The Canadian Investor - Are Canadian REITs Finally Cheap Enough to Buy?

Episode Date: June 8, 2026

In this episode of The Canadian Investor Podcast, Simon is joined by Daniel Foch to take a deep dive into Canadian REITs and the major forces reshaping the real estate market. They discuss why residential REITs are facing pressure from falling rents, rising vacancies, and slowing population growth, while retail REITs have been surprisingly resilient thanks to strong occupancy, rent increases, and valuable land redevelopment opportunities. They also cover the office sector, where return-to-office trends are helping at the margin but vacancy rates remain well above pre-pandemic levels, especially outside top-tier buildings. Simon and Daniel also look at industrial REITs, the impact of overbuilding, the role of higher interest rates, and whether areas like data centres could become an interesting opportunity for Canadian real estate investors. They wrap up with a discussion on office conversions, adaptive reuse, and what investors should watch before jumping into beaten-down REITs. Tickers discussed: CAR-UN.TO, BEI-UN.TO, IIP-UN.TO, KMP-UN.TO, REI-UN.TO, SRU-UN.TO, CHP-UN.TO, PMZ-UN.TO, AP-UN.TO, D-UN.TO, RPR-UN.TO, GRT-UN.TO, DIR-UN.TO.   Subscribe to our Our New Youtube Channel! Check out our portfolio by going to Jointci.com Our Website Our New Youtube Channel! Canadian Investor Podcast Network Twitter: @cdn_investing Simon’s twitter: @Fiat_Iceberg Braden’s twitter: @BradoCapital Dan’s Twitter: @stocktrades_ca Want to learn more about Real Estate Investing? Check out the Canadian Real Estate Investor Podcast! Apple Podcast - The Canadian Real Estate Investor  Spotify - The Canadian Real Estate Investor  Web player - The Canadian Real Estate Investor Asset Allocation ETFs | BMO Global Asset Management Sign up for Fiscal.ai for free to get easy access to global stock coverage and powerful AI investing tools. Register for EQ Bank, the seamless digital banking experience with better rates and no nonsense.See omnystudio.com/listener for privacy information.

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Investing is simple, but don't confuse that with thinking it's easy. A stock is not just a ticker. At the end of the day, you have to remember that it's a business. Just my reminder to people who own cyclicals. Don't be surprised when there's a cycle. If there's uncertainty in the markets, there's going to be some great opportunities for investors. This has to be one of the biggest quarters I've seen from this company in quite some time. Welcome back to the Canadian Investor podcast.

I'm Simon Berger and I'm back with not Dan Ken, Dan Foch, and we're doing a... Too many Dan's. Yeah, too many Dan's. I know even my neighbor is named Dan and I'll talk to my wife sometimes and she'll be like, you have to specify which Dan it is. There's too many Dan's. So, but welcome back to the podcast. Obviously, we do our Friday lives.

regularly, which is fun. We'll be doing again, our macro episodes. And the guest, this one will be coming out probably after the Friday episode is released on the podcast. So if you haven't listened to it, make sure you get to it. We'll be talking about recessions with Canada entering a recession in Q1 of this year. So following Q4. And we'll be diving deeper into that. But today, we're actually doing a special episode on REITs, so Real Estate Investment Trust, because Dan Kent is under the weather he's dealing with a nasty virus he's got the full gam of symptoms from you know sweating fever no voice so it was in no condition voices are pretty important for the podcast yeah it's pretty important so i got another dan to step in so that that's it but today

yeah i think it'll be fun we've done these reed episodes a few times um reets are it's always an interesting asset class i find just because it's so different to depending on the type of reet we're looking at. So we'll start off here with residential reits. And obviously, you know this space extremely well. I'm a bit more familiar, I guess, overall with the public space, although I know you know these reeds very well too. So let's start with residential. What you're seeing right now, what investors should think about when looking at these reits, at least for investments. Yeah, so the big, the big things that I'd be looking at are like, what are the trends that will eventually be coming into the earnings of the REITs that I'd be investing in in the residential

sector? So, you know, what can I, what can I infer on a leading indication basis? And the way that I look at that from a residential perspective is you have like a couple of prevailing trends. Number one, you have rents are falling. So your income is down for these people. You know, And there's kind of two ways to think about that. So you have your new rents, right? That if rents are falling, your new rents are going to be lower. But your existing tenants, you may not be able to charge them as much of a price increase every single year.

So that is probably going to affect the top line. Vacancies are rising as well. So we've gone from like a 2% vacancy environment to like a 5% vacancy environment across Canada, I think on average. I can pull up the RD report when you're chatting. But that's basically taking your income from getting 98% of all your your income on your suites to 95% or whatever. And so that'll shrink your income a little bit as well. So those are key factors. And then I would say that the other pieces that there's a lot of supply

coming online and there's not a lot of demand, like historically when population was growing like crazy, like the Canadian government had massive population growth, that correlates almost one to one with rent inflation. And so it shouldn't be surprising that rents are falling and rent inflation is falling if population growth is falling and population growth was negative last year. It's probably going to be negative again this year. It'd be like 27 or 28 before we see positive population growth. You know, new people moving to Canada, they probably don't buy a house immediately. They become a tenant for a little bit. You know, they shop around the markets, whatever. So you had this like consistent pipeline of renters. And now that's dissipating as a result of policy. And that's, I mean,

Carney just today mentioned it as what was probably causing the recession, right? Which is them kind of quietly admitting that they also, population growth also propped up our GDP for the last, you know, how many years. It's also not the first time he takes jabs at the previous. Yeah, the previous, even though it's liberal. He's done that a few times, obviously, with climate policy too. I think with, did Stephen Gibo resign in the end? I think you did.

Yeah, I did, yeah. Okay. Okay, I was watching that and it was anticipated by, I think it's not the first time. But I wanted to get your thoughts here. So I mentioned the rental. rentals.ca monthly rent report. Like how accurate is that? Is it a good indicator for people that are Yeah, I would say it's pretty accurate. Yeah, pretty accurate. Yeah, pretty accurate. Yeah, so we work pretty closely with CMHD who would be like their data is slower, but it is, I would say, more accurate,

like because they survey existing landlords. They use a bunch of sources like Yardy and like many different data points. Rentals.ca is literally just listings that are listed on their site and like what the prices are up or down relative to that. So it's not, it's not perfect because it's asking rents, but it's, it's, it's, it's, it's, I think it's a good enough directional indication of where rents are going and, and, and, and they're not going in a good direction. No, exactly. And it's kind of interesting because I have two anecdotal stories that you'll be interested. I'm sure people too. So I have a buddy of mine who has a triplex in, uh, in halls on the Quebec side here in Gatno, I guess the, the old hall. And he, he, you know,

he was looking to rent out one of his units and I'm like, I hope you price it appropriately. So he kind of looked at me. He's like, what do you mean? I'm like, pretty sure rents are going to be like lower than you thought you could get. And then we start looking at the rental report and sure enough, he's like, oh, yeah. And then he started looking at like what around this place other units were asking. And definitely, you think he's like, oh, you know what I'd rather know now than like having listed for several months and not get anyone to bid on it. Yeah, I think you would know pretty quickly,

like if you're, it'd be like any product, right? Like, it's like if you have, if you're holding inventory of a product, have a sale, right? Like, have an inventory sale. So reduce your prices if, you know, people aren't buying the good. So, you know, he probably would have figured it out within a couple of weeks if he had no showings. But yeah, like I would say that residential rentals are, it's a very, very tough market right now. Like you have demand's been cut off and supply is continuing to flood, right? Will supplies start tapering off? Maybe. And that's probably where, like, you are starting to see housing starts weakening a little bit, at least in some of the other markets that seem to be overbuilt. So like your Calgary's, Kelona, you know, like some of these, like, Atlantic Canada.

So like Killam is a good example of a REIT that like is in a market like Halifax where I think 14% of Halifax's entire rental universe is under construction right now. So like if their population doesn't grow at all. Yeah, and there's no new household formation. Like, vacancy is going to go up by an equivalent amount. It's going to be good to be a renter in Halifax. Yeah. Yeah, because that's the other thing I saw. So my parents recently sold their condo. They found a purpose-built rental, like this huge new building. And they looked at a bunch of other place, a bunch of places, some on the Quebec side, some on the Ontario side. And that's one thing they notice, and I notice helping them out is a lot of buildings that seem to be,

have been originally conceived as condo buildings or converted to purpose-built rentals and literally every single place they were offering at least one or two free months rent for sure yeah like rent incentives in the city of Toronto are are like four months rent and pre-parking and free internet and like all of these other things right so same for them like everything included in the in the price so I was kind of surprised it was on didn't matter ottawa or gatineau it was it was like, I think for the most part, two months. Yeah. And, and like in Toronto that like where I mentioned supply will probably taper off in a lot of markets. Toronto is probably one market where it won't. Because like we're still late in that cycle. Like Toronto's still delivering from the condo boom, right?

Like all of the closings that are happening in Toronto right now are, you know, 2021 pre-construction condo purchases that are that are closing now. So like next year, you won't see as many condos. A lot of the builders, they can't launch sites anymore. You can't sell a reconstruction condo in Toronto. So what are they doing? Well, they're, they're switching over to purpose-built rental site, so where the numbers work. So you'll probably start, just start to see an increase in rental starts in the city of Toronto by comparison to everywhere else that's tapering off. That should have like downward pressure on rents as you get supply with the absence of demand, right? It's not until demand comes back. It's just just basic economics. Not until demand comes

back that price will, your rents will start getting pushed up again, right? And the one, One interesting thing that I observed, there's this, there's a private reet that I've been thinking about investing. And I guess I have to disclose that if I'm, you know, if we're on the show, right? But they, they like I, I, on our, on our podcast, the Canadian investor, real estate investor podcast, like the real estate version of this show, we talk a lot about like these concepts that mom and pop investors can create. And multiplexes is a big one, right?

And so the Canadian government in the most recent spring economic update mentioned they were trying to get CMHC, MLI select financing possible for triplexes and fourplexes. And then they're also trying to make it, you know, they have like, I don't know, they're really incentivizing this missing metal stuff, like upzoning of different, different areas. Which the MLI select is essentially an extremely long duration loan, I think, what, 50 years, right? 50 year amortization. Yeah, that's right.

We'll talk a little bit about that. Because like a lot of these big groups are using that financing, like Rio Can, as an example, when we, when we get to the retail side of things, Rio Can has a real can living, right? and Rio Can Living is them taking excess land on a lot of their plaza plots and converting it to residential, but they're using programs like CMHCML I select to do that. They're basically bond trading, right? Like you're on a 50-year amortization, so like 80% of your first five years of payments are interest. So you're basically using real estate as like a levered long bond trade. So hire for longer interest trade environment is actually probably the biggest risk to residential

if we're thinking about that. And right now that, you know, markets pricing and higher for longer interest rate environment. But the missing middle piece is something I was mentioning before there. And sorry, I'm going a little long here, but the majority of supply being created in the city of Toronto right now, apartment supply, is coming from multiplexes. So like three to eight units. So, and there's a reet that I've been thinking of investing in that's a private reet called Alliance. And they basically have just started doing similar to like what these mega funds have been doing. They've just started running this like big missing middle acquisition strategy in the city of Toronto. So that part, that that's kind of an interesting thing.

It's happening in that space. So what are we talking about missing middle, just like more affordable? Yeah, like in, no, missing middle is like just, well, it can be more, it ends up being more affordable because it's cheaper to create. But like you go to Montreal, like, Montreal, like everybody lives in like a fourplex or a triplex or Quebec city, right? Like these like more historic like European feeling cities, like that is called missing middle supply, right?

And it's missing because in much of the Western world now, we build like McMansions and then like shoebox condos, right? So, and there's nothing in the middle. Okay. I'm glad I asked. Maybe everyone I knew what you were talking about. I wasn't sure. Yeah. Yeah. So that's a, like a, that's an interesting trade from my perspective. And then I think CMHC is also plugging a lot of the loopholes in that MLI select, you know, program, which, you know, as a taxpayer, you appreciate that, right? And as an investor, it's, it's hard. And so, you know, a lot of the projects in the pipeline that were commenced under the assumption that, like, rents were going to go up 10%. Vacancy was 2%. They're having a hard time now on completion. So. I'll leave it there and I'll let you, I don't know if you want to. Yeah, just a couple names for people to consider on the public market. So you have here.

So I've talked about it before on the podcast. I used to have a position in it. So Canadian apartment read or cap rate, ticker car.un. There's boardwalk, b.i.un. And these are all on the TSX, obviously, interrent, IPP.U.N. and then kill them that you mentioned. Those are all Canadian plays. You can find there's obviously some diversified reads.

I think you mentioned Rio Can, which is primary retail read, but also has some residential in there. And what I notice is most of these rates are still performing pretty well, surprisingly. Like, they're still above, like I looked at all the four I mentioned, and their occupancy rates are still all above 95%. Yeah. I mean, I guess it's like how much of a hit do they have to take on their net effective rent to get to that, right? because like if they're giving away four months of incentives like yeah sure it's not hard to to be 95% occupied if you're giving away for half you know half a year worth of rent right so yeah I wonder if they include that in the average rent increase that they do every year or

they zero that out who's that like the well you know the landlords well they would be they would like so if you're bought if you're building something brand new you aren't subject to rent increases in Ontario or rent increased limits. But yeah, like they you would like that's why you give the free months because then you it's like it's a it's a classic like thing that that landlords have done in commercial real estate right. You give away a couple of like a free rent period so that you're locking in at the at the rent that you want them to be at. So rather than discounting the rent, like you know if you if you give away a quarter of the year you might as well just wrote your rent down 25% but then you don't get to set them at the higher month.

rent. So that's why they do it. Like the mechanics, that's, to explain the mechanics there. But yeah, I think like the, the tickers that you mentioned, like the risks, the real headwinds here, rents are falling. Vacancies are rising. You know, there's no, like, 2028 would probably be the first time that you would see like an end in sight on that when, and that's when the government's currently forecasting that population growth will start going up again. Yeah. And I mean, I think the best thing, like obviously without markets are going in general, not just, real estate, but it's definitely one that I think is quite attractive because sentiment is so bearish on it right now, especially these public reeds where some of them are really quality

reeds. Like cap reeds the one I know the best and they divested, I think, of their European assets because it was a non-core portfolio and they're being very kind of opportunistic in adding newer properties to the portfolio as they see fit and as they see good, you know, good investments there. And I'm just looking at their funds from operation. And it increased a little bit. So the FFO per unit actually increased roughly like 1.5% over last year. So clearly things are slowing down. But it's so far, it's not as bad as maybe sentiment as for these rates. Having cash on hand is essential for any business. Traditional business accounts hit you with high fees while paying little to no interest on the cash.

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Blossom is an essential app for you. It has been blowing up with now more than 50,000 Canadians plus and growing who are using the app. Every time I go on there, I am shocked. The engagement is amazing. This is a really vibrant community that they're building. And people share their portfolios, their trades, their investment ideas in real time. And it's all built on the concept of transparency because brokerage accounts are linked. And then once you link your brokerage account, you can get in-depth portfolio insights, track your dividends.

And there's other stuff like learning duolingo style education lessons that are completely free. You can search up Blossom Social in the app store and join the community today. I'm on there. I encourage you go on there and follow me, search me up. some of the YouTubers and influencers and podcasters that you might know, I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, blossom social in the app store and I'll see you there. The one other thing I would say is like when you mentioned that they seem to be performing

reasonably well, so in the U.S., I think REITs are actually like legislated to be capped at 65% loaned value. In Canada, we don't actually have that like regulation, but there's like different leverage point. Like if you go to a REIT, you can see their trust caps, like a declaration of trust caps or like in, sorry, in their declaration of trust or like their corporate charter, which as a REIT shareholder you would like have and probably want to know. And I pulled a couple of them and it seems to be like, I mean, if you look at like a Rio Can or I think CAP REIT, they're like 45 to 55 percent range, but usually you're in like a 60 to 65 percent range. In the U.S., it's regulatory cap.

So everything like when you think about debt, you know, like leverage points, higher for longer interest rate, risk, et cetera, but reits in many cases, like they're not as exposed to that risk as like your residential homeowner who's at 80 percent leverage or whatever. So they can probably still keep the yield going reasonably well as a result of that. Yeah, and just like I have cap reed here. And I think they have total debt to gross book value. So that's the metric. I mean,

I'm sure they have other metrics. That's the one I'm looking at. That one's at 40%. But it has increased a little bit over the last couple years. The other thing I'll say like with a lot of these groups and is like I don't know how auditable those v, like the vs are in those calculations, right? Like are they getting, yeah, are they getting, I don't know. Like I'm not, I'm not familiar enough with it. But if they're getting regular appraisals and like,

marking it to market, then that seems reasonable to me. But if they're not, like if it's like pension funds where they're not writing down their, their office towers that are like fully vacant or whatever it's in the US, like it's a different story. Yeah. And I think their nav per unit. Yeah, they've lowered it a little bit, but that was one of the thing is they caperite again. They were actually buying back units. Yeah. So clearly if they're buying back units, even if the nav you account, maybe it's overstated by 10, 15%. If the gap is large enough with the actual price of the units, it could be a good indicator that it is undervalued.

But again, you're absolutely right. It's really hard to validate, especially when you start looking at massive buildings, right? Like, it's not like there's transaction every other day on these buildings. Yeah, no, exactly. It is hard. It's hard to pull comps. Like, especially we're in, like,

we're in historically, like, one of the lowest sales markets we've seen in Canadian history, right? So, like, it's hard to have comps to market market. Not everyone can buy a $50 million building or $100 million or whatever it is. Yeah, who would have known, right? No, exactly. So, okay, anything else on residential rates or let's move to retail here? Yeah, no, let's move over. I think like, yeah, the only other thing is like you're seeing a big hybrid strategy like Rio Canon. It'll be a nice segue into the retail. Like, you're seeing a lot of retail groups. Land banking, like, you know, land banking for future residential development,

like using their retail as a covered land play. Oh, you know, if I'm choice. right, like the like law blahs or whatever. Like I'm going to put a grocery store here, but I'm buying this for the next cycle. And so, you know, there's some embedded like future things that people would want to think about and they really would want to like evaluate and trust that investors development thesis or like pipeline thesis, I think, which is like that's probably where you're going to get the outsized returns when you're looking at things like this. In order to do that, you really need to be more of a real estate person than a stock person, I would say. So I'm not going to tell people to go and listen to my show, but they should anyway. Yeah, they definitely should.

I definitely support that over here. But yeah, no, I think it's really interesting what you're saying. So moving on to retail, Rio Can I've seen it firsthand. Like I know of a couple of spots in Ottawa where, and one specifically not too far from my place where they did that exactly. They had like this really shitty old mall that they're actually tearing down except for the shoppers portion of them all. And they also build a brand new apartment building in there. And obviously the first floor of the apartment building is just retail. So I would say that's pretty typical. Yeah, it's classic play. It's a great way to use. I mean, when you think about retail and like this is actually as we segue over to retail, like when you think about retail, this is a really important way for you to think

about it. It's like a retail piece of land or investment. Like it's different than an industrial use and such that like industrial is usually it's zoned in a certain spot, it's tucked away, it's intentionally removed from the remainder of society. Retail is typically major arterial road close to all the other residential areas. And so you get places like Oxford, Omers, like the big shopping mall guys, you get Rio Cans of the world where they have massive sites, right, that are income generating, that they've owned for a long time, that are like, you know, five, 10, 20 acres on a main road center ice. Like if they're, if they're, you know,

they've done their their job right, which they have for the past 20, 30 years, they have great sites for large master plan residential communities in the future for Canada. And that's what we're like, we were kind of in the middle of them turning a lot of that stuff over into the, into the residential phase.

Now obviously the supply and demand economics that I just mentioned have sort of broken that or maybe put a pause on it. But eventually they'll get back there. That's where there's maybe some ups. for some of these other groups. Remember when the internet and Amazon was supposed to destroy retail? Well, that's the interesting part on the retail side is like COVID made it. So like retail is doing surprisingly well.

I have a couple of like friends who run some of the biggest retail square footages in Canada. And nobody was building retail during COVID, right? Like it, you know, like you said, like everybody thought it was like, oh, you know, consumer just went online shopping for five years, so they're never going to go to a retail again. Well, actually, retail, right? Even pre-COVID, I feel like it was already starting to slow, right? Yeah, yeah, for sure. But there's a point, like, there's a limit to how much people will end up buying online.

And it's interesting, like, coming out of COVID, we're now seeing a decrease, like a decrease in online shopping a percentage of total and a decrease in screen time, right? So, like, people are like, I think we've tapped out, like, how much we're willing to have that non-human experience. there's no way to like really measure that but like you know qualitatively I think people are like I got to go and be in the real world well touch and feel stuff you know yeah I think I mean I can completely understand that you have some young kids too and you know what going to the mall is a when you're not sure what to do it's raining outside there are worse things than bring your kid to

the mall and you can usually make you know an afternoon of it yeah for sure I've definitely done that quite a few times of my daughter and I don't know if you've tried you've tried to ride these malls like where you, there's like these stuffed animals that you can ride around the mall. I don't know if you know. What? No. Oh yeah. So they probably do somewhere in the GTA, but I would in the, I live in the burbs. Okay. So, but yeah, I would digress a little bit. But yeah, I was looking through some of the names here. So Rio Can will mention R-E-I.U-N. Smart centers, srU.N, choice properties, CHP.U.N. There's primaries. PMZ.U.N. There's a couple of other names publicly listed in Canada, but those are just a few that I could name. And I was surprised of

the occupancy. I think every single one of them is like high 90s in terms of occupancy. Yeah, and unlike some of these groups, like you'll see them make acquisitions that kind of like make you raise an eyebrow, you know, we were like, ah, like that seemed like a, you know, like, why are you buying it like a one or two percent yield? But like usually if they did that, it's because there's a future, like it's a future high rise site or whatever, right? And And like if they have so much earnings that they need to kind of put some losses on their books to, you know, offset that from a tax exposure perspective, like they can afford to harvest tax losses, right? So they do. And then they get the benefit later. And you as a shareholder, if you can get, if you can kind of capture that markdown when they're in acquisition phase and they're sort of forced by the market to make some, you know, tougher, riskier decisions. Like that to me is I think that there will be a good buying opportunity for a lot of the reads that we discussed on this, not to say that it's today. But as like a lot of the risks that we just mentioned materialize, I like a lot of these over the next couple of years.

I mean, there's some that are glaring today that have been smoked, right? Do they have upside still, which we'll get to especially with office? But, you know, is there growth in that market? Because I think when you're buying stocks, you should be buying growth. I feel like, yeah, like it's probably a sector that could do pretty well kind of coming out of this countercycle that we're in right now. Yeah. And even looking at the distribution, most of them, I mean, you're. looking, just kind of comparing, but I think Capriot was 4.5% around there. Rio Can's 5.3.

I'm assuming you're getting like upwards of five for most of them. Yeah. Yeah. Yeah. Yeah, a lot like four or five range. Yeah. Like it'd be comparable to like a resource like a CNQ or you know. Yeah. 6.4. Yeah. So your, my point being is you're getting paid pretty handsomely even. if, you know, it does take some time for the thesis to play out for some of these names. So there could be other things. And retail, I was also looking that they seem to be able to put in some pretty nice price increase. So I was looking at smart centers. I think the increase on renewal rents at 5.8%. Extremely high when it wasn't anchor tenant. I think it was like 11% anchor tenants came in lower. But Rio Can, same kind of thing. I think it was like 4% over a year increase. So definitely. much different than the residential side, that's for sure. Yeah. Yeah. Yeah, I would say like the retail is the interesting outlier to me because if there's no real massively negative economic data, like even if we see a huge, like consumers

getting crushed by a recession in Canada, which like it's not implausible, like with oil price spikes, et cetera. Like it's still so underbuilt that like they, they wouldn't be forced to vacate all of their space, right? That to me is the kind of part that is surprising. Office is sort of a similar thing. We talk about nobody building a ton of it. Like retail, sorry, residential and industrial were the two like darlings during COVID, right? Everybody was building a ton of industrial. It's fast to pop up. Rents were rising. Everybody wanted it for warehousing and all this online shopping and like business growth. And you're seeing the same thing with, you know, with data centers and stuff. Residential rents were growing. Population was like four percent.

right. So those two were easy, obvious trades and everybody was building a ton of them. What people were not doing was thinking, oh, office is going to come back. Like everybody thought, you know, work from home or hybrid was forever. And then retail. And so those two are kind of an underserved. And we can use that to segue to office a little bit here. Office like, you know, we had, I think heading into COVID, there was like an 8 million square foot office pipeline. And it's basically dropped down because nobody's contemplating new office projects, right? And until now we're, just getting to this return to office phase. And I've heard from like a lot of the big banks like in downtown Toronto, you know, they underestimated how much square footage they needed for the workforce. And so they're like going to the market with like emergency one million square foot mandates to lease up space, right, in some of these class A towers. And they have to be, they have to be like centerized financial district, et cetera, which is probably why you're not seeing it materializing growth in like an allied of the world, who is down quite a bit, as you mentioned before we got on here. to me. But office has been kind of interesting too. Like it's not it's not crushing it. And not that

there's like a ton of ways to get exposure to that anyway. It's mostly pension funds. But it's been surprisingly strong because of this right sizing and return to office. Does recession job losses change that a little bit? I don't know. What's your take? Yeah. I mean, office is interesting because it's been surprisingly strong, but it's not, it's less bad than it was. I think we still. Yeah, it's like a low base, right? It's like a low bar. right. It's like, yeah, it's like, it's better, but like better than what, right? Yeah, better than the pandemic when everybody was locked into their, in their houses and nobody, literally nobody went to the office. Yeah, okay. Yeah. It makes sense. Yeah, it's still like very different than pre-pandemic.

I think we have to make this clear for people listening. Look, if you're looking nationally, you're looking at pre-pandemic vacancy rates around 10% for downtown office real estate and then was around what, like 12 and a half, 13% for suburbs. And then, And that flipped over post-pandemic where now it's 18% for downtown and 16% for suburbs in terms of vacancy rates. And that is down from the peak a little bit. So I think it hit close to 20%. Yeah, for downtown, I think it was in 2025. So it is definitely trending better.

Whether that continues to improve, I think it really depends how the economy, you know, trans ford obviously the trade deal with the u.s even though it's not manufacturing i'm sure it will have a ripple effect on the kind of demand that there could be for office real estate but just looking at some of the reeds i mean they they are still struggling like it's it's not pretty picture at least i're looking at allied and i think it was dream office read as well like it's not the numbers are not great and those are the two top names I would say that are publicly traded. Yeah.

Yeah. Yeah. I think like I mean, Allied's down. Like I remember because like when I was in university, Allied was like the place, right? Like everybody was the, you know,

and all the grads wanted to go work there and whatever. And I remember like I was dollar cost averaging into this stock and like coming out of the 08 recession. And I remember seeing it like, I don't know what, 60 bucks, something like that. And like I had already exited my position and like, I don't know, I don't know, like 17, 18 to like buy my house or something like that, you know. And I saw it climb and I was like, man, like I'll, like I'll never be able to buy back into that.

There's like 50 bucks. And now it's like, what, $7, $9? I get $10. It's like, and but then it's like, do I still like the stock? Like, would I buy it at that price? I don't know. Like, what would have to happen to this stock for you to be bullish on it? Well, okay.

So a couple of things happen with Allied, right? I don't know if you're as familiar with the story. Maybe you are. So first they know, like, their development exposure. Like, like they have King Toronto and the well. they have a lot of heavy development exposure. Okay, so the numbers don't look good right now, even though the pipeline might be decent.

Well, first of all, they cut the distribution back. They announced a cut in December of 2025. And then within two and a half months, they actually announced that they were issuing $500 million worth of equity, mainly to pay off debt. So that's not a great thing within a two and a half month period, especially as an investor, I'd be kind of concerned that you're cutting the distribution

and two and a half months later you're doing an equity raise. Like why not doing it at the same time? You should have. Yeah. Like it just makes me question that management actually knows what's going on with the business when you have it kind of just a couple months apart. Usually management team when they have bad news, they just like kind of rip off the bandaid and just announce it all at the same time.

So that's the first thing that I think is happening there, which is a big reason why the stock tanked to $9.79 because the equity was offered at $10 a unit. So it just pulled the stock all the way there because obviously if they're raising cataple at $10, I mean, why are you paying $14 for the share? Clearly management values it or at least it demands at $10. Occupancy rates have dropped from 95 to 85% from 2019 to now. That's a massive drop, obviously. I don't need to explain to people that, you.

the documents has just not been good. The problem too is the retention rates are around 70% compared to 85% 2019. And I used to own allied. I bought it, I think, in 2022 as a turnaround play because I thought the markets were too pessimistic on it. I thought eventually returned to work would just kind of revert things, maybe not all the way back to pre-pendemic. And clearly I was wrong and I exited, took a small loss, I think 20, 25%, not at the end of the world. But I think one of the other issues is not that it's a bad management team per se, but one of the reasons I sold is literally for like a year and a half, they would say that visits or tours or whatever interests in their properties was gaining traction, but it never materialized. And they

always focused on that. And at some point, I just figure it out, okay, what either they don't know their business well or they literally have no clue what's going on with the office market. Not out of, you know, not that they're incompetent or anything like that, but maybe it's just too hard of a market to figure it out right now. Yeah. So, okay, so then what, like, for you to want to invest in this, you would just need a clear, like, path on the, on the office market, better data out of them, like, you know, a real turnaround story. I think, yeah, for, These type of plays where you have something that's really hammered like this, I think my general philosophy is I'd rather, you know, wait a little too long than be too early. Right.

So I'd rather see things like start turning a little bit, you know, those occupancy rates kind of, you know, start rising a little bit, not necessarily getting to 95% but maybe you start trickling from 85.5, 86 over, you know, the span of a year. and you also see them actually being able to put rent increases in place where now it's been essentially flat, give or take 1%, basically. So if you start seeing that kind of momentum shifting around, that would be my signal to, okay, these could actually be some pretty interesting turnaround place. Sure, maybe Allies is trading at that point at $12.13 and I missed out on the first 20, 30% gain. But that's okay. It's just, I still think there are some, there is some risk.

But also, I think you alluded to it, there's just been under construction, right? There's almost like no projects in the pipeline. I was looking at this CBRE report. And yeah, there's just nothing in the pipeline, like almost like literally like for some markets like zero. It's like a couple hundred thousand square feet. Yeah. It's like a, yeah. So, but then like do we as a like, as a society, are we consuming more office space?

It seems like companies are all agreeing that we need more people. Or sorry, we need more office space. We need people back in the office. But then also like robots and computers are going to be doing a lot of stuff in the future. Maybe they'll need an office. You don't know. Yeah. Yeah, robots might like going to the, I mean, you could keep them there.

Like they don't need to sleep, right? So you just keep them in there. You have to keep them somewhere. Yeah. Yeah. You have a nice little robot gym, maintenance room, you know? Yeah. Or you can get your oil checked and stuff like that.

So, and I think like, I like it. I like it. It's like, uh, wallie or whatever where like we're just, we're just like this species just riding around on a spaceship and robots are doing everything for us. Okay. So I feel like office we've covered sufficiently, right? Yeah. Well, the other names, like I said, I think I mentioned in Dream Office Reed.

So D-U-N. The other one, that one is a bit of a tire fire. So, um, I think it was Slate, uh, office read before and they rebranded to Ravelin? Well, Slate. Oh, yeah, yeah, Slate. Yeah, well, Slate was trading for a period of time. They were trading like below their book value, like well below. Like even if you were to market down, like, yeah. So, I mean, that one's been a bit of a mass, right? Yeah, exactly. So for dumpster diving people that want to do a lot of homework, but, you know, that kind of last puff out of the cigar, but I think was Warren Buffett that coined that. For those interest in that,

Ravelin is definitely, I think the market's pricing it almost out of zero right now. So this one buyer beware, but there could be some value if it's really a price tool. Yeah, I wasn't kidding. But yeah, I think we've covered office real estate. Having cash on hand is essential for any business. Traditional business accounts hit you with high fees while paying little to no interest on the cash you need for day-to-day operations. That was our experience too, until we switched to the new EQ Bank business account. Now, every dollar earns high interest with no monthly fees and no minimum balance.

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I bet you they're already on there. People are just on there talking, sharing their investment ideas and using the analytics tools. So go ahead, blossom social in the app store and I'll see you there. So let's move on here. I think industrial would be the next one, right? Yeah. Yeah. So I think like industrial, just like multifamily, it gives me like this feeling of like the violence

of like the cycles that you see where markets undersupplied for one period of time. And then everyone's like, oh, let's go. Like rents are rising and, you know, we're going to start building a ton of industrial. And so you started getting a lot of banks playing in the space, you know, a lot of reeds playing in the space. And they've been pulling like a lot of capital and building a lot of supply. And now all of a sudden, you know, that doesn't happen instantly, right? Like real estate's a long run supply chain. If we're talking about like the condo market, a condo project is like six years, but industrial

maybe takes you like one year to plan it, one year to like. level the site and build it maybe two so you're like there are one two three four years let's say like in total something in that like two to four year range if you if you started underwriting and penciling projects and making based on assumptions that you were making in you know 22 and you're delivering it today that's going to suck maybe a little bit for you right like industrial has been not as not as violent on the cyclicality as as multifamily but it definitely is feeling a little bit overbuilt to the point where like nobody is now contemplating new projects. Nobody is building new projects. And I have somebody's in the space that that own a lot of this stuff, like big, big stuff in that space. And they're like,

you know, nobody is is RFPing on these like million square foot or like 500,000 square foot things. Because like nobody has like, nobody really has the capital or like the staying power because they've already put it all into like too much spec builds. So there's some opportunity there for groups like that. But most of the guys that would be playing in that space are more private, not not publicly traded. So industrial, like similar to multifamily, it feels a little bit overbuilt. It feels like it'll have like a couple of years of absorption to really get back to like a place where it would deliver like solid yields to investors. It's not to say that they won't be able to like, again, I'm talking like maybe growth in yields or like growth in into like they have to grow into

all the capital that they put out to yield onto that under that capital. Eventually they'll get there. But and in the meantime, you might take like a little bit of a leaner dividend or leaner return if you're just like buying, if you're, you know, just a regular investor buying this stuff, you know, for both multifamily and industrial. I think both of them are kind of just like they went from under supply to oversupply, not massive, but like a slight oversupply in, in a span of like four years. Yeah. I think the advantage was residential is our multifamily is that is definitely the trading at a, like the market is very low on the apartment reeds where the, I'm just looking at Granite here and I think there's

Dream Industrial. I think they've performed like pretty well in the last five years or so like well maybe not last five years but last three years of both performed like decently well as names even more so the last year of they've been under fire.

I mean Dream is up 22 percent and Granite is up 34 percent. So I'm just kind of interesting those two industrial reads and do you think it's a byproduct of COVID, the overbuilding there? Yeah, like I think that the market got really hot for industrial in Canada. And now, like I think it's less a byproduct of COVID and more byproduct of like just uncertainty in the industrial space right now with automakers and, you know, trade war and recession and all of these things.

And, you know, people built for a very clear future that Canada's population was growing at one to two percent. And, you know, the economy was going to be running hot for the decade. And then you started getting a lot of political pushback on Canada's immigration. policy and they've scaled that back and the places that it starts to hit it's like how does that start moving through the economy and then through these asset classes and I think just you know like population growth moves into rental residential like multifamily rental pretty quickly the trade war moves into industrial pretty quickly so I think less less like COVID hangover I think like there was definitely some ambition too much ambition during COVID like jup people were just jacked up on cheap credit and like

good economic data right but so it's a little bit of both. Yeah, the reason I ask is I recall, I think it was Amazon, they overbuilt some industrial space for their, I guess, factories or distribution centers, I think is the better term there. And I remember them having to downside a couple of years after because they just admitted like, yeah, we just overbuilt. So that's why I was kind of, I know it's not all industrials, the same kind of thing that Amazon would use. but that's why I was asking. Yeah, I mean, a lot of warehousing in the GTA. Like, you know, it's not hard. We don't do a lot of hard industrial here, right?

So a lot of, yeah, like warehousing or like, you know, soft industrial, light industrial uses. A lot of like, I got buddies who like take large floorblade industrial and cut it up into multiple smaller units. Like, you know, the small stuff's doing well, right? Small bay, like contractor garages, stuff like that. But large formats, like, that means tough, man. And, like, you know, it's tough to read the market on data from, like, you know, you would have had to know what was going to happen from a policymaker perspective. And that's, that's hard.

Well, yeah, and I find, too, like investing in REITs, like, you see, sure, I like to look at occupancy rates, have they been raising rents. But then you also have to figure out what will happen in the future. And I find sometimes, oftentimes you get competing forces, right? We talked about residential reeds where clearly population growth is slowing or declining at this point. That's impacting, you know, their occupancy rates and the amount of rent they can actually increase. But then you start looking, okay, like if there's also less buildings in the pipeline, I'm thinking about office, especially, there's nothing being built. Will the fact that there's nothing being built, how will that be a big tail? win for these office reads because there's just not going to be enough supply down the line,

but then how far down the line? Is there going to be potential more disruption? You know what I'm saying? Like, you have kind of competing forces a lot of the time where you can say, okay, this will impact supply negatively, but this will actually impact demand. So how, like, as an investor in real estate, how do you kind of balance these out? I think that it's like, based on just the math, like or the spreadsheet of like a of a real estate portfolio, most of the things that you said would track. Like, yeah, like eventually all the supply shortage in office as an example, similar to the supply shortage that we're seeing in retail today as we're catching up to the population growing.

But then you also have to like say, okay, well, do I think, do I believe that there are, and this is probably where you make like the big money, right, is like understanding these second order effects and like kind of hidden between the lines trades do i think that offices are going to be the same asset class for the next 20 years as they were for the 20 years before covid i don't know like and that's that's the question that i think investors really need to answer to think like yes supply and demand is is an easily readable thing like it's just math is there some qualitative layer that we're missing like AI or and I don't know like I I don't work in an office so I have a hard time like really grasping it but like when I did I understood why it existed and I didn't have an issue

with going to the office every day and I think a lot of people do need that place they need a separate work from home and and I think companies want that as well I think when I think about like office like one of the big headwinds for Canada becomes like infrastructure man like Toronto like If you're, you're trying to re-urbanize hundreds of thousands of people into the workforce in Toronto, it's like we already had some of the worst traffic in the world. Yeah. How are you going to? And that's where office landlords and companies that are trying to do this, they have this idea called earn the commute, right?

So you have to make the office so sick that they're, that they can convince people to come into the office, which, you know, which is, it's like that tells me something about the market, which is that, your, your employees is, do want hybrid. Your employees do want to work from home. Your employers obviously want them in the office because they feel they're more productive. The one thing that I'll add to that, which I think is kind of interesting, is like if you just think about like the economics of this, like the, from a societal level, if you re-urbanize the workforce, now all of a sudden, and everybody's taking a one-hour commute to get to the office, which is like the average commute, now all of a sudden you've taken that newfound productivity that the employer gets and you've pawned off on the worker, right? So now they lose two hours of productivity in their own personal lives by commuting.

And maybe they're on the train or whatever. And, you know, but assuming they're not like doing anything with that time, they're using two hours into this podcast. Hopefully they're listening. I mean, it's funny because we did see like a material tick up in listens as we started to see the return to office. But yeah, so like they're taking, they're getting the productivity advantage by getting people back in the office, but pawning it off onto society, which it always makes me wonder if there are like macro consequences to that, that people have, you know, two, two hours less that they're spending on like whatever family or spending money on stuff or, you know, scrolling their phones, whatever it is. Yeah. Well, that's the thing. Like, that's what people

are mostly doing, I think, on the commute. Yeah, exactly. No, that's interesting. And I was kind of, I was looking at office data too, and you're right. Like, for the most part, what tends to perform much better in terms of office real estate, I mean, the type of office real estate that has been, and consistent around the 10% vacancy and not much more above and below has been trophy. So the top tier, yeah, the top tier. Class A has done better than class B and C. And yeah, you see a clear demarcation between like literally, yeah, around 10% and then the closest is class A, which is like 15%. Well, like I think you're, and it goes back to that earn the commute thing. Like your B&C tenants may not have the money to be able to invest in the tenant improvements,

TIs to earn the commute, right? And so they may just concede, oh, yeah, we're a hybrid now. And they use that as a way to keep talent. You know, that like that is a plausible potential outcome. And then you just end up, okay, well, what happens to all these B&C assets? They get converted to residential. Well, the economics are tough on that or, you know, how long does it take for them to empty all of those out and move those guys to to a offices like it's a lot to think about yeah no that's that's

really interesting like anything else you're seeing reads before we wrap this up that you wanted to mention like some other sectors subsectors of the reeds whether it's healthcare or hospitality I know we don't have much of those in Canada but yeah anything else that are either on the private or public sign that you're seeing as potentially good investments I think data centers interest to me. Like with the like can can Canada get exposure to the hyper scaler capex spend with like you know we have abundant electricity and a cold climate like it shouldn't be a hard trade. So I think if somebody can really nail that like that's something that it would be very compelling for me to invest in but nobody really has

seemed to. I mean I think the biggest data center proposal in Canada is like Kevin O'Leary and it's like flaring gas in Alberta like you know that would have been otherwise wasted electricity but I don't know if it's actually going anywhere and I don't think it's investable anyways. Okay. No, that's, that's a good point. Maybe one last thing is the repurposing. I know we talked a lot about office real estate, but one thing I saw in that CBRU report is they're seeing more of that empty office real estate being converted to hotels. Yeah, it depends on the market, but like, you have to, like, your cost basis has to be pretty low. I mean, hotel makes a little bit more sense, but like when you think about an office building, like the floor plate is massive. So

it's hard for you to really like meaningfully convert that to residential or hotel. Like it would have to like, you know, the residential building, typically the floor plate is like 50% of the size because you want all the natural light and all of that and you don't have the big building core with the bathrooms and whatever. That is what makes it difficult. I think you have to be buying at like a really good price per square foot. So in Calgary, where office vacancy is like, what, double digits, 20% or something. And versus Toronto, like Toronto, you can't economically buy an office building to convert it to anything else.

Like it has to sort of stay office. In Calgary, you can buy an office building for pretty cheap and many other markets across Canada. So it really depends on like your sort of core versus non-core markets, I would say. But yeah, like you are seeing adaptive reuse. I think, I think like Calgary converted six million square feet of office into residential. And I think that that's how trend that would be worth paying attention. to in other cities across Canada for sure. Yeah, I think they have the largest vacancy rates or the highest vacancy rates for downtown

office, right? Yeah, they do. Yeah. In Canada. Okay, no, I think this was great. Hopefully people got some ideas. We went over some reeds. You can definitely find Dan on the Canadian real estate investor.

You also have a YouTube channel where you post some pretty good and regular videos. I think even my little puppy is wanting to go out as you. There you go. Perfect time. I didn't. Perfect time. Yes, I'm trying to give you a send-off, but I got interrupted. But yeah, YouTube, really great. So I know you discuss a lot of macro stuff there.

I need we also do our YouTube live on Friday. So make sure that you catch that. We'll be talking about, like we mentioned before, recession. So it should be a pretty fun discussion here. Anything else you want to add before? No. Awesome chat as always. Pleasure chatting.

And enjoy the beautiful weather. Okay, right back at you, Dan. Take care. Later. The Canadian Investor podcast should not be construed as investment or financial advice. The host and guest featured may own securities or assets discussed on this podcast. Always do your own due diligence or consult with a financial professional before making any financial or investment decisions.