Weathering The 2020 Pandemic

      No Comments on Weathering The 2020 Pandemic

This past Saturday (November 6th) the print edition of the Toronto contained an interview with Dennis Mitchell, the CEO of Starlight Capital. In the interview he was asked how Starlight’s “multi-residential properties” did during the pandemic. His response:

The businesses that we own collected well north of 90 per cent of their rent during the pandemic. Actually, during the recovery phase, they collected over 100 per cent of their rent in a couple of months because people who didn’t pay in previous months started paying their current rent plus the catch-up on that.

In other words, the pandemic didn’t affect rental housing that much, or at least not in lasting ways. Once again our industry has proven to be pretty resistant to outside economic factors and shocks, something I’ve been saying since the Great Financial Crisis of 2008-2009. Starlight has been pretty aggressive at renovating their large portfolio of old-stock buildings and raising rents—Timbercreek was I believe the first major management firm to start renovating, but Starlight quickly eclipsed them in terms of number of units renovated. Starlight has in recent years started building their own new purpose-built rental buildings to add new-stock units to their portfolio.

Mitchell goes on to discuss the advantages larger management firms have over smaller ones:

But I think the problem is that people look at real estate sectors on the publicly traded market and assume that’s the entire market. It’s not. I would estimate that the institutional ownership of apartment buildings in Canada is probably around 20 to 30 per cent. What you’re seeing in the market is the performance of institutional quality residential real estate run by professional management. So, as you would expect, they perform better. They just have greater scale in terms of managing, collecting, applying for government assistance programs, providing assistance to their tenants. Smaller operators in local markets don’t have the ability to compete and don’t have the same resources to weather the pandemic.

It would be interesting to learn how smaller firms have done during the pandemic. I suspect most have done okay and even if they had to eat some rent losses or increased tenant turnover, demand for rentals is so high they would have replaced less reliable tenants with more reliable tenants and probably raised rents on turnover. If I come across any information I will share it here.