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Blackstone Head Says Canada Too Pricey

Jonathan Gray Says He Likes Vancouver, Toronto And Montreal But Doesn't Want To Compete For Product
December 1, 2017
He runs the world's largest property portfolio with US$111 billion under management, and would like to buy more in Canada, but Jonathan Gray, global head of real estate for Blackstone, says it is just a little difficult to find anything to buy.

"I'm very positive on Canada," Gray said to a packed audience at the Real Estate Forum in Toronto. "The negatives on Canada are cap rates are low, and there is just tons of capital here and no distress. The positives about Canada is you have some great cities that have this tech creativity vibe and lots of in-migration. That urbanization and technology story, particularly in Vancouver and Toronto and also in Montreal, is very positive."

Gray was participating in a one-on-one interview with Daniel Fournier, chairman and CEO of Ivanhoé Cambridge, a real estate subsidiary of the Caisse de dépôt et placement du Québec, which itself had $56 billion in assets under management at the end of 2016.

Gray looks around the Canadian market and says he would do more in the country if he could. "It's just a competitive market," he said.

Blackstone has turned its attention to Spain and Italy. "Those are two markets we like a lot, there are not many pockets of distress in the world," said Gray, noting his group just bought a large portfolio of residential assets in Spain making it the biggest buyer there. "The story in Spain is all prices fell 40%, new construction fell 95%. Spain is sort of the Florida of Europe and I think it will come back in a big way."

Fournier asked Gray about threats to the real estate industry.

We are definitely in a more mature part of the cycle," said Gray. "On the negative side, what we have is cap rates at very low levels, even lower in Canada than the United States and around the globe and lower than (2007). What concerns you is that interest rates, the great decline that we have been watching for so long, seem like it's going to head in the other direction."

Gray briefly waded into the discussion of the North American Free Trade Agreement, saying, "I hope it holds together."

Garry Marr, Toronto Market Reporter  CoStar Group   
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