One of Canada’s largest owners of apartment buildings and multifamily properties is struggling to turn around two funds that bet on U.S. rental housing, with higher rates and an oversupply of new units eating into profits.magnate Daniel Drimmer, launched two funds that invested in U.S. rental properties during the COVID-19 pandemic with hopesBy November, 2022, however, the two publicly traded funds, known as the Starlight U.S. Residential Fund and the Starlight U.S.
Because interest rates have soared, last year the U.S. Residential Fund’s weighted average interest borrowing cost climbed to 5.78 per cent, up from 1.97 per cent in 2021. At the same time, the completion of new rental properties has hurt rental prices, and the fund’s average monthly rent fell 0.4 per cent last year.
Starlight also explained its U.S. funds are particularly vulnerable to higher interest rates because the fund largely relied on variable rate debt. Because the market dynamics have changed so quickly, both funds’ unit prices have plummeted since going public in 2021 and are now down nearly 70 per cent.