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Keeping You Informed – Q2 2023

To Our Investors and Partners,

As we report on our second quarter results for 2023, the commercial real estate landscape continues to experience significant change, shaped by global and local influences.  The challenges and opportunities presented to a value add group such as Crown are both numerous and nuanced and this quarter, we highlight three positive indications:

  • The first is that more major Canadian employers are of the view that in person interaction in the office enhances productivity, collaboration and individual mental health.  Consequently, we are seeing increased occupancy throughout our portfolio, as evidenced by the increased vibrancy of our lobbies and common areas.
  • The second factor is that leasing transactions continue across our fund portfolio, where we saw positive leasing absorption across all markets:  We have completed over 315,000 sq. ft. of leasing across our fund portfolio year to date, exceeding our target by 8%. Moreover, rental rates have continued to hold firm, with renewal rates that are at or above in-place rents for just under 90% of those leases.
  • Finally, we have continued to make progress on our dispositions and capital recycling program, with private sector players being the most active purchasers of our assets.  Year-to-date, we have completed over $50 million of asset sales that are each <$25 million, achieving an average IRR in excess of 20% and EM in excess of 2 x.

We are of the belief that as the investment market stabilizes there will be a premium placed on high-quality product, particularly those buildings with a clear pathway to decarbonization.  The value is not always found in the most obvious places and our track record in the value add space has placed us in an advantageous position.

This past quarter, we continued to expand our Sustainable Investments team to facilitate our decarbonization program across our fund portfolio.

  • Year-to-date,  we have initiated and/or completed decarbonization planning for an additional  3.6 million sq. ft. of assets, bringing our total to almost 5 million sq. ft..
  • We have continued to progress the intensification/re-zoning of over 2 million sq. ft. of potential value add to our existing fund properties.
  • Our capital upgrade program continues to be active.  Year-to-date, we have initiated over $30 million in capital projects across the portfolio; almost 30% of which can be associated with energy savings, carbon reductions, or other sustainability efforts.

The current market environment will continue to create opportunities for Crown’s value add fund.  We remain confident in our ability to deliver above market returns as we navigate our way through these choppy markets.  We look forward to keeping you informed.