Keeping You Informed - Q3 2024

To our Investors and Partners,

We are pleased to release our Q3 financial reports, highlighting our progress this quarter.  

The third quarter of 2024 began with notable shifts in monetary policy that have continued through to October.  The Bank of Canada implemented two consecutive interest rate cuts of 25 basis points, followed by a further reduction of 50 basis points in October. Meanwhile the US Federal Reserve made its first rate cut of 50 basis points.  Both central banks have indicated that further rate cuts should be expected in 2025. While these reductions may not immediately impact property values or transaction activity, they signal growing investor optimism and suggest a gradual rebound in real estate capital markets activity throughout 2025. These conditions will create buying opportunities for CR V LP, while also offering buyers of stable assets some comfort or certainty around assumptions to facilitate the disposition of assets in CR IV LP.  

The availability of debt remains a crucial factor in our industry.  As banks continue to reduce their exposure to commercial real estate, alternative lenders step in to fill the gap, ensuring debt availability remains for high-quality sponsors.   Our experience with refinancings this quarter has shown increased interest from lenders in reviewing potential commercial financing opportunities, although only a limited number ultimately provide terms.    

The lower borrowing costs are certainly helping to ease the burden of debt refinancings and should reinvigorate the real estate transaction market.  These factors are also instilling optimism among tenants regarding their business prospects.  Additionally, the increasing implementation of “return-to-office for the majority of days” mandates by companies and the public sector continues to reinforce the demand for office space.  This is reflected in our office leasing activity, particularly in our suburban portfolio.  In fact, this quarter Crown completed a 20,000 sq. ft. lease for a space that has been vacant for 14 years (read more here).  

Key highlights of the quarter include:

• Growing our talented team to include a new VP, Asset Management, Zohaib Rafi;
• Signing a Memo of Understanding with the Federal Government to review the feasibility of connecting one of our buildings in downtown Ottawa to the existing district energy system that supplies federally-owned and occupied buildings with low-carbon heating and cooling solutions;
• Reviewing a further $719 million of properties on behalf of CR V; bidding on $124 million, and having acquired one property in October;
• Refinancing over $110 million of properties;
• Completing 658,000 sq. ft. of leasing to date, in line with our budget targets, including 54,000 sq. ft. of new leasing across our fund portfolio this past quarter; and
• Attaining renewal rates at or above in-place rents for 77% of these lease transactions.

We invite you to review our detailed reports for a deeper dive into the performance of your investments and to look beyond the headlines. We thank you for your continued partnership and support and look forward to our next conversation.

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