What the Blackstone-Tricon deal tells us about the current state of real estate investing
Big news last month with Blackstone's $3.5 billion proposal to acquire Toronto-based developer Tricon Residential. In case you missed it, here's the article, which is paired with a great interview with Josh Varghese - real estate advisor and board member at Trez capital.
In the interview, Varghese provides a clear analysis on what this means for the real estate market in Canada and offers some perspective on why residential real estate is the right type of real estate for the "new economy".
Just in case you're short on time - our team watched the interview and compiled some key takeaways.
What's the right type of real estate investment in the current market?
According to Varghese, the new economy has changed the way we use real estate. Certain types of real estate, like some malls and office space are less attractive than they used to be, while others are really well positioned for the new environment. Due to the shortage of housing across North America, rental property plays are considered higher quality investments in the current market.
"There's demand for high quality real estate even in this environment. [...] Residential is definitely the right type of real estate."
How to approach investing in real estate in the new economy:
1) Prioritize properties or REITs with strong fundamentals, ideally with low leverage and free cashflow
These types of investments are better at weathering short-term economic ups and downs and can generate returns or dividends by increasing cashflow per unit without adding any leverage. Residential and industrial real estate are both well positioned for the long term.
2) Be prepared for choppy waters in the short term when investing in some industries
The market is still figuring out the future of office space and malls. Some investments that can still be good value plays at this moment include assets with low leverage and free cashflow, and assets that have alternative use cases in the long term, like some downtown Toronto office spaces. Either way, it's best to take a long-term view when investing in the current environment.
What does the proposed Blackstone-Tricon acquisition mean for the real estate investment landscape in Canada?
The proposed acquisition of a Canadian rental housing company by an established global player, shows that there's demand for high quality real estate even in this environment.
"Blackstone's acquisition of Tricon endorses the fact that there is going to be demand for the right type of real estate."
What do you think about the Blackstone-Tricon acquisition?
Interesting in exploring some cashflow positive residential real estate investment opportunities? Check out Propsharing here.
* Disclaimer: Guiker provides information for educational purposes only and does not offer investment advice. Individuals are responsible for their own investment decisions and should consult a qualified financial advisor before making any investment choices.