{"id":128820,"date":"2022-11-23T12:58:34","date_gmt":"2022-11-23T17:58:34","guid":{"rendered":"https:\/\/canada-info.ca\/?p=128820"},"modified":"2022-11-25T13:08:42","modified_gmt":"2022-11-25T18:08:42","slug":"housing-expert-on-reits-and-why-sackville-should-be-worried-about-the-sale-of-82-rental-units-to-one","status":"publish","type":"post","link":"https:\/\/canada-info.ca\/en\/housing-expert-on-reits-and-why-sackville-should-be-worried-about-the-sale-of-82-rental-units-to-one\/","title":{"rendered":"Housing expert on REITs and why Sackville should be worried about the sale of 82 rental units to one"},"content":{"rendered":"

An investor group that says it is buying six Sackville buildings<\/a> with a combined 82 units expects to close the deal today.<\/p>\n

Some tenants in the buildings have received emails from a new property management company, K Squared Property Management, even though they have not yet been given notice of new ownership.<\/p>\n

Local landlord Charles Estabrooks currently owns the six buildings and Sunset Investments is the investor group that claims to be buying them. DJC Properties has also posted on social media, advertising for investors for the deal.<\/p>\n

A social media post late last week from DJC Properties says that the \u201c82-unit acquisition is closing earlier at the Banks request.\u201d<\/p>\n

An earlier post by Sunset Investments says that building inspections have been completed, and Canada Mortgage and Housing Corporation financing has been approved. The post says all buildings are in excellent condition but for one older 4-unit building.<\/p>\n

It\u2019s not clear what the plans are for the buildings. CHMA has reached out to Estabrooks and Sunset Investments for further details on the deal. Estabrooks has not responded to a CHMA interview request, and Rachel Godbout of Sunset Investments says she has no comment since her company does not yet own the buildings.<\/p>\n

Earlier this summer, Sunset Investments bought another Sackville building, and proceeded to evict all tenants in the 16-unit building<\/a> in order to perform renovations. Among other things, Sunset converted 2-bedroom units to 3-bedroom units, and dramatically increased the total rent for each unit. CHMA spoke to one previous tenant of 15 King Street who had been paying $775 to rent a two-bedroom unit before being evicted. In October, converted 3-bedroom units at 15 King Street were being advertised for $1800 per month.<\/p>\n

Current tenants in the buildings still owned by Estabrooks are concerned that something like the renovictions at 15 King Street could be repeated, but on a larger scale. However, without the extension of a rent cap into 2023, Sunset Investments would not need to evict tenants in order to dramatically increase rents, it could do so simply by giving notice.<\/p>\n

Thursday at the legislature, Service NB Minister Jill Green effectively ruled out an extension of the current temporary rent cap, which limited rent increases in 2022 to 3.8%. Instead, Green introduced a bill to add a phase-in mechanism that could be used by the Residential Tenancies Tribunal on a case by case basis, if landlords raise rents by more than the Consumer Price Index, and if the tenant formally complains about the increase.<\/p>\n

The six buildings being marketed to investors by Sunset are still owned by Charles Estabrooks according to Service New Brunswick\u2019s property online website. Service NB data also shows that since 2021, property assessments on Estabrooks\u2019 properties have gone up substantially, between 30% and 40% for 2022, and 10% for 2023.<\/p>\n

A REIT by any other name<\/h2>\n

Julia Woodhall-Melnik is the Canada Research Chair in Resilient Communities, and an Associate Professor of Social Science at UNB in Saint John. CHMA spoke to her last month when news of the 82 unit sale first broke, and asked about the seemingly new phenomenon of investors buying affordable housing stock.<\/p>\n

\u201cIt\u2019s not a new thing,\u201d says Woodhall-Melnik. \u201cIt\u2019s just something that we\u2019re seeing more and more in New Brunswick.\u201d<\/p>\n

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\u201cIn the 90s, when housing was really was shifted out of federal responsibility, and started to be a bit more deregulated in Canada, we started to see more of these pop up everywhere,\u201d says Woodhall-Melnik.<\/p>\n

While Sunset Investments and DJC Properties\u2013the two company names advertising for investors on social media\u2013do not specifically call themselves real estate investment trusts, or REITs, they likely are, says Woodhall-Melnik. \u201cHonestly, to me, it sounds like a REIT. They\u2019re looking for investment in their investment firm, right?\u201d<\/p>\n

Woodhall-Melnik says REIT investment has become commonplace in Canada, with many pension plans major investors. \u201cThere\u2019s a massive amount of global capital involved, washing around the global housing market. And it\u2019s all based on speculation. These guys are called speculators, they also call themselves investors. There\u2019s multiple different things that people call themselves. Because of the bad press surrounding REITs, not a lot of companies directly come out and say \u2018we\u2019re a REIT\u2019 anymore.\u201d<\/p>\n

In addition to being a \u201chuge problem\u201d in Vancouver and Toronto, REITs are also common in university towns everywhere. Melnik says they are common near campus in Saint John and Fredericton, with Killam Properties being one of the major players. \u201cAgain, it\u2019s not new, but it\u2019s likely something that\u2019s a bit of a newer phenomenon in Sackville,\u201d says Woodhall-Melnik. \u201cI\u2019m not surprised that they\u2019d be infiltrating Sackville because of Mount Allison, and the constraints in student rental markets that we have right now. But it\u2019s also, you know, it\u2019s disheartening to hear.\u201d<\/p>\n

Having investors buy up housing units means \u201cnothing good\u201d for tenants, says Woodhall-Melnik. \u201cReal Estate Investment Trusts have one mandate, and it is to maximize profit for their investors over everything else,\u201d she says. \u201cIt\u2019s not to ensure that people have places to live. It\u2019s not to provide the best quality housing for a reasonable affordable price. Their mandate is to make as much profit as possible for their investors, and that\u2019s what they\u2019ll do. They\u2019ll find ways within their particular projects to optimize capital so they can refinance, and then sort of \u2018rinse and repeat\u2019 and get another building.\u201d<\/p>\n

Woodhall-Melnik says that banks look at profitability when they are considering refinancing. If REITs can increase rents, \u201cthen all of a sudden, their assets are more liquid, because it\u2019s seen as being more profitable than what they purchased it for. So in a very quick time, like within the span of a year, with an increased balance sheet, they can re-mortgage this building for a lot more than what their initial mortgage was for, take that difference in capital, and reinvest it into another building.\u201d<\/p>\n

\u201cSo what this means for tenants is that, you know, they will try to find ways to increase rents on units,\u201d says Woodhall-Melnik.<\/p>\n

Traditional landlords could also raise rents by exorbitant amounts, though Woodhall-Melnik says their motives are often more complex than REITs. \u201cThat landlord, who owns 80 units, you know, that\u2019s probably been a big part of his life\u2019s work that puts food on his table and lets him save for retirement, right?\u201d
\nCharles Estabrooks lives and works in Sackville, which might also come with the onus of neighbourly fair play. \u201cThe second you have a REIT step in or a speculative landlord or an investor or whatever it be,\u201d says Woodhall-Melnik, \u201ctheir number one goal becomes to make as much profit as they can off the unit to reinvest that profit in another unit.\u201d<\/p>\n

Woodhall-Melnick says that there are solutions that can help tame the REIT wave that seems to be buying up Sackville\u2019s rental housing. \u201cWe need to have other affordable options available and tenant protections that make it less attractive for these REITs to enter the scene.\u201d<\/p>\n

Renter protections like caps on increases and bans on renovictions can make purchasing existing housing stock less attractive to REITs. And investing in social housing stock that provides reasonably priced alternatives will also affect the market, says Woodhall-Melnik. \u201cThey can\u2019t keep raising rent if the market won\u2019t allow it. If there\u2019s somewhere else for these folks to go that costs less, they\u2019ll go there.\u201d<\/p>\n

Rally for a rent cap this Saturday<\/h2>\n

Supporters of more permanent rental protections are gathering this Saturday at 1pm in Fredericton for a rally on the front lawn of the legislature to demand the permanent extension of the rent cap in New Brunswick. More details are available online here<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

An investor group that says it is buying six Sackville buildings with a combined 82 units expects to close the deal today. Some tenants in the buildings have received emails from a new property management company, K Squared Property Management, even though they have not yet been given notice of new ownership. Local landlord Charles…<\/p>\n","protected":false},"author":106,"featured_media":114305,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[217,57],"tags":[571,21122,21124,21123,7989,4117,3619,18415],"radio":[227],"origine":[274,275,277],"acf":[],"_links":{"self":[{"href":"https:\/\/canada-info.ca\/en\/wp-json\/wp\/v2\/posts\/128820"}],"collection":[{"href":"https:\/\/canada-info.ca\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/canada-info.ca\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/canada-info.ca\/en\/wp-json\/wp\/v2\/users\/106"}],"replies":[{"embeddable":true,"href":"https:\/\/canada-info.ca\/en\/wp-json\/wp\/v2\/comments?post=128820"}],"version-history":[{"count":1,"href":"https:\/\/canada-info.ca\/en\/wp-json\/wp\/v2\/posts\/128820\/revisions"}],"predecessor-version":[{"id":128826,"href":"https:\/\/canada-info.ca\/en\/wp-json\/wp\/v2\/posts\/128820\/revisions\/128826"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/canada-info.ca\/en\/wp-json\/wp\/v2\/media\/114305"}],"wp:attachment":[{"href":"https:\/\/canada-info.ca\/en\/wp-json\/wp\/v2\/media?parent=128820"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/canada-info.ca\/en\/wp-json\/wp\/v2\/categories?post=128820"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/canada-info.ca\/en\/wp-json\/wp\/v2\/tags?post=128820"},{"taxonomy":"radio","embeddable":true,"href":"https:\/\/canada-info.ca\/en\/wp-json\/wp\/v2\/radio?post=128820"},{"taxonomy":"origine","embeddable":true,"href":"https:\/\/canada-info.ca\/en\/wp-json\/wp\/v2\/origine?post=128820"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}