Canadian Apartment Properties Real Estate Investment Trust T.CAR.UN

CIBC

[DanielDarden123]

Rising Interest Rates – A Harbinger Of Things To Come? Given the uncertainty of where rates may ultimately settle, we view CAR’s forward refinancing of 70% of its 2022 debt maturities at a locked rate of 3.1% (vs. maturing rates of roughly the same) as a very prudent decision. While conventional wisdom would assume that, given a rising interest rate environment, we would likely see some upward pressure on cap rates, CAR’s IFRS cap rate of 3.69% has essentially held stable since year end. We’ve long been of the view that cap rates are more of an art as compared to a science, and there are myriad other factors that must be taken into account. Rising interest rates may very well mark the end of the era of “easy money” (nothing’s really that easy), forcing would-be buyers out of the market and into the rental market. The increased rental demand and ensuing upward pressure on rental rates could very well offset any cap rate expansion in the near term.