Interest rate cuts boost Equiton's portfolio growth, sparking new property acquisitions in Canada
Wealth Professional reports that private equity real estate firm Equiton is poised for growth in Canada’s real estate sector as it expands its multifamily portfolio under the Equiton Residential Income Fund Trust (The Apartment Fund), bolstered by recent interest rate cuts.
Geoff Lang, Equiton’s senior vice president of Business Development, explained the favourable market conditions, noting, “Now is a great time to acquire properties for our portfolio. Rates are still higher, but they’re coming down. There’s still an opportunity to purchase properties before rates drop further, which will drive up valuations within our portfolio.”
Lang confirmed Equiton’s active presence in the market, citing a recent acquisition of a four-building portfolio in Toronto with additional properties anticipated soon.
The Apartment Fund, which reached over $1bn in assets under management earlier this year, comprises 41 properties and 3,463 units as of September 30.
Lang highlighted Equiton’s confidence in multifamily assets, particularly Canadian apartments, due to supportive market factors such as population growth, shifting demographics, and low housing supply.
“Multi-family is a great sub-sector within real estate backed by strong tailwinds,” Lang stated, adding that these factors are expected to continue benefiting The Apartment Fund.
The recent rate cuts have created opportunities for significant property value appreciation, according to Lang. “The recent rate cuts have been a long-awaited positive for the real estate sector,” he said.
While these cuts were slower to arrive than anticipated, Lang explained that they have set the stage for cap rate compression, a phenomenon where lower borrowing costs lead to higher property values.
As competition among bidders increases, Equiton expects this trend to raise the valuation of its properties, which are appraised quarterly.
Equiton’s approach includes securing 10-year fixed-rate mortgages, which has provided stability against rate fluctuations. With the Fund’s weighted average mortgage rate at 3.19 percent as of June 30, Equiton retains flexibility to reinvest capital in new acquisitions or property enhancements.
Lang stated, “As rates come down, it gives us more capital to reinvest, either in new properties or in value-add projects within our portfolio.”
Additionally, Equiton benefits from a rental gap, where current rents are below market rates, allowing it to steadily increase cash flow even as rates shift.
Despite surpassing the $1bn AUM milestone, Lang noted that Equiton remains committed to a disciplined approach in evaluating acquisitions.
“Whether it’s $1bn or $5bn, we’re sticking to our game plan. We’ll continue to scrutinize every property with the same sharp focus. Yes, we’re proud of the achievement, but our eyes are already on the next opportunity.”
