Our office portfolio is primarily multi-tenant properties with a few select single-tenant buildings. This asset class has performed well even though many of the tenants are working from home. We collected 93% of the budgeted rent owing. Office: This asset class comprises 11 office properties and represents 23% of the Gross Asset Value in NCRE LP. Note, the Dev/Other category listed below relates to the development of multi-family rental apartments or industrial projects that are either in planning stages or under construction in our “build to own” program. Below is a summary of the performance level and details for each asset class within NCRE LP. Nicola Canadian Real Estate LP is well diversified by asset class and geography. This figure is expected to rise as we continue to receive rent from tenants who are either late paying and/or receiving subsidies and/or relief through government assistance programs. Nicola Canadian Real Estate LP (NCRE LP)Īs of April 24 th, NCRE LP was successful in collecting 90% of the budgeted rent owing. Rent recovery in April for various asset types, as reported by major landlords in North America, appears to be 85-90% collected for the Office & Industrial sectors, 90-92% for Multi-Family Rental Apartment, and 50-60% for Retail.īelow is a detailed breakdown of the results and performance in April for each of the NWRE funds. For our NWRE funds, April saw a very respectable outcome but the industry is bracing for tougher months ahead. As such, over the past month, our NWRE team has re-positioned its’ people resources to focus on rent collection and implement a very tenant-specific strategy on the deferral program for those tenants seeking relief and deferral for the “uncollected rent.”Īt this point, none of us knows how long the government imposed shutdown will last. We want our tenants to succeed as payment of rent underpins the foundation for real estate investing.Īs stated in our previous newsletter, we have suspended all acquisitions and capital expenditures in response to this challenging environment in order to preserve our already significant cash balances. Our approach to rent collection in this environment is a balancing act between being firm and fair, assisting tenants, and preserving relationships. We want to say a big “thank you” to those tenants in our portfolio who paid their April rent. In other instances, landlords were forced to work on rent deferral programs with tenants whose businesses were directly impacted by the government-mandated shutdown. There were delays by some tenants who were attempting to preserve cash but ultimately paid their rent. Residential and commercial tenants who legitimately could pay their rent in fact did. Landlords around the world learned very quickly how their real estate portfolios would absorb the shock of the new reality.Īs bad as the press reports predicted, there were actually many positive outcomes. Over the past four weeks, our Nicola Wealth Real Estate (NWRE) team has been focused on rent collection for our Canadian and US income properties. Revised budgeting and cash flow forecasting are required to understand how long properties can weather the storm. Owners have financial obligations such as mortgage payments, operating costs, and property taxes not to mention the distribution of cash flow to investors. The current environment tests the stability of real estate as a reliable investment in terms of the fund composition, asset type, geography, and tenant profile. Real estate has historically been viewed as a desirable product in any investment portfolio. How long the government imposed shutdown will last and how severe the impact will be on rental income and property values is a concern for the entire real estate industry. Everyone, including all levels of government, was caught off guard putting us on the defensive.
The foundation of real estate is undergoing a serious “stress test” the likes of which has never been experienced before. But these are not normal times and this has changed.
In a normal environment, real estate functions consistently: tenants pay rent, operating costs, and property taxes are based on the contractual agreements allowing landlords to pay their mortgages and maintain the buildings in accordance with the lease. April rent collection was the first of several “monthly tests” we will face in this COVID-19 environment but it has provided some data points we can share with our investors.
#Holliswealth wealth tracker update
I want to give an update on what has transpired with our Nicola Wealth Real Estate Funds since our last newsletter. By Mark Hannah, Managing Director – Real Estate
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