Real Estate

Royal Bank of Canada forms $7-billion real estate partnership

  • Last Updated:
  • Mar 12th, 2019 8:49 pm
2 replies
Deal Fanatic
Feb 22, 2011
7323 posts
7826 upvotes
Toronto
A little light on details but looks like RBC looking to capitalize on passive investors who want to add RE to their portfolio.

Just one of a million reasons why RE is a great long term investment. These institutional investors have access to better deals too. If a housing project is struggling to sell they can buy up a couple dozen homes at a discount and rent them out. It benefits the developer because they can continue to sell at inflated prices without having to advertise lower prices. It benefits the bank because they get a discount and can generate substantial cashflow, with a better ROI on a long term investment.
Deal Addict
Nov 9, 2013
3947 posts
3646 upvotes
Edmonton, AB
With interest rates at historic lows, institutions (i.e. pension funds) are looking for alternative asset classes that can provide stable predictable cash flows and are also less volatile than equities - i.e. a bond substitute. Generally infrastructure assets and real estate fit the bill and so bond allocations are decreasing while alternative asset allocations are increasing.

From RBC's point of view it makes sense to enter the business as it's a way to generate more fees and increase overall earnings. Chances are it will be directed more towards institutional players rather than retail investors.

They are competing with other alternative asset managers (like Brookfield Asset Management - BAM - 45 billion market cap) who has been in this game for a long time and they are quite good at it. Their real estate fund trades on the TSE as BPY.UN. If you want exposure to high quality, international real estate it top markets (i.e. New York, London, Toronto, Sydney Aus.) check it out.

For little guys like you and me this RBC announcement probably means nothing, unless you're also a shareholder of RY, as it may help or hinder their earnings.
Keep calm and go long

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