Finding long-term investment ops in Trudeau’s activist plan

AACI | Vice President, The Regional Group of Companies Inc.
  • Nov. 18, 2015

It’s a brave new world in Canada these days, with a new Liberal federal government that promises to be much more activist than the Conservative one.

John ClarkOur new prime minister has ambitious plans to stimulate the economy with deficit spending. In each of the next three years, $10 billion will be pumped into infrastructure projects.

(Thank the Maker! It’s long overdue. We need that kind of impetus for two or three decades to overcome this nation’s infrastructure challenges.)

Trudeau has also earmarked $6 billion for renewable energy projects over the next four years, with a plan to ramp that to almost $20 billion over 10 years.

Pundits on all fronts have been speculating about how impactful this spending spree will be on Canada’s foreseeable economic performance. The media is filled with stories about movements in Canada’s gross domestic product, the value of the loonie and the spread on government bonds.

But all the focus is on the temporary effect of fresh infrastructure spending, the lift that comes of creating new jobs and new demand for equipment, supplies and materials.

But what are the long-term effects?

What about after said infrastructure projects are wrapped up and the workers have gone home?

Today’s infrastructure builds become tomorrow’s real estate investments. We’re not talking near-term opportunities here. This is a long-term play for the sort of investor with an eye to the future – the patient sort who isn’t afraid to buy and hold.

Say, for example, if a new rapid commuter rail service was announced to connect Toronto to Southern Ontario communities like Guelph and Kitchener-Waterloo.

A community that lands a station along this route could transform from sleepy backwater to sought-after bedroom community overnight, for well-heeled professionals with a desire to escape the big city. It would also help employers in the big city at the end of the line draw in more talent from further afield.

I’ve written often about the dire straits of smaller cities and towns bereft of opportunity with the loss of local manufacturing. This kind of development could be a lifesaver. On the other hand, those communities too far off the line would continue to flounder, perhaps at an accelerated rate.

Engaging in a little speculation

It then becomes a matter of speculative land-buying – where and how is new infrastructure investment going to land? What impact could it have on a local economy?

What opportunity does this create to step in early and purchase land before the rest of the market catches on and prices begin to rise? (Or, as the case may be, sell off assets before their values plummet?)

I recall here in Ottawa, a group of investors decades ago bought up acres of farmland outside the community of Orleans. Their expectation was that one day, Ottawa’s steady growth would eventually turn farmers’ fields into residential subdivisions and big-box retail.

Their hunch proved to be worth the risk. There were years where they likely lost money on owning that land, but in the end, the long play paid off in spades.

Take Ottawa’s current light rail transit build.

Phase 1 construction is well underway, Phase 2 is already far along its planning phases. Anyone with their ear to ground long ago saw where Phase 2 is going to create new real estate development opportunities. The window of opportunity for speculative buying has pretty much already opened and closed, and Phase 2 won’t even be completed for eight years, if all goes according to plan.

It remains to be seen where the Liberals will commit funding. Actual planning and construction, along with the fine details of interest to a savvy investor, will fall to the provincial and municipal levels of government.

Time for fresh ideas, experimentation

But the new Liberal government is most certainly an activist one that’s open to fresh ideas, in contrast to the laissez-faire approach of its predecessor. It is going to target those regions and project types where it believes it can have the greatest economic impact.

I for one hope Prime Minister Trudeau and his team will continue to be open-minded and willing to experiment with all it does on both the infrastructure and renewable energy portfolios.

(For example, I hope he noticed this recent article about storing surplus energy in big balloons under Lake Ontario – no, really.)

To discuss this or any other valuation topic in the context of your property, please contact me at [email protected]. I am also interested in your feedback and suggestions for future articles.

John Clark is Vice President with The Regional Group of Companies Inc. He has more than 33 years of experience in the real estate appraisal field, is a fully accredited…

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John Clark is Vice President with The Regional Group of Companies Inc. He has more than 33 years of experience in the real estate appraisal field, is a fully accredited…

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