Exciting New Investment with perpetual 14%+ yield target in Central Alberta
Through wise investing and prudent fiscal management, a very realistic cash-flow 8% yield + 5% to 6% equity, value upside & mortgage paydown target per year is still achievable even in today’s often frothy real estate market and economic climate. We offer an investment formula with a proven track record, and a management team with the right mix of experience and innovative thinking.
Note: the investment below is NOT a guaranteed investment. Please read subscription documents and risk acknowledgement forms carefully. Accredited investors only, or friends, family and close business associates of the two directors, Mike Hammerlindl and/or Thomas Beyer. Not RRSP nor TFSA eligible. Not a guarantee ! Minimum hold periods and minimum subscription amounts apply.
Target 8% cash-flow yield
Target 5-6% equity growth & mortgage paydown
– For a total return target of 13% – 14% per year –
WITH POTENTIAL TO HAVE NO MONEY INVESTED AFTER 5 YEARS
We have put under contract an awesome mobile home park (MHP) package in central Alberta. While many are wondering how to participate in today’s frothy Canadian real estate, there are some great value plays in Alberta. Mobile Home Parks provide a number of advantages including:
– Low vacancies
– Reliable cash flow
– Resilience to economic shocks
– Reliable value increase
– Cheap mortgage terms
– Higher CAP rates
– Low repair and maintenance bills as the mobile homes are owned by the pad renters
– Far better cash flow for the MHP owner(s) .. which could be you !
These 3 mobile home parks are a very attractively priced package, with immediate and medium term rental – and thus value – upside. The cash flow roughly out of the gates is 8% on the cash invested, plus mortgage pay down, and value upside potential in time will make this an attractive opportunity, especially when compared with REITs or dividend paying stocks. Personally we hold a lot of these more liquid instruments too, but the downside to us is we find their yields a little meagre (and the overhead and associated salaries a little high), and often gravitate back to direct real estate ownership with a better yield (albeit far more work). The reason: liquidity comes at a price, and the price is securitization costs in the public market of real estate, such as annual audit costs, large management fees and complex legal overhead.
Alberta has had a lot of negative news during the last two years and therefore has fallen out of favour with investors. However it’s our opinion the real estate market has bottomed as have rents and occupancy in our numerous apartment buildings we own and/or manage. We love a value play and buying when the market is at the bottom of the cycle has served us well as successful real estate investors over the last 18 years.
We are now seeing signs of green shoots everywhere; new hiring, retails sales up, car sales up, new home sales up, and prices beginning to show positive trends.
We believe the time to buy is NOW.
We have conducted an exhaustive search for bargain priced MHPs across Western Canada. While there’s no shortage of availability, most are overpriced in our opinion with 5% or often sub 5% CAP rates. Over $60,000/pad is normal, often priced as redevelopment land. Much like multi-family properties the CAP rates have fallen, while unmotivated sellers with exaggerated price expectations abound.
We own three MHPs thus far within the Prestigious Properties Group and they’re all performing as we anticipated with very low vacancies even through the two year recession Alberta just experienced. Notwithstanding, our MHPs have performed; in spite of the fact that commercial and multi-family properties have experienced rent decline, and value decline because of higher vacancies due to Alberta’s temporary adverse economic and political circumstances. The Wildrose and PC parties are now in merger talks to unite the right and an alliance would likely overturn the economically disastrous NDP from office in 2019.
We negotiated our deal and secured these MHPs under contract, at what we feel was the bottom of the cycle in the fall of 2016, and have now substantially completed our due diligence. The delay has proved fortuitous for us as we now find ourselves with a more positive outlook for the province. In the meantime, we’ve also secured attractive financing at 75% loan to value at sub 3.9% interest. We’ll have immediate cash flow, even before the anticipated rent increases. A set of three parks with an almost 8% CAP rate in the low $40k/pad price plus rental and value upside is a very rare feat. The property appraisals recently came in approximately 6% higher than our purchase price. We believe that in addition to the value added our interest and management will bring, that prices for these properties will soon rise once Alberta has more positive news commentaries, a new more pro-business government and slightly higher and/or stable oil prices.
The anticipated exit strategy & overall strategy of this deal is this: we could sell off the smaller of the three MHPs, the Drayton Valley Park, for a modest profit in short order. We then may sell the large Eckville park within about 3 years in around 2020. This would facilitate the payback of approximately 50% to investors in the LP. By year 5 we anticipate the re-finance of the very desirable Rocky Mountain Park and return a further ~50% to investors in the LP. At this point investor Limited Partners could own a desirable MHP in Rocky Mountain House with perpetual income with no or very little capital at risk. Again, this is a plan and like any real estate offering it is not a guarantee and is subject to change.
We’ve learned some things from our $250M+ in real estate transactions across multiple projects over the last 15 years. Specifically, one needs to keep upfront fees and ongoing management fees very low in a muted market to achieve a decent yield. This MHP its structured with a 85/15 split on cash distributions for the Limited Partners and General Partner. It is designed as a tax advantaged long term yield play, as opposed to a short- or medium-term turnaround investment. We see this split as a win-win structure / deal for all concerned.
This Is Our 7th Multifamily Real Estate Investment Limited Partnership Offering
We have made money for our investors time and time again. And we’ve often exceeded the ROI target that we are using to attract new limited partners like yourself today, namely 5% yield with 5% equity growth on an annualized basis. We are just being exceedingly cautious in today’s world economic climate in a recovering Alberta market into 2017 and 2018. Mobile home parks as well as multifamily/apartment building real estate provide reliable cash-flow and low vacancies even in economically uncertain times.
Above Board Philosophy With No Inflated Going-In-Prices
We take great pride in our corporate philosophy of sharing a wealth of information with our investors and being very up front about investment prospects and performance. For instance, unlike many other LP offerings we do not inflate going-in-prices of properties we purchase and as such, the general partners do not make a return on investment until the limited partners do.
How We Historically Have Invested
- Focus on apartment buildings or mobile home parks (MHPs) because this real estate class is less volatile than the stock market or other real estate sectors, while having good upside plus built-in inflation protection. Keep door open to invest up to 25% elsewhere, such as in residential land development, when the price is right. Here’s more on why we choose apartment buildings.
- Look for buildings or MHPs in regional economies that are strong or expected to be strong in coming years, such as Western Canada or select US states such as Texas. This is ALBERTA in early to mid 2017 !
- Evaluate buildings or MHPs for sale, sifting through the list over many months to find the best values.
- Purchase selected buildings or parks as good deals are found, typically with 25-30% cash down.
- Increase value of assets through prudent renovations, which support higher rents and resale values.
- Increase value of assets through expert property management, further supporting rents and resale values.
- Use cash flow from renters to maintain the asset and flow excess into the LP as available.
- Allow time for cash flow from rents paid to lower the mortgage debt on each building so that the LP owns more of each, and thereby increasing the value of its original investments outside of the increases in market value of the assets themselves.
- Allow time for local economic growth/in-migration/tightening vacancy rate to increase market value of assets.
- Periodically sell or refinance buildings or MHPs to produce investor profits, and at some point liquidate the LP and its assets for the same reason.
How You Participate
There is a minimum $100,000 investment for accredited investors in our latest investment. The set value of one LP unit is $1,000 and each limited partner will own at least 100 units. Your investment term is a minimum of 10 years, with monthly cash flow and occasional, likely every 5 ears upon re-finance add’l distribution.
This is not designed to be a liquid investment for at least 10 years. it is designed as a perpetual or quasi-perpetual income machine !
If you envision that you need the money before the 10 year exit target, this investment may not be for you. The underlying real estate usually carries a five year mortgage, with early discharge penalties, plus it takes time to raise money and time to sell, plus we plan to re-finance at least once in 5 years, so a 10+ year minimum commitment is expected. The investment is designed as an alternative to the often very volatile stock market, specifically REITs, with a higher return but it is less liquid.
What is an accredited investor ?
Security legislation in Canada allows multiple exemptions to invest into securities such as those offered by our firm. There are mainly five:
- Friend and family of the directors
- Close business associates of the directors
- $10,000 or under investments
- Offering Memorandum (OM) – this is currently unavailable
- Accredited Investors
An accredited investor is someone that
a) has an income (for the last two years) of at least $200,000 or $300,000 with a spouse, or
b) has liquid securities or cash of at least $1M [ excludes your personal residence and your business, say a dental practice], or
c) has a net worth of at least $5M
Liquidity comes at a premium, namely the securitization of a firm or real estate, through the stock market. Liquidity also causes volatility and pricing frequently removed from real world value. This is not designed to be a liquid investment. If you envision that you need the money before the 10 year exit target, this investment may not be for you. The underlying real estate usually carries a five year mortgage, with early discharge penalties. The investment is designed as an alternative to the often very volatile stock market, specifically REITs, with a higher return but it is less liquid. It is based on REAL assets, where REAL people pay REAL money to us every month to live in REAL apartments with REAL appliances, called income producing real estate, usually apartment buildings.
The exit strategy & overall strategy of this deal, why it is so unique, and why you should definitely consider it now is this: We plan to sell off the smaller of the three MHPs, Drayton Valley Park, in short order for a modest profit. We then plan to sell the large Eckville park within about 3 years in around 2020 when Alberta is in positive news territory again as a leading province, with rising oil prices, rising rents, rising house prices AND a more conservative pro-business leadership, at a significantly higher price. This would facilitate the payback of about 50% of your money invested. In year 5 we anticipate the re-finance of the very desirable Rocky Mountain Park and return a further 50% to you. This essentially allows you to now own a desirably located, well maintained, impeccably managed large mobile home park with perpetual income with no $s at risk in 5 years. Of course, if markets change, this strategy will change, such as someone is willing to pay far more, we would be open to this and cash everyone one. Again this is a plan, and like any real estate offering this is subject to change and a plan, not a guarantee.
Our Return Objective
A 14-15% average annual ROI over a 10 year investment with 8% annual cash distribution is our objective.
Protecting Our Investors & Management Fee Breakdown
General Partners sign all required personal guaranties for mortgages (investors like you are Limited Partners).
Your total liability is limited to your investment.
We take no management fees but we charge a modest acquisition fee and 15% of all distributions. 85% of distributions are distributed to investors. As such, the GP’s goal and the investors’ goals are aligned. The GP is owned by Mike Hammerlindl and Thomas Beyer. The GP may pay a fee or distribute some of their units to investment finders at their discretion.
Some Short Videos
Please note that these videos do not provide investment, tax or financial advice ! These are only opinions. No return is guaranteed. Not every interested party is able to invest. Please contact an Exempt Market Dealer licensed to sell our products for financial advice.
Video 2: Profit Centers in Real Estate
Video 3: Alternative Investing 101
Video 4: Explanation of Target Return
Video 5: Explanation of Cash-Flow
Video 6: Risk of Mortgage Investments
Videos 7 & 8: Our Cold Lake Project