The Bank of Canada (BoC) recently announced its third consecutive rate cut, lowering rates by 0.25%.
For investors who have been on the sidelines, the allure of risk-free investments like GICs and money market funds is beginning to fade. As the spread between vehicles like GICs and private market yields—such as those from MICs, private REITs, and development projects—widens, we anticipate a significant influx of capital into the private markets.
Public markets have already signalled this shift, with broad-based increases in Canadian REIT share prices over the past three months. We're observing a similar trend in private market products, as savvy investors seek higher yields with substantially lower volatility.
Given these market dynamics, exempt market investments – and private real estate products in particular – are well-positioned to capitalize on the growing demand for higher-yield, lower-volatility investments, making them an attractive option for investors looking to optimize their portfolios as interest rates continue to drop as forecasted.
In this article, we’ll delve into what you need to know about the exempt market, how real estate investment fits into the picture, and its increasing appeal to Canadians.
Understanding the Exempt Market and how Real Estate fits in
The exempt market in Canada represents a unique investment space where securities are not required to be registered with the Canadian Securities Administrators (CSA) or accompanied by a prospectus. This market includes a range of investment opportunities, from private equity to real estate, accessible through specific exemptions outlined in securities regulations.
Real estate, in particular, has emerged as a cornerstone of the exempt market, offering investors a way to participate in projects that are typically not available through public markets.
For Canadian investors, exempt market real estate investment presents a compelling avenue for diversifying their portfolios and achieving their financial objectives.
Key Reasons Investors are looking to Real Estate in the Exempt Market
1. Diversification Beyond Traditional Markets
The stock market’s volatility has led many Canadians to look for more stable and resilient investment options. Real estate offers diversification into tangible assets that are not directly correlated with the ups and downs of public markets. By including real estate in their portfolios, investors can spread risk across different asset classes and protect themselves from market fluctuations, thus achieving more stability and long-term resilience.
2. Potential for Higher Returns
One of the most appealing aspects of exempt market real estate investments is the potential for significant returns. Unlike traditional public market investments, exempt market projects—especially those in developing regions or emerging sectors—can provide outsized gains. Investors willing to accept more risk in exchange for higher potential rewards are drawn to these opportunities, which offer the possibility of growth through real estate development, rental income, and appreciation of property values.
3. Inflation and Economic Resilience
Although inflationary conditions have improved, uncertainty about future economic trends remains. Real estate in the exempt market acts as a hedge against inflation, given its reliance on tangible assets and income streams that often increase in value as prices rise. In particular, investments in real estate projects such as residential properties and infrastructure developments offer Canadians the security of inflation-adjusted income while protecting capital from the erosion caused by rising costs.
4. Access to Unique Investment Opportunities
The exempt market grants access to exclusive real estate projects that are not available in public markets. This includes early-stage developments, niche projects, and investments in specific regions or sectors that provide unique growth opportunities. These investments allow Canadians to participate in innovative, high-growth sectors that they might otherwise not be able to access.
5. Increased Investor Protection
Recent regulatory improvements have bolstered investor confidence in the exempt market by ensuring higher transparency and security. Accredited investor requirements, enhanced due diligence practices, and stricter disclosure regulations have made the exempt market a safer space for Canadians. These safeguards, combined with the stability of real estate as an asset class, make the exempt market an attractive option for investors seeking higher returns without compromising safety.
Considerations for Real Estate Investors in the Exempt Market
Like any investment decision, investing in the exempt market requires careful consideration. Due diligence is essential—investors should evaluate project developers, market conditions, and long-term prospects. It's also important to ensure that these investments align with personal financial goals, as exempt market securities can be less liquid and may carry higher risk. Additionally, staying informed about regulatory changes is crucial. Parvis offers resources to guide investors through these considerations and ensure informed decision-making.
Recommended Reading: Mastering Due Diligence In Real Estate Investing
How Parvis Facilitates Exempt Market Real Estate Investments
Parvis is a registered Exempt Market Dealer offering institutional-level private real estate investment opportunities. Our platforms offers:
Tailored Investment Opportunities
Parvis specializes in offering a curated selection of real estate investments designed to align with the goals and risk tolerance of each investor. These opportunities include residential and commercial real estate developments and funds across Canada, providing investors with access to high-quality, well-researched projects. Parvis ensures that investors are presented with strong opportunities, backed by thorough market analysis and due diligence.
Rigorous Due Diligence and Transparency
Parvis emphasizes the importance of conducting thorough due diligence on every real estate project it offers. By evaluating the credibility of developers, assessing market conditions, and analyzing the long-term viability of each project, we ensure that our platform grants access to opportunities with strong fundamentals and exceptional potential. Parvis also prioritizes transparency, offering full disclosure on all aspects of the investment, from project timelines to potential risks, allowing investors to make informed decisions.
Liquidity via our Secondary Market
Real estate as an asset class has traditionally been illiquid. Parvis has introduced blockchain technology in the alternative investment space, modernizing how investments are acquired and traded within the secondary market. The benefit is the liquidity now provided in what has been a typically illiquid market; the ability to purchase long-term investments at a shorter time horizon; and increased transparency into the investments.
Conclusion
The rising interest in real estate within the exempt market is driven by factors like diversification, potentially higher returns, and access to unique investment opportunities. Parvis provides Canadian investors with a gateway to these opportunities, offering tailored real estate projects that are carefully curated and backed by rigorous due diligence.
To learn more about opportunities on our platform, sign up today or explore our investment opportunities.
