The current portfolio of District Property Trust (District REIT) is not large, but the trust’s vision certainly is. It’s even bringing in some star power in an effort to raise its profile, partnering with HGTV personality Scott McGillivray.
The REIT was created by Valour Group of Companies founders Richard Hall and Carmen Campagnaro.
“District REIT was formed in the latter half of 2017 with the purpose of creating a vertically integrated series of companies that can raise capital, develop real estate and ultimately buy and own the real estate as well,” District REIT executive vice-president Erik Kroman told RENX.
The Valour Group is a full-service real estate entity based in Burlington, Ont., that includes:
* Valour Mortgage Services Inc., a mortgage administrator to Pro Funds Mortgages;
* Valour Management Inc., which is involved in project monitoring, management and accounting, as well as development consulting, sales, leasing, and property, construction and site management;
* Valour Capital, which sources real estate assets with approved development proposals, and is involved with property and project review and assessment, developer reviews, market analysis, project costing and validation, financial projections, independent appraisals, legal reviews, acquisition or partnership suitability, finance model structuring, project exit and real estate development and management plans.
“The Valour Group is able to develop very specific, purpose-built real estate for the REIT. We can lock in the agreement of purchase and sale up to two-and-a-half years in advance, which secures the price for the REIT,” Kroman explained.
“Naturally, during that time, the REIT will benefit from some appreciation in the underlying real estate while the development group gets comfort in knowing that there’s an exit plan and a financing strategy in place for the portfolio. We have a bit of a win-win where more and more developers are looking to work with the Valour Group because of our potential exits.”
Partnership with McGillivray Group
That includes McGillivray Group, which is led by chief executive officer and HGTV host Scott McGillivray. As part of a strategic partnership, McGillivray serves on the executive committee and assists the REIT’s leadership with realizing its acquisition strategy and growth plans.
McGillivray Group launched in 2014. It spans four business areas, including brand management, product and service partnerships, real estate developments, and television and digital production through McGillivray Entertainment.
Scott McGillivray also co-founded real estate investing education company Keyspire. He’s invested in properties across North America and is also a contractor and author.
“He made a very compelling case to work with District REIT,” said Kroman. “Since he’s come on board, we’ve really enjoyed his presence and his strategic insights on value creation on each of the properties and also his understanding of various pricing and cap rates in some of the markets that we work within.
“He’s a fantastic property manager as well, and we plan on leveraging that as we build some satellite offices to facilitate some of the future growth that we have. He’ll have a variety of contributing functions.”
District REIT investment strategy
District REIT is focused on investing in stabilized, diversified income-producing real estate assets in Southern Ontario.
It targets off-market opportunities and its objective is to maximize investor value by providing stable, monthly cash distributions and long-term appreciation through effective management and cumulative portfolio growth.
District REIT has a distribution of eight per cent per annum and a capital appreciation target of three to five per cent per year, for a combined return of 11 to 13 per cent.
That capital appreciation target hasn’t yet been reached, but Kroman said it’s getting closer.
District REIT has raised more than $14 million since February 2018. It has deployed the funds to acquire three properties, with a combined appraised value of approximately $25 million, at a large discount.
Kroman said some of the REIT’s pipeline of future investments also includes a “heavy discount.”
District REIT current and target properties
District REIT’s three current properties are:
* McClary Apartments, comprised of two low-rise, multifamily apartment buildings with 34 units in London, that are more than 90 per cent occupied;
* and 100 Bronte – The Rose, a mixed-use building in Milton, where the commercial area is 100 per cent leased and the residential units are more than 95 per cent leased.
District REIT is targeting these properties, has financing in place and hopes to close on the acquisitions in the first quarter of 2020:
* Riddell Gardens, a 56-unit, two-bedroom townhouse development located in Woodstock with a gross leasable area of 49,868 square feet that’s close to full occupancy;
* Wonderland Path, comprised of 47 three- and four-bedroom townhomes in London that are close to full occupancy;
* and Victoria Westmount Centre in Kitchener, which includes a two-storey medical office building with a finished basement, a retail plaza and a restaurant pad.
District REIT growth strategy
“The growth strategy calls for a series of acquisitions in 2020 that will bring the gross book value of real estate under management to $100 million,” said Kroman. “The most important pillar in District REIT’s strategy is strong property management.
“The REIT prides itself on creating value through diligent property- and portfolio-level real estate management.”
Kroman said there’s “about $400 million in real estate that can roll in over time to support the growth plan. The actual REIT itself could become quite large just based on the portfolio of potential acquisitions.”
District REIT has “a diverse group of accredited investors, alongside growing interest and commitment from local family offices and institutions,” according to Kroman. “We’re at a sweet spot with the REIT now, where it’s ready to catch some steam behind it.”
Subversive Real Estate Acquisition REIT LP Announces Election of Directors of General Partner – Canada NewsWire
TORONTO, Oct. 30, 2020 /CNW/ – Subversive Real Estate Acquisition REIT LP (the “REIT LP“) (NEO: SVX.U) (NEO: SVX.RT.U) (OTCBB: SBVRF) today announced that the nominees listed in the management information circular for the 2020 annual general and special meeting of holders of Proportionate Voting Units were elected as directors of Subversive Real Estate Acquisition REIT (GP) Inc., the general partner of the REIT LP. Detailed results of the votes by proxy for the election of directors held virtually on October 29, 2020 in Toronto, Ontario are set out below:
Michael B. Auerbach
Craig M. Hatkoff
Details of the voting results on all matters considered at the meeting are available in the REIT LP’s report of voting results, which is available under the REIT LP’s profile on SEDAR at www.sedar.com.
About Subversive Real Estate Acquisition REIT LP
Subversive Real Estate Acquisition REIT LP is a limited partnership established under the Limited Partnerships Act (Ontario) formed for the purpose of effecting, directly or indirectly, an acquisition of one or more businesses or assets, by way of a merger, amalgamation, arrangement, equity exchange, asset acquisition, equity purchase, reorganization, or any other similar business combination involving the REIT LP that will qualify as its qualifying transaction for the purposes of the rules of the Exchange. The REIT LP is a special purpose acquisition corporation for the purposes of the rules of the Neo Exchange Inc. (the “Exchange“). The REIT LP’s restricted voting units and rights are listed on the Exchange under the symbols “SVX.U” and “SVX.RT.U”, respectively.
Additional information is located at www.subversivecapital.com/reit.
SOURCE Subversive Real Estate Acquisition REIT LP
Canada real estate: RBC Economics reports condo listings on the rise as investors look to sell – The Georgia Straight
RBC Economics reported on October 15 that condo prices have “stagnated over the past six months”.
Previous to this, the bank’s economics section on September 30 predicted that condo prices could “weaken in larger markets next year”.
Another thing is happening as well with the condo market in Canada.
In its latest housing report, RBC Economics noted that the real-estate market is awashed with condo supply.
According to economist Robert Hogue, “condo investors are looking to sell”.
“As rents soften and vacancies rise, condo listings are spiking in Toronto, Montreal and Vancouver—albeit from low levels,” Hogue reported on Wednesday (October 29).
In the City of Toronto, condo listings in September 2020 increased 133.9 percent compared to supply in the same month last year.
For the rest of the Greater Toronto area, condo listings last month posted year-over-year growth of 81.5 percent.
In the island of Montreal, listings rose 41.4 percent in September compared to the same month in 2019.
However, for the rest of the Greater Montreal area, listings declined 32.8 percent year-over-year.
In Greater Vancouver, listings of condo properties rose 20.9 percent in September 2020 compared to the same month last year.
In contrast, listings for detached homes in all Toronto, Montreal, and Vancouver metropolitan regions decreased year-over-year in September.
“New, stricter regulations in Toronto are adding to the impulse to sell – at a time when new condo completions are bringing more units to the Toronto and Vancouver markets,” Hogue noted in his October 29 report.
Hogue’s report covered in broad strokes how the COVID-19 pandemic is affecting the Canadian housing market.
“Rural and suburban areas that once lagged desirable city addresses are now roaring hot as homebuyers wearied by lockdowns seek bigger yards and larger living spaces,” Hogue wrote.
Meanwhile, “Tight downtown condo markets that previously commanded expensive rents are now thick with supply.”
Hogue also stated that “rent is now declining in Toronto, Montreal and Vancouver, especially in higher density, downtown locations”.
“Underlying the shift,” according to the bank economist is a “surge in rental supply as the short-term rental business dries up and new purpose-built rental and condo units are completed”.
As well, “Big-city living has lost some of its luster with social distancing measures severely restricting cultural life and socializing opportunities.”
“Meantime, affordability issues are driving many Canadians further afield into smaller towns and cottage country, where larger living spaces are available,” Hogue wrote.
The Importance of Mortgage Loan Insurance
Mortgage Loan Insurance is meant to shield the borrower from default on the borrower’s part, both straightforward and easy. However, the Canada Mortgage and Housing Corporation (CMHC) has built mortgage loan insurance to cover more than just banks. The CMHC needed homeowners to be better able to reach the housing market at an earlier time and better results. After all, more privately-owned housing means more employment, more market activity, more money invested, and so on. If there are more jobs and more investment, the economy will gain. In short, the risk to lenders has been eliminated, leaving them in a stronger position to offer lower interest rates and lower payments.
When the CMHC developed its Mortgage Loan Insurance (MLI) plan, it had a stipulation that if the borrower had less than 20% of the purchase price as a down payment, the insurance was necessary. Before introducing MLI, the Canadian Bank Act restricted federally controlled lending institutions from lending to those with less than 20% of loans. Banks will now fund up to 95 percent of the purchase price, given that MLI is purchased. The move meant that so many more people, who had previously given up on owning a house, now had hope.
MLI offers choices for those who already own a house for those who want to renovate, refinance, or move to another place. CMHC MLI’s are portable from an existing home to a newly purchased one, often without paying the initial premium for a new home. Besides, self-employed individuals looking to fund the purchase of a new home are now in a position to do so without offering conventional forms of proof of income. And those new to Canada are eligible. Current homeowners who choose to integrate energy-efficient elements into their home (the NRCan Energy Assessment Rating must increase by at least five points) are entitled to an extended amortization period-without a surcharge and with a 10% insurance premium rebate. There are also more incentives for borrowers to buy a second home or income land.
Now that we know the value of MLI, how do we translate it into numbers? Ok, it depends on a few equations, for instance. Your lender will do it for you, but if you want an idea ahead of time, start measuring the Gross Debt Service (GDS). The GDS estimates the most expenses you can afford per month, particularly those related to running your house. The cumulative GDS need not be more than 32% of your gross household income to apply for an MLI. Next is your Total Debt Service (TDS) estimation, which calculates the most debt cost your payment can cover. The TDS should not be more than 40% of your total monthly household income. Use the online mortgage calculator to enter the details and your gross monthly income, along with other factors, and you will be presented with the maximum allowable mortgage you apply for.
The MLI premium rate will then be measured as a percentage of the overall loan, taking into account the down payment size. For example, if you need the lender to fund 80% of the property’s cost, your fee would be 1 % of the total loan. If the purchase requires 95 percent of the lender’s funding, the price would be 2.75 percent of the total amount of the loan. The lower the sum financed, the lower the insurance premium.
Also, the harder homeowners work to pay off their mortgage, the more equity they create in their house. The ability to buy earlier than was traditionally feasible (through the MLI), homeowners took the opportunity to go faster than even the lender had expected. As of 2009, the CMHC estimated that Canadian homeowners’ equity status was, on average, 74 percent, while that of its American counterparts was 43 percent. The importance of the MLI is obvious now.
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