today, perhaps each of you can tell us a little bit about yourselves and what you do. Fred, do you want to kick off here?
Fred Cassano: Absolutely. Hello everyone. Thanks, Joe and the Canadian Family Offices team. I’m a tax partner and leader of our national real estate team focused on advisory, tax, and assurance services. I also spend a lot of time with ULI on our Emerging Trends report, so I’ll draw insights from interviewees’ comments that are fresh. We’re currently drafting our publication now, and from insights within our client base across the country and connections within our global practice. Looking forward to this discussion.
Joe Chidley: Great. Thanks Fred. Michael?
Michael Beaupré: Thanks Joe, and thanks everybody for attending today. It’s a pleasure to be on this panel. I’m Michael. I work for IMC. IMC is a real estate debt lender. We’ve been active in the Canadian market for 15 years as a fund manager. Prior to that, we were under the Merrill Lynch team, so we’ve been in business for more than 25 years. I’ll try to approach real estate more with a lender’s perspective today.
Joe Chidley: Perfect. Okay, and last but not least, Quinntin.
Quinntin Fong: Thanks Joe, and good afternoon or good morning to everyone on the call today. Thanks for joining us. As Joe mentioned, I’m the fund manager for the Fiera Real Estate Industrial Fund, an industrial-focused fund in Canada, specifically in the small and medium bay market, with about a billion in assets under management open to institutional and family office capital, in an open-ended fund series.
We have a long history in the space — over 40 years in the small bay industrial sector. More broadly, Fiera is a global asset manager with over 160 billion of assets under management, of which about 12 billion is in real estate globally, with Canadian being our largest component. Looking forward to sharing some insight on real estate and maybe a little bit more on industrial as well.
Joe Chidley: Awesome. Okay, thanks Quinntin. So let’s get started. We’ve got a lot of territory to cover, so to speak, and we’ll begin with maybe the 10,000 or 100,000 foot view, and talk a bit about the Canadian economy, which seems to be in a pretty precarious position right now, with tariffs, declining consumer confidence, trade disruption, some talk of recession coming this year, or at best, maybe tepid growth. How in general, and this can be a short answer, thumbs up, thumbs down, does this kind of gloomier outlook affect the outlook for real estate?
Fred Cassano: So I can start, and I would say that we’re in a moment of “Crisitunity,” to borrow a phrase from my good friend George Karis. Because although there are certainly geopolitical trade issues that still need to resolve themselves, and let’s not forget we need our construction workers back with shovels on the ground, there’s certainly a multiplier of impact. If we don’t get the laborers back, then it’ll impact other asset classes.
There are now many catalysts that will give us room for excitement in the world of real estate, whether it’s interest rates coming down, to capital flows across various asset classes, to policy that is very favourable to get housing moving again. So I think there’s a lot of excitement, and I would say maybe cautious optimism, certainly as we approach 2026.
Joe Chidley: Okay. Michael, from your perspective as a lender, how would you answer the economic question?
Michael Beaupré: Yeah, it’s a good question. We still really like the asset class. We’re still very confident about this asset class, and the main reason why is it’s a very long-term asset class. Investors are in for the long term.
So even though we’re still probably absorbing some of the effects of COVID, some of the effects of inflation, and construction costs have increased in the past few years, most investors are in for decades. I think that’s one of the reasons why this asset class has performed that well over the long term.
Joe Chidley: Right. Okay. Thanks Michael. And Quinntin, from your perspective in industrial, have trade tensions and tariffs dampened enthusiasm around industrial, or what’s the story there?
Quinntin Fong: Yeah, great question. Maybe I’ll go 10,000 feet and then narrow down, because I think industrial specifically had the headlines on tariffs most recently. But I think more broadly, the real estate industry — without a doubt, most sectors in most geographies — we’re all feeling it.
And maybe very micro in that, deals are just taking longer to get done, with businesses being a little uncertain on tariffs, or where the growth plans are, or whether it’s the movement of capital that has caused less transaction activity in the market.
But I think what’s really important is from an opportunity set is first: whenever there have been periods of changing in government spending, essentially stimulus with interest rates, interest rate cuts, we’ve seen a good rise in real estate performance. And so I think it’s really important then to bifurcate where are there going to be performance in real estate, which real estate sectors, which geographies are coming from a position of strength.
And so, as an example for industrial, inherently, tariffs impacting manufactured goods exports are perceived to be relatively more disproportionally hit compared to other sectors. But what’s really interesting is if you look at the larger market heading into this period for industrial, it’s actually been relatively stable. Call it more normalized than it was.
We’re hitting a period of maybe 5% vacancy, which is actually closer to our pre-pandemic averages. So really the devil’s in the detail. When you look further in there, what’s the percentage of inventory that’s actually manufacturing? Less than a third. What within industrial, what is actually doing well? Is it small bay, medium bay, large bay? So there’s a deeper story behind refining every book there.
Fred Cassano: So can I just add to that? Because I, I agree with you that we, can’t have one broad statement on real estate. It’s very, very, very asset dependent, and within each asset class it’s bifurcated even further. And certainly, industrial, has a lot of legs in terms of continued investment because of its steady stream of income. You know, call it lowish CapEx compared to other asset classes. And there’s a lot of fuel adding to the growth, whether it’s e-commerce to onshoring, we don’t know yet what defense spending is gonna look like, but it could impact the industrial sector. So there’s still a lot of, aptitude for, investment in industrial.
Joe Chidley: Okay. Have you seen, so there’s a reader question here about whether this environment, this gloomier environment, economic environment has, and this is from Sean McMahon, thank you, Sean, have family offices been decreasing the percentage of real estate holdings in their overall portfolio? Have you noticed any trends there in your interactions with family offices?
Michael Beaupré: Maybe I could start. I’m not sure about the answer to that because sometimes they don’t really share their allocation, but what we’ve been seeing on the debt side is a lot more interest from, it started with large institutional investor like pension plan, but right now is family office. They’re looking at real estate debt as a compliment to their portfolio. So I’m really seeing some activity, on, on that side.
Quinntin Fong: Maybe I’ll jump in from an equity fund perspective, I think a lot of people on the call may have seen headlines in the Globe and Mail, seen funds gaining, and I think family office group that went with high net worth, private wealth, retail money, what have you. I think without a doubt, there, there’s definitely been some movement and, you know, retail money compared to institutional, historically less sticky. So we are seeing a little bit of that movement there. I think the key is zoning in on the type of strategies where you’re seeing that, where they, what’s the driver there were they really over-leveraged that’s reduce the amount of levers they have in a period of softness. Were they more aggressive on some of their buying that’s led them with less conservative cash management? So I think it would be anecdotal depending on the fund, depending on the strategy. Sharing a little bit about my fund in particular, we’re about 10-15% in the high net worth retail or family office space. We have seen some movement, but for the most part, flows have been positive. There’s been a little bit of rebalancing inherently, because real estate, private real estate, depending on the sectors, industrial as an example over the last few years has done fairly well. And if you’re a liquid fund, which is what we pride ourselves with doing, and I think that’s what most funds should be doing, to our investor or to be able to provide to our investors. It is a window for them to be able to recalibrate. But we’re not seeing widespread redemptions across the board seeing very little, a hundred percent redemptions.
Fred Cassano: So I think, Michael, for the question, I promise you it was not a planted question, ’cause I could tell you PWC just launched its global family office survey, just a few days ago and talking about real estate allocations. So globally, they have come down and our study now shows that actually it’s going back up. It was, I think, 23% last year and the headline now is 39% globally. We also try to track, how Canadian family offices are behaving compared to global. In fact, we’re finding 69% are allocated to real estate, which is a large number, which is great. But I agree with Quinntin, depends on the asset class, right? If you’re heavy on office and you need to maybe pivot their portfolio, maybe you’re not allocating, a lot into office. But if you’re, again, long-term investor, multifamily looking for opportunistic buys, whether it’s tied to energy or a data center play, then you’re still in there for a long-term and you’re not reallocating. So I think it’s good news that family offices are liking the sector and certainly as rates come down, cap rates will behave similarly. You know, that’s more allocation to towards, real estate.
Joe Chidley: Okay, great. So as always, the devil is in the details. And what was that phrase you used? That neologism, Fred?
Fred Cassano: Crisitunity, that’s George Karis for you.
Joe Chidley: This is the era of Crisitunity. Okay, staying on that sort of 10,000 foot level, and the details matter, and I think there are fairly few details about this area, but on the level of policy, so the federal government’s made housing infrastructure, faster project approvals, sort of core priorities in its Build Canada initiatives, including the recent Build Canada Homes affordable housing program. And feel free to answer this or not, depending on your area of expertise and interest, but is there a likely impact on the housing crisis in Canada for all this kind of stuff? And are there opportunities for family offices or other investors here over the long term?
Fred Cassano: The short answer is absolutely, I think this is a generational policy initiative that we’ve seen in a long time. And it’s a signaling of we’re here to help the industry deal with the supply issue. So I applaud it. Obviously the devil’s in the detail, but certainly there’s gonna be a lot of opportunities, whether it’s getting into long-term lease agreements with land that has been already designated to be sold to developers and partner with the government on several projects. And whether it’s Canada lands to Canada Post to national defense, I think those are opportunities to partner with privates.
The other thing is, the announcement also included the investment in how we’re going to build in the future, prefab modular housing, and certainly that investment is the intersection of real estate with tech and forestry and policy. And I believe all forms of construction should be investigated. And certainly, the push to modular, I applaud. And there’s a lot of private, family offices that are investing in this space to take advantage of the opportunities that could be afforded, including scaling, scaling across the country. We don’t have a natural platform yet, but that could be coming, and certainly with this initiative, it could lead to a lot of deals. So I applaud what’s happening from a can homes, or Build Canada Homes perspective, or as Carney said in his campaigns, “Build Baby Build” right? So it’s an exciting time.
Joe Chidley: Michael, Quinntin, anything from your perspective that’s relevant?
Michael Beaupré: I echo everything that Fred said. I think it makes total sense. I just hope that the different layers of government can start working together as well. It’s good to have those kinds of statements from the federal government, but at the same time, the developers are dealing with the municipal government, the provincial government. And when we have discussions as a lender with our borrowers, with these developers, their main issue, it’s not just the money that is being invested. It’s actually not really the money. It’s more the fact of how long it takes. We used to joke, but we still joke about the fact that when you’re in Toronto and you see a crane, it’s a project that’s been put together for the past 10 years. So it shouldn’t take 10 years. Let’s try to cut the time it takes to put together a project, and I’m pretty sure it will help the multi-residential market in Canada for sure.
Quinntin Fong: And maybe to chime in, will it help? Definitely. Will it solve all affordability issues in a world-class city or the largest cities in Canada? Probably not. That’s the global phenomenon here. But I think from an opportunity set that’s interesting, obviously there’s direct exposure, infrastructure investment, affordable housing, purpose-built rental. But I think what’s unique and what’s going to be interesting is who are going to be the other winners. I think that’s where you’re going to be able to find the additional alpha in those opportunity sets that less, whether it’s family offices or other institutions are zoning in on whether that’s adjacent to these affordable housing. They’re going to need retail. They’re going to need amenities. So are the local retail plazas, your local strip malls, going to see a resurgence? Is there going to be a need for certain industrial development to support the building of this, manufacturing of certain products, aluminum products, steel products, or even smaller bay products that support local communities or contractors, necessity-based businesses, services?
So, I think there are going to be more than the obvious winners in this next cycle as a result of these policies. So overall, I think the opportunity set is not that narrow, and I think it depends on each investor’s thesis on where they see the puck going, the adjacent sectors.
Joe Chidley: Right. Yeah. Sorry, go ahead, Fred, did you have something there?
Fred Cassano: No, I totally, totally agree with that. The adjacent sectors, one that comes to mind is data centers. That could be an adjacent area because if we’re focused on also elevating AI and the use of technology on prefab modular, again, that’s just more to the story of who’s going to help fuel the environment for data storage and data centers. So now you have EVs, to decarbonization, to Bitcoin, to AI and gen AI. There are opportunities in data centers and certainly we’re seeing a lot of club deals being formed where family offices are participating alongside institutions to invest in data centers, which has a long-term investment horizon.
Joe Chidley: Yeah. Data centers are interesting, aren’t they, because they’re kind of where infrastructure meets real estate, right? Do you see, you mentioned there’s a lot of activity in there, what other plays are there around data centers, around energy and infrastructure and things like that?
Fred Cassano: Well, I would say the intersection of real estate with so many other different infrastructure plays, including life sciences. So as tech is being infused in life sciences and healthcare, now sure there’s a data play. But from a real estate perspective, you’re also seeing these outpatient delivery models, rebranded, before we used to call them medical offices that will help with delivering services to deal with health issues in a more efficient manner. But that needs space from a real estate perspective. So it’s the intersection of life sciences, tech, and real estate as one example.
Joe Chidley: Right. Okay. Great. So now that we’re talking specifics, let’s get further into some specific sectors of interest in real estate. And again, within your own purview, maybe I’ll just throw out a few sectors, sub-sectors and get your thoughts on them. Does that sound good, gentlemen?
Panelists: Yeah, sure.
Joe Chidley: Okay. Feel free not to answer if you don’t have an opinion. We’ve talked about data centers, let’s talk about office for a bit. Like everybody else, we all left the office four years ago, five years ago now, and now we’re being asked to come back. What’s the outlook on office vacancy rates, occupancy, cap rates, et cetera, now that people may be coming back to work?
Michael Beaupré: I can start with that one. As a lender, we tend to lend on short term. So it’s usually two-year terms. During COVID, we stopped lending on office just because we didn’t know really what would happen. We’re now back at looking. I would say that we don’t have, I think our exposure in our portfolio is probably 3% or 5%, but we’re now looking at office transactions because we think there will be some winners and some losers. I think this is what we’re seeing right now, and this is usually what happens when there’s a lot of disruption in the market. Some properties are actually fully leased right now. I’ve heard from one of my friends working for another bank that during COVID they reduced their footprint because they thought they didn’t need the space, but they were in a AAA building in downtown Toronto, and now they’ve mandated all their employees to be back four days a week in the office, and they realized they don’t have enough space. So they called their landlord and said, “We need an additional floor.” And the landlord said, “We’re full, you’ll have to go somewhere else.” So now they’re stuck having part of their team working in another building just because that building is full. So I think we’ll see more and more of those issues for some tenants. But at the same time, I think other offices that are outdated, with no services, no access to transit, will probably have a hard time navigating the next few years.
Quinntin Fong: And maybe to add to that, I think for sure the trophy and class triple A are seeing a huge resurgence. And I think the repricing is getting closer, even on the peripherals and more suburban offices, they’re seeing yields that some funds can make sense of. I think what I would probably caution, and still share from our perspective, generally, I think there’s going to be a few years still to absorb some of the pain we’ve had. That’s what our internal research group is saying. But also from a family office perspective, or in terms of an investment product perspective, whether it’s REITs or private funds, I think it’s really important to understand what type of office buildings they have. What strategies has that manager taken to remain competitive in that market? Is the location bulletproof? It may be cliché to say, but location is probably the most important, if not one of the most important, pieces of assessing the underlying real estate. I think the devil’s in the details again but be careful what’s hidden in these portfolios. There are a lot of really strong institutional funds that have done really well, but they still have a few skeletons in the closet with some of that office allocation they historically have.
Fred Cassano: Mm-hmm. I could tell you that during our interview season for Emerging Trends this year, at the beginning of the summer towards the end, the mood shifted on office. Certainly, the return to office was a catalyst for that. And for the first time we started hearing “undersupply,” which a few months ago no one would have ever said that. So, it shifted from “we’re not out of the woods yet” to “undersupply,” which is a stark contrast. But to our earlier point, that bifurcation is really, important. You know, amenity rich, transit oriented, sustainable buildings will perform better. And hopefully as they’re fully, occupied, over the course of the next few years, that’ll spill over to the B’s and the C’s as well.
But I think the office return, there’s also another narrative that we’re not talking about nearly as much is that of employee productivity. So we’ve been hearing over the years that our productivity is lower. I think it’s important to get people back to understand what people are doing. You know, teaching them mentorship aspects, the collisions in the office space that lead to opportunities. So I think that’s very important as part of the narrative as well.
And the other concern sometimes that we talk about is the friction of getting into the office. Certainly infrastructure needs to allow the reduction of that friction, whether it’s all mobility services. So I think that’s going to be a pain point for years to come. But we just need to be patient, because I guess there are initiatives like the Ontario line, and other transit methods that are going to encourage that. So that employee productivity is very important to the narrative.
Joe Chidley: This is a reader question from Evan Lewis. Thank you Evan. With remote work, is that a thing to stay and urban congestion? Are they creating investment opportunities in rural or ex-urban areas that are within driving distance of urban hubs? I imagine this is a question for the long term. What are your thoughts on that?
Michael Beaupré: I think Quinntin mentioned it a little bit, like it created an opportunity for suburban office. I think we saw some property, actually the cap rate now is quite similar between suburban office and downtown office. I think this is really where it created an opportunity for sure.
Fred Cassano: I think hybrids is here to stay, even though we have mandates. It allows flexibility. You know, as you design your workforce, maybe not everyone needs to be in the office. Whether it’s back office, there are certainly service delivery models not only in Canada but across the world. So I think COVID taught us that you can still be productive. So I think hybrid, and adding that flexibility into someone’s program, is here to stay. But getting back to the office, like I said, for a whole bunch of other reasons is very important.
Joe Chidley: Okay. All right. Great, thanks. Quinntin, I’m going to direct this at you. Where are you seeing opportunities in industrial right now?
Quinntin Fong: Yeah, thank you for that question. I think for industrial, the tale of two stories: we’ve heard supply for larger bay product over the last few years hit a peak with some of the post-pandemic trends, obviously growth in e-commerce, third-party logistics. I still wouldn’t say that’s an unhealthy environment. As I mentioned, 5% availability, rents are still higher than where they were three years ago. So, in most cases, it’s a healthier market. I think the opportunity set actually exists in some of the smaller, medium bay industrial that really has been underbuilt and under-levered over the last few years. As a proportion of inventory, it represents about a third. Over the last 10 years, the amount of new inventory in industrial for small bay has hovered in the single digits. So really disproportionately built, and what’s really interesting about this little sub-niche is, despite all these market trends that we’re over the last year, or market cycles if you will, the pandemic, interest rate hikes, tariffs, the volatility and the vacancy in this subgroup has been effectively nil, hovering in a 1.5% to 3% range. So I think it’s still a really unique value/risk proposition: inherently a little higher yielding, older, a little smaller, but the risk profile is a really unique one for the broader food group of the four main real estate asset classes. It’s an interesting one for sure.
Joe Chidley: Okay. Anything else in industrial that’s peaking your interest?
Michael Beaupré: I would agree with what Quinntin just said. For us, when we underwrite as a lender, we really like the smaller bay, multi-tenanted industrial buildings. For us, it’s more about the fact that it’s a diversification of income. Especially right now with tariffs, if you end up lending on a property with a tenant that is being affected by tariffs, you might run into some issues. But if you have a multi-tenanted building, there’s less chance that all your tenants are actually hit by those tariffs. So I think for us it’s really more of a risk mitigate for income.
Quinntin Fong: And maybe if I could jump back in there, you made a really good comment on the tariff impact. It’s something we’re seeing broadly across the industrial space is that tariff impact may have been a little overblown. I think over this last year, we’re seeing vacancies, maybe in manufacturing have been more disproportionate, but general warehousing space hasn’t actually seen a significant change in occupancy or vacancy. What’s also very compelling is in the small and medium bay space, as Michael mentioned, is the diversity of income. A lot of these tenants support local communities, regional players, local players and lot of them do not have immediate down or upstream impacts from tariffs. So we actually haven’t seen that in a material way. In one example, we have almost 500 tenants, the majority in small and medium bay, there hasn’t been a single delinquency as a result of tariffs, or even anyone coming up to us saying “Hey, we need some relief because of tariffs.” I’m sure everyone would love it, and there is some government policies that are supporting it. I forgot the name of it now, but there’s about a billion dollars committed to small and medium enterprises. So think there’s maybe some light tailwinds, or at least a position of a good foundation coming into the next cycle, for this little niche within the next year.
Joe Chidley: Okay. That’s interesting. Yeah, it’s so good. You guys, one of the big debates around tariffs is when are we going to see the impact, right? And you’re saying in that sub-sector anyway, you haven’t seen them yet.
Quinntin Fong: Yeah, because at the end of the day, when we look at supply problem for, let’s say for housing, it’s affordability and supply. For industrial, and at least for some of the type of product that exists there, it’s a supply issue, but it’s not necessarily an affordability issue. Rent isn’t the largest line item on their P&L.
Joe Chidley: Right.
Fred Cassano: At the same time, rental growth has reached its peak, right? So I think the good news is it hasn’t really decreased a lot, right? So that you’re still earning relatively sizeable returns. But the rental growth, correct me if I’m wrong, Quinntin, is plateaued from an industrial perspective?
Quinntin Fong: Yeah, no, great. Good point. Nationally, a hundred percent. We’re seeing it moderate a touch from 2022, but in certain markets, what’s interesting is, even in broader light, if you think small and large bay, if you look at Halifax ,Ottawa and certain markets in Alberta, we’re actually still seeing slightly positive rental rate growth and we’re seeing that on the ground as well. In the leasing deals we’re doing, we’re still seeing certain markets, decent rental rate growth, decent steps as well. The natural escalators that give us a little hedge to inflation still in the 2.5 to 3. I did a deal just at 3.5 last week. So it depends on the product, the right product in the right locations that continue to have supply demand imbalances, will stand the test of time. And I think I’ve been very resilient over these last two years.
Joe Chidley: Okay, great. That’s a good segue actually into my next topic, which is, from industrial rental to purpose-built rentals. They were kind of hot, I think, last year, moving into this year. What’s going on with Purpose-Built Rental now?
Fred Cassano: I would say, a lot. Certainly, the pivot away from condos to rental is certainly having a lot of developers change. And certainly I think what’s also happening is policy initiatives related to purpose built rental, whether it’s HST relief to DC waivers, to property tax reductions, to even EIFEL, which is a restrictive interest deductibility clause is being carved out from multifamily. So I think that tax policy, the pivot from condos, then you have capital flows, whether it’s from foreign investors to the Canadian pension plans are also looking at industrial as an asset class, other institutions like REITs as well. So there a lot of catalysts for excitement in multifamily. And it’s rooted based on supply and demand and the fact that we have under supply. I think a recent report from Urban Nation, a few months ago, confirms that I think we’re still going to be short 122,000 units on the rental stock. So I think there’s a lot of reasons to be excited. Now, over the years we’ve heard the numbers don’t pencil, and I think that that mood is changing, certainly helped by CMHC financing, to the tax relief, but also cap rates are starting to come down because, what happens when everyone’s interested in the same product? Well, you’re going to start, paying a bit more. So your cap rates are going to come down. Your interest rates are going to come down. Your NOI growth is also going to increase. So you have almost a clash of a few very interesting cap, catalyst moments that’s going to increase the ROI on multifamily. Call it defense, recession proof-ish asset class, steady returns on cash. So I’m bullish on multifamily.
Joe Chidley: Okay.
Michael Beaupré: Yeah, I agree. There’s a structural demand for apartments in Canada. So I think since we’re talking to multifamily or single-family office, I think it goes really well with what they’re trying to achieve. It’s a cash flowing asset, capital preservation, and the ability to just create long-term value across generations. I think it’s a great asset class to be an investor in, and we’re seeing the flow on the debt side. We’re seeing a lot of activity, there’s also a lot of older buildings in Canada, so some investors are acquiring them, doing their program, renovating them, and looking at after that for long-term financing opportunity, mostly through CMHC as Fred mentioned. So, for us as a lander, it presents itself like a good opportunity to bridge that time that it takes usually a year or two. But I think for investor, it’s a really good point.
Joe Chidley: Right.
Quinntin Fong: And maybe I’ll add from a family office perspective, I think there’s also a trend that we’re seeing in lot of the larger institutional landlords in this space, but really flight to quality. And so what that’s actually creating is, there’s good demand for newer space that’s driving up prices there. But I think then the exits on some of the older vintage, could present an opportunity, but at the same time, it needs to be done with a well capitalized group. Because the reality is some of these buildings now, the 30, 40, or 50 year old vintages is going to require a lot of upkeep. And so some of that turnaround capital and there’s probably value add funds, maybe opportunistic funds are playing in that space, could be interesting. Well, I think for purpose-built rental and multi-res in general is interesting for family offices, is historically, it’s been the least volatile of all four asset classes. When we look at it in private funds world, at least the property fund index, which as a composite of some of the large open-ended funds in the Canadian space, historically the least volatile, even more volatile than industrial. Hate to say it, but I think that’s a unique place. I think what needs to be understood about this asset class is historically it also has the lowest returns on a long term basis. So you get the right amount of risk for the right amount reward, and depending on what the profile is for the family office, is it a conservative play that’s managing recurring cash flows? Is it a family trust that’s looking to pick big swings? I think it really depends on your thesis and your investment horizon, as a family office when you’re playing these spaces.
Fred Cassano: I agree. Also I want to add on that NOI growth, let’s not forget the impact of AI. So we’re seeing a lot in terms of tools that help reduce leak detection to energy, to security, to the ability to search in screen, to security. My point is, the investment in AI across a large portfolio of assets, could result in returns that as cap rates go down is a significant value add, right? And then you can use that increase in value from the savings on AI to maybe delever or refinance. Michael will be happy to provide some financing, and then you can do it again and again. So I think the NOI growth because of AI savings could be instrumental.
Joe Chidley: Okay. Well, when AI can come and fix my leaky faucet, I’ll let you know. On a related note, condos have been in free fall in major urban centers, obviously. It’s an area where we hear that family offices are taking on some risk, including bulk buying of units; like 20 or 30 units, I think we reported in CanadianFamilyOffices.com. Is that a, is that a smart play? What’s the upside here as things seem to be dropping?
Fred Cassano: Is that a smart play? I think you have to believe in the thesis that condos will be back, right? And if you do believe that, given that the condo is certainly an asset that is providing choice to housing, it will be back, maybe it’ll look different. Different meaning the level of investors versus end users, to the size of the units, to the height of the buildings. But if you believe in the thesis that it’ll be back, then we’re entering a moment-in-time opportunity to buy in bulk, less than potentially the resale value. Right now in Toronto, call it a thousand a square foot; if you can pick up multiple units for $800 a square foot, and if you believe that it’s going to come back in 2028 – 2029, and sell for $1,250, which is where we were a few years ago, if not higher, then that’s a very interesting thesis. And certainly if there’s a demand for rent, even with rental rates dropping, you can hold a unit for, call it five years before you sell. It’s a very interesting proposition. So there are funds that are being created, have already transacted, and it is creating an interesting thesis and investment opportunity.
Joe Chidley: Okay.
Michael Beaupré: Yeah. I echo everything that Fred just said. I would add that I think it really depends on the price that the investor would pay for. I think for developers that exit the third or even the fourth option, they are willing to negotiate with a very lower price. First they were trying to sell the condo at the value they were expecting to an end owner. I can say as a lender, what we’ve seen in the past couple of years is a lot of these developers came to us asking to refinance an inventory of condos just because they weren’t able to sell them, and they didn’t want to sell them at a discount because they didn’t want to put pressure on price. But for a lender, this is tough to underwrite, it’s not something that we like, so the truth is we ended up passing on all of these opportunities. I’m sure we’re not the only lender who did something similar. I’m sure some lenders actually financed some inventory. But after that, when some developers realized they couldn’t finance those inventories, they probably went to investors like family offices and offered a pretty steep discount. So if you can get that steep discount, maybe there’s a play there.
Quinntin Fong: And maybe my 2 cents on price and the opportunity from a value perspective: I don’t disagree with my fellow panelists. The part I would encourage investors to think about is whether that aligns with the liquidity requirements of your family office, whatever it is. Because ultimately it won’t be a liquid investment. You have to think about how much runway you have to wait through that thesis. Or if you’re looking for multi-res exposure, there’s other more liquid ways, whether it’s in REITs or certain private funds that aren’t gated. There are other vehicles to do that, and depending on the risk you’re willing to take, it’s important to look at that liquidity and impact.
Fred Cassano: So I agree with that. And bringing up the REITs, that’s certainly an area of potential opportunities as well. We talk about NOI growth and cap rates. Certainly the difference between the REIT trading price to the NAVs, I think there’s a very interesting opportunity right now to take advantage of some of those discounts. And if you believe that institutions are also looking at that from a potential M&A perspective, it could be a very interesting opportunity to get into some of the REITs right now, given the dislocation of outside/inside bases or values, and also the anticipated M&A.
Joe Chidley: Right. Okay. Great. Condos: some hope, maybe, maybe not? So we’ve covered multi-res rental, condos, office, data centers, industrial-ish. And what about retail? What’s going on in retail? All bad news? All good news? Somewhere in between?
Fred Cassano: I would say I could share that retail has been a really good news story for the last three years in our emerging trends report. Especially grocery anchored, necessity-based retail, enclosed malls right now, again, are seeing positive signs. I also like the play of retail and multifamily combined, because one feeds each other, if you will. You have amenities close to your multifamily, and then multi-family has a captive audience here to go to the retail store to shop. So I think, retail has been a really good news story in our report. Of course, not all retail is the same, but overall it’s been a positive story.
Michael Beaupré: Yeah, and I agree. We’ve seen a lot. We’ve done a lot of deals on the retail front, especially the property including an essential tenant in there, so a grocery or pharmacy. And what we’ve seen from private investors, that the play they like is really to maximize the value of one center. So they will come to us asking for bridge financing because they’re acquiring property and they have a program that they want to put in place. So maybe there’s a space that is currently empty, but they know a tenant that is looking to take up that space, but at the same time, maybe there’s parking, so they want to add a Tim Horton’s or Starbucks as a pad, or something like that. So they know it’s actually a very good play for them, because they can get financing, let’s say with us for two years. They get a bridge, but after two years, when they go back, usually to a long-term lender, maybe a bank or an insurance company, the new appraised value is much higher. So they basically get all their equity back and the asset is still cash flowing. So I think a lot of investors made some good transactions in retail in the past few years.
Quinntin Fong: And maybe just final quick 2 cents. I think it all comes back to a supply and demand story. I think it’s very basic economics, but no one’s really built a lot of the necessity-based retail in a while, right. And some of just a few other sectors in real estate. And so I think that will do well, a very location sensitive again, right? So, I think retail is what I think to be a good spot to be in right now.
Fred Cassano: All eyes on Mount Royal in Montreal. See how that development, looking forward to seeing success and good news. Certainly, luxury-based retail. So, you’re right, we haven’t seen a lot of builds in a long time, but that one there, I think everyone’s going to have their eyes on, especially Michael. He is going to go and buy some stuff in Montreal.
Joe Chidley: Michael’s in Montreal. Yeah, that’s right. Okay, a couple more sectors maybe or sub-sectors to go over really quickly, and then I’m going to open it up in case there are others that we haven’t talked about. Student housing.
Michael Beaupré: Yeah, I can say that we do like student housing, and I’ll say at the same time senior. I think that this story is a little bit similar. There’s a strong demand for both. The only thing I would say for students is that we’re maybe a little bit more careful now with the new regulations around immigrants and things like that. We want to make sure, so maybe we’re a little more conservative on our assumptions on rents. But other than that, there’s still a shortage in Canada. So, when you look at the waiting list for those student residences, usually it’s in years. It’s usually always a hundred percent leased. It’s a good investment for sure.
Quinntin Fong: Okay. And maybe a quick 2 cents here. We don’t have anything active on the senior housing or student rentals, but we have looked at it from a product perspective, in the past as here as a whole. And I think one of the challenges that people don’t think about is the operating risk that comes with it. You historically need an operating partner, not just the owner, the underlying dirt. And so that comes with its own risks. I think the headlines also create a significant amount of risk, depending on the exposure to incidents at a senior care or, unkept student dorms, whatever it may be. So just a little bit of that effectively comes with a bit of the premium, why you get that yield where it is. But just consider that piece when looking at different investments in that space.
Joe Chidley: Yeah, there’s reputational risk there too, right? Especially on the senior side, that can get involved as we saw during COVID, for instance.
Fred Cassano: But there’s capital flowing into the senior space in particular: Chartwell REIT’s very active, and Welltower’s purchase of Amica portfolio across the country, and rent growth over the years. And let’s not forget the baby boomers are turning 80 this year. So certainly, demographic shifts continue to feel the demand. I think, I don’t want to speak out of turn here because our results are still being to tabulated, but I would say senior homes probably going to be a top category to watch in our Emerging Trends report this year.
Joe Chidley: Okay. Alright. Good. That makes me feel better. As one of those boomers fast approaching 80. Any other sector sub-sectors of interest to gentlemen that we haven’t discussed before we move on to geographies? Because I think that’s got a number of reader questions about how their home market is poised to do.
Fred Cassano: Michael, did you want to talk about the debt market? Because certainly there’s a lot of debt funds that are emerging. We touched upon it briefly in the context of opportunities with CMHC maybe taking longer to fund. Maybe there’s an opportunity related to that bridge financing, but that’s certainly, we’re seeing that right now, a lot more debt funds being created.
Michael Beaupré: Yeah, there’s definitely an opportunity for us. And what we did in the last couple of years is really trying to be able to do all type of loans to help borrow. And that way we have a better pipeline of potential opportunity is stronger and we can pick and choose the one that we prefer. But you just mentioned this CMHC requirement that are now taking longer. So most board are owning multi residential properties or they’re looking for construction financing through CMHC. It takes a lot more time and sometimes the criteria are harder to meet. So they come to us for a bridge, usually it’s between a year or two. So that’s why we have a very active CMHC team that we don’t use those loans into our own fund, but it’s more to provide a service to the board. So they know that we can work under CMHC financing while we do the bridge. So when they acquire property, we’ll do the bridge for the first 6, 12, 18, 24 months. And when they’re ready to go to CMHC our team can actually help them get their approval. So yes, it’s definitely one of the things that we really like, one of the opportunities.
In terms of different fund, I think it really depends on, it’s really the family office has to do its due diligence and really look at what are the differences. You mentioned some funds are gated now. We’re lucky we didn’t have to gate any of our funds, but it really depends on how you manage your cash flow. The way maybe we do things a little differently at IMC is we do have a core fund that is open-ended. So we think there’s a lot more liquidity in the core space, but for sure the risk-return profile is different than the value add fund. In the value add where you see some construction loans, some land and development, we don’t do that much, but we have some, there’s usually less liquidity. So what we do is that we prefer to have closed-end fund. So we will launch a fund, we will keep the investor tie-in for five to six years, but that way it’s a lot easier for us to manage cash flow. And we think it aligned the interest of all investors better. And if an investor is looking for an open-ended structure, we tell them that they should invest in the core fund. So I think that’s how we managed to not have to gate any of our funds.
Joe Chidley: Okay. Great. And I guess you know there’s kind of a running theme, right? That there are shifts going on in the marketplace and there are areas of opportunity, some quite specific, where family offices and private capital in general can inject themselves and serve a need and also realize some return, right? Yeah. Okay.
Can we move on to a number of reader questions on geographies of interest? We have about eight minutes left. Quinntin, maybe over to you. Are there particular regions within Canada that you are excited about, looking to place money?
Quinntin Fong: Yeah, so I think it’s a very loaded question, because depending on the sector, it also is different, right? So I’ll try to be the general industrial flare and if I can zoom out a bit, I will. In-house we do have a research team and proprietary model that looks at target markets for us. We do really like Alberta right now. We’ve seen some good population and GDP growth on a macro basis that supports the thesis there. Even specifically sector-wise, multi-res and industrial we also really believe is a great place; really low new supply in that market as well and actually still growing rents in Edmonton, I believe, over the last year.
What I also really like is some of the smaller primary markets in Canada. Everyone’s always in GTA, Montreal, Vancouver, but I really like Ottawa and Halifax as well. We’ve seen a lot of growth there over the last few years. Our returns, especially for industrial, have been very attractive there as well. A little less institutional capital that target that space, and I think that’s actually the opportunity set for family offices. It’s nice to play in the big space as well and diversify there, but I think the nimbleness of family offices to be a little more thematic in the selection process, at least on a geographic basis and then again on the sector or sub-sector basis, could be interesting. So Ottawa, Halifax; even go a little contrarian, Kitchener-Waterloo-Cambridge, as much as the perceived impact there is on tariffs, we’ve seen really strong growth in that area as well.
Fred Cassano: I could share with you that Calgary continues to be the number one market to watch in our report, for a whole bunch of reasons: net migration, business friendly, lower tax rate, and from a provincial perspective a tech hub emerging by the day. The energy sector will likely start another cycle for years to come, certainly fueled by policy initiatives. Distribution center of Canada from an industrial perspective, either because of its land prices or its proximity to both U.S., Vancouver, and the East. So I think there are a lot of factors driving interest in Calgary.
Michael Beaupré: And from a lender’s perspective, I guess we do like some of these markets, but I’ll take this question a little differently by the fact that we just like Canada in general, for sure. And it also depends on the asset class. Quinntin just mentioned Alberta with industrial, so we do also like industrial in Alberta, but maybe we don’t like as much office in Alberta, let’s say. So it really depends on the asset class and the location. But I’m going to say Canada in general; we much prefer being in a Canadian market when we compare to other lenders that do deals in Canada. In the U.S., the legal environment is completely different. We’re, as a lender, better protected in Canada, so it’s much easier. And the dynamic is completely different. We tend to joke that if you default in the U.S. on Tuesday and you need a loan on Wednesday, you’ll probably get 40 offers. You default in Canada on Tuesday, you’ll probably be out of business, and you’ll never get a loan by any lender in Canada, probably just because there’s less competition, there’s less lenders. But for us it’s a much better market to be in Canada, and there’s plenty of opportunities. There’s no real reason, because some of our investors ask us, before looking at our performance, “Why do you not do anything in the U.S.?” And we were like, we’re not seeing any opportunity that would make sense when you compare the risk we would be taking if we go into the U.S. compared to what we’re able to get in Canada and being as protected as we are as a lender.
Joe Chidley: That’s interesting. Quinntin, do you invest outside Canada? You have U.S. or international exposure in your fund?
Quinntin Fong: Not in my fund, not in our industrial fund particularly. We do have verticals. We do have a U.S. debt fund, a European debt fund, a European equity platform, so there’s a few different verticals as well. Not as familiar with them, but what Michael’s saying makes sense.
Joe Chidley: Okay. Alright, good. Can I just ask really quick, and they can be positive or negative, I’ll ask about Montreal, Toronto, Vancouver. You guys have talked about Calgary already. Montreal outlook? Positive, negative, middling?
Quinntin Fong: Maybe I’ll comment really quickly for what we’re seeing specifically in industrial. I think that was probably one of the most overheated markets over the last few years, a lot of new supply. But what’s interesting is, I think it depends on how the manager has approached the valuations there. We forget that just 10 years ago rents were as low as $5–6, and sure, maybe we’re no longer at the high watermark of $15–17, but rent at $11–12 is still doubling the income. So I think it really depends on how prudent these managers have been from a valuation perspective, at least from the launch point of industrial. And then for Vancouver and Toronto, I think there is a little bit of repricing as well, both on the rental side but also on the transaction side. I wouldn’t say it’s moved the needle in a material way that fundamentally shifts any major strategies. That would be my take on it.
Fred Cassano: You can’t count the biggest cities out of the game, right? So Toronto has a lot of good things going for it, including affordable housing initiatives. Kudos to CreateTO and the City of Toronto for unlocking a whole bunch of homes. I think those are slotted to be built, and that creates a whole bunch of opportunities for family offices and developers to partner up with organizations like that. So I think our biggest cities will always attract a lot of attention and investment; Toronto, Montreal, Vancouver, but for me it’s still going to be Calgary, for a whole bunch of reasons previously noted.
Joe Chidley: Okay, interesting.
Michael Beaupré: I think these are the markets where there’s the most liquidity. So I think they’re always going to perform well.
Joe Chidley: Okay. Great. Any last thoughts, gentlemen? We’ve covered, as promised, a lot of territory today. I get the feeling that I could talk to you guys about this stuff all day. Maybe we’ll have to get together again later and revisit some of these predictions, prognostications, and impressions.
Fred Cassano: I think everything’s been great. Thanks, Joe, for moderating and to the Canadian Family Offices team. I think we should do it again. And I would say that November 4th is going to be a big federal budget, and certainly we think there’s going to be more tax initiatives related to housing and the broader economy. So all eyes on that one. So maybe we should regroup after the budget comes out.
Joe Chidley: That sounds good to me. I’m available. Michael, Quinntin, are you up for that?
Quinntin Fong: Sure.
Michael Beaupré: Good. It has been fun, so why not?
Joe Chidley: I hope our attendees, registrants, and guests will be here as well if we can get that together.
We’ve had a lot of great insights today, a lot of actionable insights, and you’ve all been terrific panelists. Thank you so much, Michael, Quinntin, and Fred. And thanks to everybody who attended today and listened in. Talk to you later. Bye.
Panelists: Thank you, everyone.
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