Performance figures for each account are calculated using time weighted rate of returns on a daily basis. The Composite returns are calculated based on the asset-weighted monthly composite constituents based on beginning of month asset mix and include the reinvestment of all earnings as of the payment date. Composite returns are as follows:

Nicola Wealth Real Estate: Where We Want to Go Next


Nicola Wealth’s real estate portfolio grew by an unprecedented $2 billion, to $8 billion in gross assets, in 2021. Managing Director of Nicola Wealth Real Estate (NWRE), Mark Hannah, sees it continuing to grow, though perhaps not as fast, in the second half of 2022 and beyond.

The returns Nicola Wealth’s real estate funds have posted so far in 2022, in the face of rising interest rates, were achieved thanks to “having the right asset types in the right markets,” Hannah explained in the NWRE real estate team’s recent Mid-Year Update webinar. “We learned a lot during COVID, where fund composition really mattered.”

“This year’s change in market conditions has tempered the pace of acquisitions, but we are still underwriting and acquiring smaller deals that are accretive to our portfolio,” he said.  There will be interesting opportunities in the coming months from owners who are undercapitalized and who need to bring in a partner or sell at favourable terms.

For the Nicola Canadian Real Estate Limited Partnership, there will be continued emphasis on Greater Toronto and Vancouver. Yes, these are expensive markets, but they continue to deliver positive returns. The same goes for secondary markets, including Victoria, Nanaimo and Kelowna. The NWRE team is also looking at Calgary, Edmonton and Winnipeg but is being highly selective about the property types there. Montreal and Ottawa are the next Canadian markets where they are looking to build a presence.

The team will continue focusing on multi-family residential, industrial, low-rise, creative office space and self-storage. Hannah highlights the plan to grow the last category from nine properties today to 25 in three to four years. “It has many appealing attributes,” Hannah said. “There continues to be strong demand for space, and when a tenant moves out of their locker, you sweep the floor.”

Office towers, by contrast, seem to hold little interest for the NWRE team. “Corporate tenants generally pay their rents, but actual occupancy levels are still down around 50%. It’s likely to take a really long time before we get back to pre-COVID occupancy levels,” Hannah said.

In the Nicola U.S. Real Estate Limited Partnership, the NWRE team will continue to augment our multi-family apartment portfolio in the southern U.S. in partnership with Venterra Realty and develop rental housing on a build-to-own basis in Seattle. They will also focus on industrial opportunities in the six metropolitan markets that we believe offer the right combination of education and transportation infrastructure, Fortune 500 companies and low vacancy rates: Seattle, Dallas, Las Vegas, Denver, Phoenix and Minneapolis.

One niche attracting the NWRE team now is industrial outside storage for parking vehicles and equipment, which is increasingly challenging for companies to find as cities get denser. These are usually infill sites adjacent to larger developments that require a low capital outlay and can provide a pipeline of properties for future development.

“We’re also attracted to Nashville, Salt Lake City, Austin and Reno. But we feel any new market must support a cluster strategy. If we go into a market, we don’t just buy one property. We want to have many assets,” Hannah said. “Not only can we then build economies of scale, but it also creates awareness in the brokerage community, which might bring deals to us in the future.”

 

This material contains the current opinions of the author and such opinions are subject to change without notice. This material is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Past performance is not indicative of future results. All investments contain risk and may gain or lose value. Returns are net of fund expenses charged to date. This is not a sales solicitation. This investment is intended for tax residents of Canada who are accredited investors. Residency restrictions apply. Please read the relevant documentation for additional details and important disclosure information, including terms of redemption and limited liquidity. Please speak to your Nicola Wealth advisor for advice based on your unique circumstances. Nicola Wealth is registered as a Portfolio Manager, Exempt Market Dealer and Investment Fund Manager with the required securities commissions.