With a mission to inform, empower, celebrate and advocate for British Columbia's current and aspiring business leaders, BCBusiness go behind the headlines and bring readers face to face with the key issues and people driving business in B.C.
Issue link: http://digital.canadawide.com/i/1468031
MAY/JUNE 2022 BCBUSINESS 37 BCBUSINESS.CA $20 AND UP 1 REAL ESTATE INVESTMENT TRUSTS What's that, you want to own a stake in the historic Dominion Building on Victory Square? Oh, and you only have a fiddy? You're in luck! The Vancouver landmark, once the tallest building in the British Commonwealth, was just bought by Toronto-based Allied Proper- ties Real Estate Investment Trust (REIT) which, last we checked, was trading for around $45 a unit on the Toronto Stock Exchange. Allied has a thing for heritage office buildings, also owning the Sun Tower on Pender Street and The Landing in Gastown. If you're not so picky, there are scores of REITs in Canada and hundreds in the U.S. offering low-cost entry points to any number of real estate niches and annualized income distribu- tions between 2.5 and 6 percent. For an extra layer of safety, pick a low-fee exchange-traded fund (ETF) invested in REITs, like the iShares Canadian Capped REIT Index ETF (TSX:XRE), with broad exposure to the sector. Don't expect REITs to provide a counterweight to your stock holdings, though. As publicly traded securities, they're still pretty highly correlated to equity markets. 2 REAL ESTATE CROWDFUNDING Financial technology companies such as Vancouver-based Addy Technology Corp. and Toronto's BuyProperly, NexusCrowd and Willow Real Estate Technologies have taken up the challenge of making real estate investment, with its relative safety and income-generating characteristics, available even to those of modest means. After paying an annual mem- bership fee of $25, you can participate in any one of Addy's newly acquired properties for anywhere between $1 and $1,500. For a minimum investment of $2,500 and 2.5-percent management fee, BuyProperly lets you partake in the rental income stream and eventual sale of selected proper- ties in Ontario. All require minimum lock-in periods, similar to a guaranteed investment certificate (GIC). Keep in mind this is a very new business model without a track record over a complete economic cycle to look back on. $25,000 AND UP 3 REAL ESTATE POOLED FUNDS There are a number of private real estate investing pools that investors can participate in, and B.C. has its share. More liquid than owning prop- erty directly, these limited partnerships let you buy and (with some restric- tions) sell units fairly readily. However, many of the general partners of these funds impose substantial minimum investment thresholds of $100,000 or more along with a hefty management fee, so it's worth shopping around. Vancouver-based CPI Investments, which invests in garden-style rental communities in the southern U.S., broke into the market last year with a relatively affordable minimum invest- ment of US$25,000. 4 MORTGAGE INVESTMENT CORPORATIONS (MICS) Partnered with a mortgage broker to feed you clients and a lawyer to draft your agreements, you can become a lender to buyers rejected by the banks all on your own. But an easier option is to invest in a private mortgage pool like those offered by AP Capital, Arise Mortgage Corp., Cambridge Mortgage Investment, Nicola Wealth and others. Understand that mortgages represent a different asset class than real estate itself. They're income investments, albeit high-yielding ones, without the potential for capital gains that owning property comes with. $100,000 AND UP 5 STRATA TITLE OK, you get buying a condominium, which in the Lower Mainland will set you back at least a few hundred thousand dollars. But did you know you can buy strata offices, storefronts and even industrial sites within larger developments, too? In many cases, the ready market is owner-occupiers such as dentists or mortgage brokers who want to lock in their overhead costs. But the niche also increasingly attracts investors, with cap rates (the property's annual net income as a percentage of market value) typically in the 3.5- to 5-percent range. See commercial real estate brokerages for listings. T H E I N D U S T R I A L ( L A N D) R E V O L U T I O N Lease rates for industrial land had already been rising steadily for a decade before the pandemic, buoyed in large part by demand for warehouse and logistics space from the growing e-commerce sector. When COVID hit, not only did industrial workplaces keep operating as usual, those e-tailers saw a big bump in their already buoy- ant business. Today, vacancy rates in the Lower Mainland have sunk below 1 percent for the first time since records have been kept, according to commercial real estate company Colliers International. The space squeeze has prompted a few developers to build up, hitherto a rarity in the industrial land game. Wesbild Hold- ings has gone up to six storeys at its Marine Landing project in south Vancouver. The nearly six million square feet of industrial space under development in Metro Van- couver is expected to at best just keep pace with demand, though. That's good news for existing landlords, but with the price of industrial strata climbing to an average of $429 per square foot—doubling in the past five years—new investors must pay a pretty penny to get a toehold in the market. GWL research chief Wendy Waters also expects the rate of growth in demand for industrial space to settle back after the recent spurt. n #Don'tHaveAMillion Five ways to invest in real estate for a relatively modest sum (without having to find tenants or manage property) CAVEAT EMPTOR As with any investible asset, there exist shady promoters of exempt market real estate investments, looking for any opportunity to separate you from your money. Red flags include high-pressure sales events, promises of suspiciously high and/or "guaranteed" returns and the absence of financial statements. Always do your due diligence on the general partners, including checking the B.C. Securities Commission's Investment Caution List for recent unquali- fied solicitations and the Canadian Securities Administrators' list of disciplined persons and organizations going back decades. –M.M. R E A L E S T A T E I N V E S T M E N T G U I D E 2 0 2 2