Canadian hotel investment activity totals approximately $750 million in first quarter: Report
Canadian hotel investment activity totaled roughly $750 million in the first quarter of 2024, up more than twice from the same period last year with the closing of major portfolio and single asset transactions, according to the Q1 2024 INNvestment Canada Hotel Report by Colliers International Hotels.
According to the report, 60 per cent of volume was attributed to portfolio transactions spanning 19 hotels, including a $410 million disposition by Morguard Corporation to InnVest Hotels and Manga Hotel Group by way of sub-portfolios.
The report noted that there were 28 single-asset transactions recorded during the quarter, including several large full-service hotels. These included the 340-key Fairmont Winnipeg, which was acquired by Lombard Hospitality, a subsidiary of James Richardson & Sons Ltd., and the 236-key Sheraton Ottawa, which was sold to Sunray Group.
In terms of price per room metrics for the quarter, they averaged a healthy $168,000, up 12 per cent year-over-year, according to the report.
Just over 75 per cent of national volume was driven by sales in Eastern Canada with Ontario driving the lion’s share at just over 60 per cent.
The report noted the impact of the 2024 Federal Budget on the real estate industry, stating that the most significant measure was the announcement of an increase in the capital gains inclusion rate from 50 per cent to 66.67 per cent. The report noted that the new rate would apply to all capital gains realized by corporations and trusts on or after June 25, 2024, and on the portion of capital gains realized on or after that day that exceeded $250,000 for individuals.
According to the report, this effective date left a short window for taxpayers and their tax advisors to potentially lock-in the 50 per cent inclusion rate on certain accrued capital gains.
The report noted that after June 24, 2024, capital gains realized by the vendor, would be subject to a higher rate of tax. For private corporations, there would be a corresponding change in the amount added to the capital dividend account (CDA). It also noted that before June 24, 50 per cent of the capital gain was available for distribution on a tax free basis, and that after that date, the rate would decrease to 33.33 per cent.
For imminent transactions that closed on or after June 25, 2024, but before December 31, 2024, many taxpayers considered expediting the closing to pre-June 25 to lock-in the 50 per cent inclusion rate, noted the report.