News of Blackstone’s Toronto Real Estate Office Met with Mixed Reactions | Ezine Daddy

Earlier this week, global investment giant Blackstone Inc. made headlines when it announced it was opening a real estate agency in Toronto.

The move quickly drew mixed reactions as Blackstone became the subject of passionate banter online. For the past decade, Blackstone has been accused of making a profit by buying foreclosed single-family homes at cheap prices during the 2008 housing crisis in the US.

So it wasn’t long before the alternative investment management business was slammed following Monday’s social media announcement. “The vultures are here in anticipation of a bloodbath in the housing market,” wrote a Twitter user, for example. In the meantime, Reddit has been alive and well with banter of its own.

Whether scapegoated or legitimate culprit, institutional investors like Blackstone have been blamed in part for North America’s housing crisis. And many Canadians — some, inevitably, would-be homebuyers in another time and place — are yelling “NIMBY” at them loud and clear.

On the one hand, proponents argue that the entry of institutional investors could bring much-needed rental supply to the housing market. On the other hand, critics say that taking stocks off the market could make it even harder for first-time buyers to buy homes, ultimately contributing to the affordability crisis.

Residential suburb in Toronto/Shutterstock

But while some have been quick to assume that Blackstone will come and buy large batches of single-family homes like they’ve been doing south of the border, there’s actually no indication that that’s the case in Canada. In fact, the company says it’s not happening.

“In Canada, we are long-term investors in areas like logistics that remain underserved and benefit from growing e-commerce. Our focus will remain on investing in our themes that excite us the most, including logistics, high-end creative and life science offices, studios and multi-family homes,” Nadeem Meghji, Head of Real Estate Americas, said in a statement to STOREYS.

That doesn’t mean other institutional investors aren’t buying up single-family homes in Canada. Last June, Core Developments acquired $1 billion worth of single-family homes, including land in eight Ontario communities. Core has acquired properties in Cambridge, Hamilton, Peterborough, London, Barrie, Kingston, St Catharines and Guelph.

“These are mainly in secondary markets; They buy these homes, renovate them, add basement suites, and create an extra unit in the rental market. I don’t see a big impact on some of these smaller markets,” said Ben Myers, President and Owner of Bullpen Research & Consulting Inc, of Core Developments’ bulk purchase. “Yes, a condominium will be removed, but two rental apartments will be created. In many of these markets, the percentage of single family homes for rent is only 10% – a small percentage of the total and a good option for people.”

Not everyone is so excited about the growing presence of institutional investors in the housing market. “We think it’s a disaster,” said Geordie Dent, executive director of the Federation of Metro Tenants’ Associations of Blackstone, which is continuing to penetrate the Canadian real estate market. “Institutional investors tend to think of entities as money machines, not places where people live. So they’ll often cut services, try to raise rents for existing tenants, or—more often or not—try to evict tenants who are there now. They will attempt to raise rents through evictions or other illegal means. When they did that in the US, rents went up. They were a disaster in the US and will be a problem in Canada.”

But even if they wanted to, it would be difficult for Blackstone to buy groups of houses in Toronto, Myers says. “There’s so much cheap housing you can buy in the US markets in sprawling communities,” he says. “You can scale the business and have one person looking after a collection of houses. I don’t think there is the same availability in the greater Toronto area market to do more of these. There is no longer room to build single family homes in Leslieville, The Annex or Rosedale. There is a fixed number of houses. So it’s not something I’m too worried about.”

Myers notes how Blackstone has invested in existing landlords like Starlight in the US, intensifying their existing rental offering. “Blackstone is essentially creating more rental housing,” he says. “I know people always want to be afraid of big bad companies coming to Canada from the US, but I think that’s actually going to be a positive thing.”

Elke Rubach, a principal at Rubach Wealth Management, says the idea sounds fundamentally good given the growing role of institutional investors in Canada. “But if approvals take forever, the supply problem is far from solved,” says Rubach. “Canada will continue to be an attractive place to live and work. The supply demand is there; the need is there. If they can deliver, definitely. I think there needs to be political support there to make that happen and some oversight to make sure there is no abuse. All levels of government must work together on the supply issue.”

Whether you are for or against (or indifferent), the presence of institutional investors in Canadian real estate is not going away.

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