Canadian Lawyer

September 2022

The most widely read magazine for Canadian lawyers

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www.canadianlawyermag.com 39 FEATURE COMMERCIAL REAL ESTATE Legal departments help support tenants in creative ways as business strengthens in the post-pandemic era, writes Lucy Saddleton Commercial real estate industry rallies amid rising costs COMMERCIAL REAL estate in Canada has seen an upswing in momentum this year after a downturn during the pandemic. Although investors remain circumspect and lenders are more cautious in the post-pandemic era, the outlook for Canadian commercial real estate is positive, says Bavia Bisetty, a partner at Osler, Hoskin & Harcourt LLP. "Transactions are progressing, but LOI [letter of intent] deal terms are taking longer to negotiate, and there's a general slowness in terms of how these discussions are moving along," says Bisetty. The shortage of industrial space for land and stabilized assets continues to create challenges for Bisetty's clients, as do significantly higher acquisition and construc- tion costs. As supply diminishes, demand increases and transactions become more complicated. These deals often require regula- tory approval, thus taking longer to complete. "There is more attention being given to the long-term outlook and complexity," says Bisetty. "Some investors are finding that this requires pricing and resources that they aren't willing to consider in the current market, so they are just going to wait it out." Bisetty predicts that foreign capital will continue to be attracted to Canada as geopolitical challenges shift the focus to more stable socioeconomic environments. "Real estate is a significant vehicle for that capital," she says. In-house counsel at real estate companies and their external counsel partners are facing new challenges. "We are now negotiating terms and conditions that we didn't have to previously consider, or didn't have visibility or access to, and this means being nimble and creative as we deal with new issues," says Bisetty. At CT REIT, the priorities for the legal department this year have been supporting an executive transition as the CEO retired and maintaining a solid relationship with Canadian Tire, their anchor tenant and controlling unit holder. The legal team is also building up the role of the associate vice president VP, legal – real estate, Diana Pegoraro, who was a real estate associate at Torys until she joined the team in April. Because of CT REIT's unique relationship with Canadian Tire, its occupancy rates remained high throughout the pandemic. The REIT also collaborated with other tenants to assist them with solutions during the pandemic. "We're seeing more construction costs in our development contracts, and we're also seeing some expanded force majeure clauses and provisions being added to contracts to address things like health emergencies, so negotiating that new reality has been interesting and "We're seeing more construction costs in our development contracts, and we're also seeing some expanded force majeure clauses and provisions being added to contracts to address things like health emergencies" Diana Pegoraro, CT REIT

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