Lots of planning and work boils down to a 4-step process

Prestigious Properties’ general investment strategy starts with locating under-managed, under-valued properties in growth areas of promising cities within emerging markets of North America, and then managing these properties to their full potential for the benefit of all investors.

Macro-Location: Markets with Declining Vacancies and Rent Growth – sometimes even CAP rate (ration between asset’s cash flow and current market value) compression. As home ownership becomes less affordable, or foreclosures increase (as in many US markets) demand increases for rental housing. This in turns decreases vacancies, increases rents and increases values in select markets such as Saskatchewan, Colorado, Arizona, Texas… even some Ontario markets (see chart on previous page). Prestigious Properties has demonstrated success in the AB and SK market for the last 6-7 years. Until recently, rent growth, declining vacancies and CAP rate compression was attainable in Alberta. However, with vacancies and CAP rates as low as they will likely go, CAP rate compression and high leverage with positive cash flow are no longer possible; only very slight rent growth is attainable. Hence, it is our intent to re-finance and hold most of our AB or SK properties and focus on new areas that meet these three criteria such as select pockets in SK, BC, ON, Colorado, Arizona and Texas.

Micro-Location: Property Under-Valued with Upside (class “C” building in class “B” location). We buy in sub-markets that are desirable to live in. Would we personally live in that location? Would my daughter live here? Is this an area of transition? Are there transportation improvements coming? Is there a Starbucks, a shopping centre, a desirable school or a park nearby? Is this an area where “average” people want to live?

Property Upgrades: In addition to buying in desirable sub-markets of growth markets, we also improve the properties with appropriate spending. We look for assets that have higher than normal vacancies when we purchase, due to management neglect or poor spending by the previous owner. We then apply better management and marketing techniques (which cost relatively little) and also apply prudent spending as itemized on pages 10-11. Upgrades vary from inexpensive (like paint, clean-up, a new sign or cutting the grass) to full renovations in-suite or in common areas like hallways or exteriors — depending on the project.

Positive Cash-Flow with High Leverage (which is a function of going in CAP rate and debt coverage):
Over the last few years in AB and SK, we have been able to create positive cash flow with a high leverage mortgage (i.e. typically 80 to 85% loan-to-value). With real estate prices so high in AB and now SK relative to rents, it is very difficult (even impossible) to find these types of properties. In select pockets of Canadian or US growth markets, we can still find these buildings!

Using these four proven steps, in the past we have repeatedly delivered high double-digit and even triple digit returns on the cash invested.