How the Equifax Hack Affects Commercial Real Estate in Canada

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What Went Wrong in Equifax?

As a consumer, you know all about credit checks – they’re required for just about anything, from applying for a phone line, taking out a loan, financing a car, applying for a mortgage, and such. Companies like Equifax do the credit checks; as a consumer credit reporting agency, they collect your personal information to determine your credit rating and in effect, if you qualify.

On July 29th, Equifax learned about a massive security breach, resulting in thousands of Canadians’ personal information, like birth dates and credit card numbers being obtained by hackers- all prime for widespread identity theft. On August 1st and 2nd, three Equifax executives sold shares in the company days after the breach, however, they state they did not know about the breach. On September 7, 2017, Equifax reported that up to 110,000 Canadian Automobile Association (CAA) subscribers in Canada that have dealings in the U.S. were a part of the security breach. 

What are the Effects of the Equifax Hack?

The Equifax hack is big news. Millions of credit files and personal data on hundreds of millions of individuals appears to have been stolen by hackers. Some cybersecurity experts pose that this could extend to Equifax’s entire database. Not just the 143M originally revealed. The company’s CEO is expected to testify in October 2017, amidst investigations by the FTC and other organizations. Concerns are that there is even bigger fraud and scandals under the surface.

How Does the Equifax Hack Affect Real Estate Investments?

The biggest concern is over the negative impact on personal credit, and identity theft. Americans, Canadians, and Brits could all be impacted. This could mean diving credit scores and limited ability to use and obtain new personal credit. Retailers and banks also need to be ready to deal with an elevated number of chargebacks and customer service calls.

As for real estate, Richard Crenian says that commercial real estate landlords need to be looking at the potential impact to tenant credit reports. Individuals who would normally be signing personal guarantees may not have the credit scores and history they once did, out of no fault of their own. As Equifax also maintains and provides business credit reports, some organizations may also be impacted.  Richard Crenian even thins that landlords may have to lower the bar to account for this unique situation.

On the other hand, Richard Crenian states that we may also see a spike in commercial real estate investment in the wake of the Equifax hack. The impact on personal credit could hurt the condo and single family property market. Qualified buyers may be far more scarce, and that will affect ability to finance residential property investments and demand as well. In contrast, it can be far easier to get business credit and commercial mortgage loans, especially for new entities which haven’t been impacted by the hack.

The Future

The Equifax hack is unprecedented and could have far greater and widespread consequence than expected. Richard Crenian says we have to anticipate new regulations, a change in overall credit quality, and shifts in the types of investments most in demand, and how they are financed. Finally, in the realm of real estate investment, Richard Crenian says that savvy commercial property investors and asset managers should be able to skillfully navigate the period ahead, by looking deeper into the data, selecting the right tenants, and correct positioning for attractive exits.

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