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Debt & Structured Finance | Canada Research

Curve inversion draws CRE capital

Increasing evidence of a global economic slowdown in recent weeks has elevated the risk profile for Canada’s economy. Globally, Brexit negotiations are still gridlocked, the Eurozone economy falters and U.S.-China trade negotiations drag on. Domestically, household debt-to-income levels are the highest they have ever been, retail sales are slowing, oil sands producers are reevaluating projects due to pipeline delays and the likelihood for ratification of the CUSMA trade deal wanes as tariffs remain. These developments have sparked concern that a technical recession may emerge in Canada given weak expectation for Q1 2019 growth and a potential downward revision to Q4 2018’s already meager results.

Amid these growing headwinds, the Federal Reserve eliminated their expectations for an interest rate hike this year. The Fed acknowledged the need to avoid getting stuck in a deflationary environment like that which has plagued Japan for the last two decades. In turn, this dovish shift in tone triggered an inversion on another segment of the U.S. yield curve as investors sought the safety of bonds. Widely considered a reliable harbinger of a downturn within a few years, the spread between 10-year Treasury bond yields fell below its 3-month counterpart for the first time since just prior the Great Financial Crisis. The inversion also emerged in Canada and pulled down global bond yields. In fact, investors are even pricing in expectations for central banks to cut interest rates by the end of 2019 to keep the economy going. For the commercial real estate market, falling bond yields may translate to lower mortgage rates with wider cap rate spreads. The precipitous fall in bond yields has some lenders contemplating next steps.

Against this backdrop, commercial real estate has become an increasingly attractive investment vehicle. According to CBRE’s Global Investor Intentions Survey 2019, diversification is the primary driver for investors in the Americas showed the strongest interest for value-add property assets. However, the commercial real estate sector has attracted an abundance of capital over recent years and real estate funds are now challenged to deploy all that capital as the levels of dry power continue to rise. But even more capital is expected to come with the recent formation of several mega-sized real estate funds such as BCI and RBC’s CA $7 billion investment partnership, Brookfield’s recent closing of its US$15 billion BSREP III fund and Blackstone’s record-setting US$20 billion property fund on the horizon.

 

 

 

 

 

 

 

 

 

 

 

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Top 5 Reasons to Use Mortgage Alliance Commercial Canada (MACC)

At Mortgage Alliance Commercial Canada (MACC) we pride ourselves in providing the best service possible. Our number one source of referral is via word of mouth, hence we make sure to conduct business professionally and diligently so all parties are satisfied. Here are 5 reasons we think you should use MACC on your next commercial transaction:

 

Top 5 Reasons to Use Mortgage Alliance Commercial Canada (MACC)

 

  1. Mortgage Alliance Commercial Canada was voted Canada’s Best Commercial Mortgage Broker for 5 years in a row by Canadian Mortgage Professionals Magazine
  2. MACC is Licensed across Canada with offices in Quebec, Ontario, Alberta, and BC
  3. MACC has maintained privileged relationships with all major lenders across the country to allow our clients to access better terms and conditions for their financing needs
  4. MACC will simplify and manage the entire process of the transaction from loan underwriting to lender negotiations, through to the disbursement requirements to ensure that successful completion and funding of the project
  5. MACC has 30 dedicated and experienced commercial mortgage professional at your service

 

If you have a current project you are working on and would like our assistance or have any questions on the best route to take, don’t hesitate to contact us.

MACC, Your commercial financing solution!

416-499-5454 ext 102

info@macommercial.ca