FREQUENTLY ASKED QUESTIONS

Who is Prestigious Properties and what do they do?

Prestigious Properties specializes in acquisition, value-add and management of multi-family apartment buildings in growth markets with tightening vacancies. We target acquisitions of “C” class buildings in “B” locations where rent growth can be achieved. Combined with high leverage and cash-flow, we aim to double investor’s money in four to five years. Prestigious Properties offers a proven track record, proven results, and proven management experience based on real assets with regular cash flow and equity growth. 300+ investors have invested over $25,000,000 so far with asset values exceeding $80,000,000.

What does PRISM A LP stand for?

PRISM A LP is an acronym for Prestigious Investment & Management (PRISM) A Limited Partnership, our latest investment opportunity. 

What does the PRISM A LP investment entail?

The investment is in Limited Partnership (LP) Units in an Alberta based Limited Partnership formed to acquired, improve, re-finance and hold multi-family apartment buildings in growth markets in North America.  

Am I investing in a single apartment building?

No, the limited partnership will acquire multiple apartment buildings in the partnership creating a small diverse portfolio of revenue producing real estate.

How does a Limited Partnership (LP) work?

A LP is a preferred and commonly used way to structure a relationship between willing parties for a defined business venture. It is used to reduce risk, delineate responsibilities and share profits in a predetermined way. It is a well thought out, provincially regulated legal vehicle to raise capital for a venture without the expensive overhead of a public company. Each LP has one general partner (GP) and one or more limited partners.

An LP is like a marriage of multiple parties. Unlike a real marriage, it takes a sense of structure if 34 people marry. One party has the expertise for a certain business venture, in our case, multi-family residential real estate in North America – the GP. The other parties have a desire to invest some of their capital for significant returns, limited risks and potential tax savings. The GP usually executes all activities of the business venture, reports regularly to the investors and shares the profits with the partners in a predetermined fashion.

In essence, the GP-LP relationship is like a trustee trust relationship: the trust (LP) holds all the assets, but the trustee (GP) on behalf of the trust (LP) manages the assets of the trust (LP). The GP in our latest syndication is called PRISM A Inc (PRestigious InveStment & Management A Inc.). The benefits to the investors / limited partners are:

a) Limited risk – to the amount invested, even in case of a major disaster or law suit.

b) Clear delineation of responsibility – one party is the general partner which does all the work with a clearly defined fee structure and compensation – usually a combination of (hopefully small) fixed fees and variable, profit oriented share of profits (40% in our case, up to doubling your money, after you have received all your original investment).

c) Allocation of 100% of losses for potential tax savings (usually in early years due to startup costs and depreciation).

d) Clearly defined time line (up to 5 years in our case).

e) Possibility to sell units to later partners at annually set prices (usually higher).

f) Existing and well tested legal framework, with oversight by provincially appointed regulators.

g) Annual reporting.

h) Regular distributions, likely quarterly

How do I know if I am eligible to invest?

Depending on your Province of residence, the provincial securities commission requires that all investors must qualify as an Eligible or Accredited Investor. An Eligible Investor is someone who has assets worth over $400,000 or has made over $75,000 in income (or over $150,000 with their spouse) per year over the previous two years. An Accredited Investor is someone who has over $1,000,000 in assets or has made over $200,000 in income (or over $400,000 with their spouse) per year over the previous two years.  

Is there any difference in the cash versus RRSP investment?

No, there is no material difference. Both invest in the same partnership units and the returns will be similar. The only difference is that the RRSP investment will be 0.5% lower annually as Eye Logic, a publicly traded corporation receives 0.5% annually for its supervisory and bond administration services. 

What are my liabilities as an investor?

As an investor in the limited partnership, our limited partners are only liable for the amount of their investment. The General Partners, or principals of Prestigious Properties sign all personal guarantees for mortgages and take on all additional liabilities. 

What kind of returns can I expect as an investor?

Prestigious Properties aims to deliver a 75-100% return on investment to our investors in 5 years, which is a 15-20% return per year. While we have been able to consistently achieve these results in the past through prudent acquisitions, renovations and asset dispositions, there is no guarantee that we will be able to exceed these returns as in the past. Although a look at ones track record will give a good indication of the abilities of the General Partner leading the company into the future. 

Is there monthly, quarterly or annual cash flow?

Typically, in the first 18-24 months after the acquisition of an underperforming multi-family property, there is very little positive cash flow as we aim to re-inject the majority of the cash flow back into the properties to improve the assets and to increase the value of our assets over the long term.  

What is the DRIP program?

DRIP is an acronym for Dividend Reinvestment Program. The program allows our investor’s portion of positive cash flow to be reinvested into additional LP units to increase their equity share in the partnership, with the idea being that the investors return on investment will be higher at the end of five years if they chose the DRIP program versus quarterly cash distributions. 

What are the tax implications of a LP Investment?

The LP agreement that you signed (or intend to sign) provides that income and net taxable capital gains for purposes of the Tax Act will be allocated to LP Unit holders in the same proportion as distributions received by Unit holders.
Distributions may consist of the following for income tax purposes for which T5013 partnership income statements are issued, usually in the latter half of March for the previous tax year.

a) Distributions that are currently taxable. This portion of distributions for income tax purposes will be treated as regular taxable income (and not treated as dividends or capital gains) to each Unit holder.

b) Distributions that are treated as a dividend received from a Canadian or US subsidiary corporation. As such, it will be subject to a preferential tax treatment that all dividends from Canadian corporations receive (subject to the dividend tax credit).

c) Distributions that represent your portion of capital gains allocated to you relating to gain on the sale of a property in the year, if any. Please note that of the portion reported as capital gains on your tax return, only 50% of this is included in the calculation of your taxable income. The nontaxable portion of the capital gain is not deducted from the adjusted cost base of your Units.

d) Distributions that are not currently taxable and will be treated for income tax purposes as a return of capital.

Accordingly, this currently non-taxable portion will reduce the adjusted cost base of the Units owned by each LP Unit holder. If, after deducting the return of capital portion, your adjusted cost base of your Units is a positive amount, no portion of the return of capital will be taxable. If, however, after deducting the return of capital, your adjusted cost base of your Units is a negative amount, you will realize a capital gain equal to the negative amount and your resultant adjusted cost base of your Units will be nil. LP Unit holders should consult their tax advisors with respect to any questions they may have concerning tax matters.

What communication can I expect to receive from Prestigious Properties after I invest?

We typically issue quarterly written updates on the progress of the limited partnership along with the financials of the partnership. We pride ourselves in our transparency and encourage all investors to contact us with any additional questions they have regarding the details of the partnership.

What is the time horizon for my investment?

The investment is for five years. It takes time to change poor management, to upgrade and renovate existing apartment buildings and to improve revenues and decrease expenses. Therefore, in order to deliver our typically above average returns, we need at least five years with the investment to materialize into above average returns for our investors.

When can I take my money out of the partnership?

The investment is a five year investment, however there are liquidity clauses in the Limited Partnership Agreement outlining options for our investors if they need their money back before then. These fees are used as a disincentive to take money out before then and the fees decreases linearly over the first five years to no penalty in 5 years. For more details, please see the Offering Memorandum.

How does Prestigious Properties make its money?

In addition to small commissions, acquisitions fees and asset management fees as outlined in the Offering Memorandum, Prestigious Properties, acting as the General Partner of the partnership, shares in the equity appreciation of the assets only after our investors receive 100% of their initial investment back.

After our investors receive 100% of their initial investment back, Prestigious Properties in entitled to 40% of all future cash distributions and the investors are entitled to 60% of all distributions until they have received a 100% return on the their initial investment. At that time Prestigious Properties will then be entitled to 60% of all distributions and the investors or limited partners will then be entitled to 40% of all future distributions.

How do I liquidate my investment?

At the end of five years, there will be an Annual General Meeting of the partners. The partners will get be given details on the current position of the Limited Partnership and have the opportunity to request their investment be liquidated based on the Net Asset Value (NAV) of their proportionate share of the Limited Partnership assets. If they choose to remain partners, the General Partners may make recommendations to hold properties for longer than five years and the Limited Partners will have the option to remain partners going beyond the initial five year investment.

Please refer to the latest Offering Memorandum for all details. This is not an investment offering. Investment is sold via an Offering Memorandum only to Eligible and Accredited Investors.