Is It Time to Move Up

Residential Rentals to Apartment

Residential rental properties have long been a haven for investors to buy, operate and secure solid returns. However, that was when we had a less volatile housing market. With the recent escalation of housing prices, but no corresponding increases in rental rates, properties that once cash flowed to a positive annual return no longer deliver positive returns to the investors.

Yes, your current properties have certainly escalated in price, but where will you invest your profits when the next rental property opportunity is not available.

An alternative can be moving up to small apartment buildings or small residential complexes. Residential investors collectively represent an enormous amount of equity, which, when brought together in groups of 3 to 8, can be used to secure smaller complexes, as your introduction to this new-for-you housing class.

Historically apartment investments have done extremely well.  Even through the challenges of COVID most multi-family properties provided to be far more resilient than the experts predicted.

For some, apartment investments can be a much longer-term investment within their portfolios.  They can create a diversification element for that investment pool that is your retirement.  

It’s important to remember, however, this jump does not come without its challenges.  The scope of property maintenance and tenant management multiples with each unit in the apartment or complex.  There are things the investors need to learn in order to achieve the past levels of success they had with individual properties.

In the last while we have seen new and interesting combinations of financing and property management that are delivering well thought-out structured solutions to help investors step up into this next-step asset class.  These multi part programs can provide everything a small collective of investors need to succeed in their initial years as multi-family property owners; from legal ownership structures, to funding, to tenant management.

If we can help you with you “Move Up” please let us know.  Simply leave your contact information in the section below and we will back to you as quickly as possible.

Vendor Support Solutions

Commercial Real Estate Insights

Vender Support Solutions

In these times businesses are shifting their practices in hopes of coming out the other side with a profile that meets what will be the new normal.  Place of business and what that looks like plays a major part of those plans.

Buyers are more uncertain of what they want than they were before the pandemic. This creates challenges.

The more flexible your sellers can be with your prospective buyers the more likely you can bring in a sale that delivers top dollar for that property. Flexibility however should not mean a reduction in your seller’s profits.

One way to increase flexibility while maintaining profitability is through the new approaches to vendor financing support or “VFS”.  A long way from the old high risk vendor takebacks of yester year, VFS is a concise analysis that determines what specific form of support an individual buyer needs and structures around it.

Some of the most common forms of VFS are:

  • Short term debt servicing support  (the most common)
  • Direct payment performance during a move-in or rent up period
  • Renovation financing
  • Loan to value accommodations    

VFS is typically short term in nature and should always add to the profitability of the overall sale transaction for the seller   Often VFS sees the seller teaming up with 3rd party lending partners utilizing their fund and limiting the impact on the seller’s cash flows.

Structured and managed by established professionals, VFS transactions carry all the rigger and credit risk analysis applied by any major bank or institutional commercial real estate lender.

As a professional commercial realtor, it is your job to provide the best advise and to bring the best tools to your clients. VFS solutions should be one of those.

For more information on our VFS solutions and how your clients can make use of them, please contact us at www.northbrookcapital.com/contact/ or simply through inquiries@n-bgroup.com.

Considering Alternative Solutions

Commercial Real Estate Insights

Considering Alternative Solutions

The world after COVID is not the same and will not likely return to what it was.  The place businesses will run their operations out of is one of the more challenging questions they are facing. 

Both property owner and tenant are looking for flexibility and terms they can live with over the next 5 years. 

We recently advised on a transaction where a distribution company was looking to acquire their own building.  One that was large enough to allow them to expand as a local distribution centre offering same day and next day deliveries for on-line retail clients. 

Debt servicing was not a problem as the client’s revenues were actually increasing with the new distribution centre strategy. However, the company did not yet have the equity base to secure a mortgage for the size of property they were looking for.    

Rather than purchase a smaller building and go through a property sale and yet another disruptive move in a few years, the decision was made to find a tenant to rent out part of the space in the short term (2 to 3 years). 

The rent would add even more debt servicing capacity for the mortgage but did nothing to improve the lack of equity in the prospective new owner. 

Our solution – offer the rent at a reduced rate in return for having the tenant utilize its equity by way of a guarantee that could be added to the buyer’s own equity position. 

The tenant, a small manufacturer looking for additional inventory storage space was able to get a far more flexible lease, at better rental terms, simply by using its idle equity to generate a rental benefit that improved its own net profits.  

The transaction was a win-win for both sides because they were willing to look at something new, at a time where it’s too important not to at least consider alternatives. 

The same structure and security positions created for this transaction can be used for retail, commercial or office transactions.   

For more information on how we can help bring new solutions to your changing COVID world please contact us at: 

inquiries@n-bgroup.com 

We look forward to hearing from you.

Commercial Real Estate Lending for the New Market

Commercial Real Estate Lending for the New Market

Over the past 12 months we have all felt the effects of a rapidly changing market. Many traditional methods of lending have reduced, changed, or disappeared entirely, while new initiatives and opportunities are now starting to arise. It’s as if we have entered the wilderness of everyone’s’ “new normal” within the Canadian Lending Sector. And as any good wilderness survival expert would say, it’s time for us all to learn to adapt, overcome and thrive in this new market!

Since the begin of 2020, NorthBrook has focused on assisting our lenders in developing new solutions for their portfolios that fit this new normal. This “behind-the-scenes” work with our lenders has given us a unique market perspective that has enabled us to develop new tactics and strategies for our placement support. And utilizing these new techniques, we were able to reconcile over $50 Million of liquidity to many of our MICs and private lenders.

In 2021, we are now offering these solutions to the open market. NorthBrook is now assisting real estate investors, mortgage agents, realtors, developers, and any other industry professionals struggling to fulfill their clients’ financing needs. Whether you are looking for advisory services, consultation on a file, or looking for assistance in placing a transaction – we are the experts that are here to help!

Each month we will be delivering a newsletter that lays out the strategies we have used over the past year, with our first article arriving next week. Our goal is to provide you with innovative ways to overcome the challenges we are all facing today.

As always, if you are currently struggling with a particular file, reach out to us! We’re always happy to review a transaction to help put together a strategy. Alternative, if you ever have a question or would like us to speak on a particular topic for the next newsletter, send us a quick note at the link below and we’ll do our best to address it.

Let’s make 2021 a year of opportunity together.