Pooling funds can deliver startling real estate returns

Vehicles like investment syndicates and limited partnerships have delivered substantial real estate yields to participants, with minimum buy-ins from $25,000

By
Western Investor
June 7, 2018





wwc
Example: Western Wealth Capital of North Vancouver bought this Arizona rental apartment complex for US$15.6 million in 2015 and sold it recently for US$22.1 million. Investors received a net annualized return of 35.95 per cent. | Western Wealth Capital

 

Many would-be real estate investors have remained on the sidelines as real estate values skyrocketed over the past few years. Hampered by the need for a hefty down payment or a lack of time and knowledge, they watched as others – from foreign investors to their closest neighbours – reaped double-digit returns from property investments.

Yet there are ways for even small investors to share in real estate yields, both in Canada and in foreign countries, with little money or hands-on management.

This is through participating in proven syndicated investment groups or limited liability partnerships where individuals pool their money with other investors to leverage the purchase and potential of real estate. 

North Vancouver-based Western Wealth Capital (WWC) is now the third-largest landlord in Phoenix, the fast-growing capital of Arizona, and the company is expanding into Texas.

“We are generating annualized returns of more than 20 per cent,“ said Janet Trpin-LePage, president of Western Wealth Capital.

WWC has acquired 41 multi-family communities since the company’s inception in 2011, with the majority of transactions completed in the last three years. The total purchase-price value of all WWC acquisitions is US$661.5 million. Its current portfolio, net of divestments, includes 28 rental buildings with 5,975 units.

Western Wealth Capital strategy is to acquire undervalued multi-family rental properties; allocate capital for improvements; optimize operations to increase the asset’s net cash flow and valuation; refinance to return equity to investors; and, when appropriate, sell the building for a profit.

“We go where the jobs grow,” Trpin-LePage explained.

Like most foreign investors, WWC also puts a premium on business-friendly jurisdictions that attract diversified industries and corporate relocations or expansions. 

On a typical WWC equity raise, two-thirds of investors are Canadian (the majority from B.C.) and a third are U.S. residents. For some acquisitions the percentage can be 100 per cent Canadian.

So far, WWC has bought, improved and sold 13 properties. The average annualized return has been 34.08 per cent. 

Oh, so now we’re interested.

Here is an example of a previous WWC investment: 

  • Trails@Harris: WWC purchased this 216-unit Mesa, Arizona, multi-family building in 2015 for US$15.6 million. WWC sold it this year for US$22.1 million. WWC investors received a net annualized return of 35.95 per cent.

Here is a current example of a WWC opportunity: 

  • In February, WWC acquired a 552-unit apartment and townhome community, the Carlyle in suburban Phoenix, for $90 million. WWC believes there are many opportunities to unlock value at the Carlyle through improvements and rent increases. Minimum investment is US$25,000.

Island land play 

 

Vancouver-based Performing Equity Ltd. is a limited partnership that invests in condominium and developments in Canada, the U.S. and Mexico. It recently completed the sold-out Lauren condo project in Squamish, where the projected returns for investors are 40 per cent in about 22 months.

Performing Equity has a unique structure weighted towards the investor partners who can get in at a $25,000 entry point in most projects.

“There is no markup,” said John Murphy, head of sales and marketing for Performing Equity. This is unusual in limited partnerships, which normally charge substantial fees up-front, or an acquisition fee.

Performing Equity has a second condo project, Park Place, underway at Squamish and also a land development investment, Shawnigan Heights, on Vancouver Island just north of Victoria near Shawnigan Lake. An 8.3-acre site has been purchased for $2.1 million as the third phase in the subdivision. The plan is to divide the land into 15 building lots and sell them for up to $190,000 each. The offering is $2.5 million with 25,000 partnership units on a 21-month investment horizon. Pre-sales begin this September.

Investors are advised to have their lawyer check out a potential investment syndicate or limited partnership before they invest. The best offer a chance to share in substantial real estate returns.


Frank O'Brien is the editor of Western Canada's biggest commercial real estate newspaper, Western Investor, as well as a contributing editor at West Coast Condominium, real estate contributor to Business in Vancouver and a regular media commentator on real estate investment.
Copyright © Western Investor

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