Download Centurion: Real Estate as an alternative to fixed income

Real Estate Investing
An Alternative to Fixed Income
Stephanie Kremer
Vice President, Business Development & Institutional Sales
www.centurionreit.com
What is Real Estate?
A piece of land, including the air above it and the
ground below it, and any buildings or structures on it.
Real estate can include business and / or residential
properties, and is generally sold either by a realtor
or directly by the individual who owns the property
(for sale by owner).
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Types of Real Estate
Real Estate Sub Sectors
 Commercial
 Services
 Industrial
 Apartments
 Retail
 Residential Single
Family Homes /
Condominiums
Investing in Apartments for Income & Stability
A timely opportunity to invest in one of the safest sectors 1 within the
real estate market – income producing apartment properties in
Canada
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Real Estate Investment Benefits
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Income: Provides the foundation for monthly income
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Investment growth: A hard asset that appreciates over time
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Lower volatility: Not impacted by as many short-term market forces as other asset
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Capital preservation: For several usages a fundamental staple with downside
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Inflation hedge: Real estate has a history of protecting against the destruction of wealth
classes
protection
caused by inflation1
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Options for investment in Real Estate
 Direct ownership
 Pool your money with friends/ business partners
 Real Estate Investment Trusts: Public and Private
 Mortgage Investment Trusts
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Real Estate Investment Trust (REIT)
What is a REIT?
A REIT, or Real Estate Investment Trust, is a company that owns or
finances income-producing real estate. Modeled after mutual funds,
REITs provide investors of all types stable income streams,
diversification and long-term capital appreciation.
REITs allow anyone to invest in portfolios of properties the same way
they invest in other industries – through the purchase of units in the
REIT.
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Property Ownership vs. REIT Investment
Direct Property Ownership

Real Estate Investment Trust
Pride of ownership, you have a piece of
property you can touch, feel and call your
own

You make all the decisions

100% of the profit is yours

100% of the expenses are yours

Fully responsible for the day-to day
maintenance and operations of the
property

Shared ownership and profits

Management of the property is
professionally handled by an experienced
property manager

Expenses are managed by the trust and
does not require any out-of-pocket
payments from the unitholder beyond
their investment

Legal and financial requirements are
managed by the asset and property
manager

Legally responsible for the property

Only recipient of capital gains


Board of Trustees make decisions in the
best interest of the unitholders.
Tax structures depend on where you live
& where the property is located

Unitholders have the right to vote on
changes to the Declaration of Trust

100% of the risk is yours
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Private vs. Public REIT
The two main categories of REITs in Canada are publicly traded REITs and private REITs.
Differences between Public and Private REITs
Publicly-Traded REIT:

Private REIT:
Trade on a public stock exchange (provide

daily liquidity)


Not traded on a public stock exchange
(generally offer 30-day liquidity)
Trading daily also means investors can
potentially push price up or down, reflecting
current market sentiment, regardless of actual
market value of the asset
Increased reporting costs due to requirements
of a public listing

History of more volatile pricing

Tend to be more highly correlated to equity
markets. Example during recent financial crisis:

Value is based on the value of underlying
real estate or equity / lending rate (not a
“market-traded” price)

No additional reporting costs related to a
public listing

Rational pricing with lower volatility2

Tend to be far less correlated to major
equity markets1
2008: Non Listed Property Ownership**: +3.7%
Non Listed Apartment Property**: +6.4%
2008: Public REIT Market*: -34.0% S&P/TSX*: -33.0%
* Source: Morningstar Research Inc.
** Source IPD (2008 Edition); Note: Non listed property ownership is similar to a Private REIT
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Mortgage Investment Trust
What is a Mortgage Investment Trust?
A Mortgage Investment Trust is an income and capital growth oriented
investment trust that allows qualified investors to invest in a diversified portfolio
of mortgages and opportunistic real estate developments and investments.
Simply put, investors pool their money together to invest in mortgage and
growth-oriented real estate opportunities. The net profits are distributed back to
investors.
Mortgages
(income)
Investments
Investment
Investor
Distributions &
Capital Growth
Mortgage
Investment
Trust
Income &
Capital Growth
Growth
Oriented
Investments
(capital growth)
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Centurion Asset Management Inc.
Based in Toronto, Centurion Asset Management Inc. is a Canadian asset management company
that offers a growing portfolio of private investment products. Centurion Apartment REIT owns
and operates 43 multi-residential rental properties in 16 Canadian communities.
Huntsville
Gravenhurst
Acton
Barrie
Mississauga
Brighton
Cambridge
Montreal
Kitchener
Oshawa
Waterloo
Whitby
London
Toronto
Tillsonburg
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Hamilton
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The Centurion Portfolio
Investment Solutions
 Centurion Apartment REIT
 Centurion Real Estate Opportunities Trust
The Centurion Asset Management Inc.’s Investment Products Portfolio is governed by two
separate independent Board of Trustees, the majority of whom are independent of management.
Financing Solutions
 Construction and Development, Refinancing, Bridge
and Mezzanine Loans and Equity Participations
Property Management Services
 Multi-residential apartments
 Student Residences through the Centurion Brand: The MARQ
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Investing with Centurion
1. We look at the needs of our Investors
Income-oriented investors that are looking for:
 Cash Flow
 Asset Appreciation
 Portfolio Diversification
 Opportunities to Re-Invest
2. Then we offer solutions with the objectives of meeting those needs
Monthly Distributions
Diversified Portfolio
Growth Potential
Maximize Unit Value
RRSP, RESP, TFSA
Eligible
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Investing with Centurion
At Centurion Asset Management Inc. we are:
Focused
 Focused on investing and managing multi-unit residential properties, student housing residences and
mortgages
Experienced
 Centurion was established in 2003.
 Regulated by the Ontario Securities Commission and Financial Services Commission of Ontario.
 Depth of experience: managed by Greg Romundt, President; Wayne Tuck, COO; Robert Orr, CFO;
and, Stephen Stewart, VP Mortgage Investing and Joint Ventures.
 Supported by experienced analysts and an experienced, majority independent Board of Trustees
with executive ownership.
Disciplined
 Established, process-driven investment and operating methodology to manage risk and uncover
opportunities to maximize income and value.
 Diligent approach to asset and property management.
 Adding value by improving both the physical building and the service experience to maximize
income.
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Notes
1.
Source: Canadian Investment Review, Spring 2001. “Canadian Real Estate and Inflation” by Victor W.K. Li
2.
“Rational pricing with lower volatility” means that property values are based on a methodical process involving a number of highly skilled
professionals that must opine on and thus impact upon value including a) knowledgeable and professional buyers and sellers b) third party
appraisers and c) financial institutions (that will be restricted in loan to value ratios and debt service ratios and other financial covenants).
Valuation methods would follow standard valuation guidelines used in the industry and third party appraisers would be accredited professionals.
Further, buyers and sellers are not casual participants in the marketplace and are risking substantial capital in a transaction given that the
average equity required for a purchase would be substantially larger than that required to buy a few shares of stock in a publicly listed company.
Whereas regular stock market investors need to have no specific skills, industry knowledge, infrastructure, substantial capital, substantial capital
at risk in a single investment and relationships that would otherwise serve to exclude them from the marketplace, direct property investors must
have these at a minimum. The participation of knowledgeable buyers, and the limitations imposed by lenders for debt service and leverage
further act to constrain valuation parameters which constraints may not apply on a traded stock. This rational pricing means that in the absence of
changes in property net operating income (which ceteris paribus tend to move with inflation) or capitalization rates, that valuations tend to move
slowly over time in comparison to how stocks can move constantly and with great volatility over the course of the day (or any other investment
horizon). As such, rational pricing would tend to be associated with lower volatility.
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