Mark Zilbert, a former Montrealer
who now runs a real estate agency
selling million-dollar condos in
Miami Beach, is quite content that
the U.S. dollar is tanking against
the loonie.
He says the amount of
business he's doing with Canadian
clients is up about 20 per cent over
the past six months.
"There's always a number of
factors that influence the spurts in
business that we see - interest
rates, property taxes. Currency has
definitely had a substantial impact
on Miami real estate," said Mr.
Zilbert, the 43-year-old president
of Zilbert - Zilbert International Realty - Zilbert Realty Group.
"When the dollar was doing very
poorly, we saw our Canadian business
just drop off. Everybody wanted to
wait and see what happened," he
said. "Clearly, a lot of Canadian
buyers are taking advantage right
now, and are starting to look around
and shop."
They're even willing to book
trips during the month of July to go
condo shopping in Miami, something
that Mr. Zilbert says he has rarely
seen.
It's one example of how Canadian
consumers and companies are digging
into their pocket books to see
whether they can take advantage of
the high loonie.
"With the Canadian dollar as
strong as it is, it's a bit like a
gigantic sale sign going up," said
Simon Nyilassy, the chief executive
officer of Calloway Real Estate
Investment Trust, which is in talks
two retail centres in Oregon. "It
will definitely encourage us to look
at more," he said.
The favourable exchange rate
isn't the largest factor that
Calloway would consider as it weighs
U.S. acquisitions, but it certainly
helps, Mr. Nyilassy suggested.
Stephen Suske, the co-CEO of
Chartwell Seniors Housing Real
Estate Investment Trust, said the
REIT is still digesting a recent
acquisition. But, once that's done,
it is very interested in expanding
its U.S. platform and "the rise in
the Canadian dollar, that is good
for acquisitions."
Colin Walker, managing director
at investment bank Crosbie & Co.,
suggested he doesn't expect Canadian
firms to go on a full-blown shopping
spree for major U.S. companies as a
result of the higher loonie.
Most large acquisitions are made
for strategic reasons, he said. "The
truth is, I don't think people make
acquisitions due to currency." Even
if they did, there's an offsetting
factor at the moment, Mr. Walker
said. The government's decision to
change the rules governing how
companies can deduct interest on
borrowings for foreign investments
is causing Canadian companies to
hold off on acquisitions, and that's
outweighing the impact of the loonie,
he said.
While the strong loonie has made
machinery and equipment from the
U.S. much more affordable, an
economic report this week showed
investment in machinery and
equipment tumbled 6 per cent on an
annualized basis in the quarter -
the first drop in more than four
years.
One bad quarter doesn't mean
factories have stopped investing,
cautioned Dale Orr, chief economist
at Global Insight (Canada). Many
manufacturers may have held off
buying new equipment last year
because back then the loonie was
weakening.
"The relationship ... we've seen
since 2003 between the exchange rate
and imports of machinery and
equipment, is consistent," he said.
"The lags can be quite long."
The Canadian dollar closed
yesterday at 94.22 cents (U.S.), up
0.73 cents from Thursday's close.
That came as Canadian Imperial
Bank of Commerce became the first
major bank to predict the currency
would hit parity by the end of the
year. Takeover talk, rising rates
and higher commodity prices should
propel the loonie, chief economist
Jeff Rubin said. The last time the
loonie traded at par was November,
1976.
The dollar's ride
What's driving the loonie higher?
The Canadian dollar traded at
high as 94.32 cents (U.S.)
yesterday, the highest point since
July 25, 1977. It closed the day at
94.22 cents, up 0.73 of a cent.
The currency has been driven
higher by a wave of takeover
activity, rising commodity prices
and, lately, expectations of rising
interest rates. Its rise also
reflects a general decline in the
U.S. dollar as the United States
suffers from a ballooning deficit.
The loonie is now up a dramatic 43.4
per cent over the past five years.