From time to time, strong growth-oriented investments will arise and may provide an opportunity to generate additional cash-flow returns in specific real estate projects or services related to real estate investments. Below are some of the additional opportunities that the Trust will continue to monitor:
Mobile-Home Communities (“MHCs”) provide low-cost housing that deliver recurring cash flows and targeted returns based on solid fundamentals – high occupancies, negligible defaults in lot rental payments, high operating margins, negligible or no interruption in lot rental payments on home turnover, recession resistant, low recurring capital expenditures and favourable demographics.
Cash flows derived from MHCs are often the least sensitive to changes in GDP and the most stable when compared to all other real estate sectors. This is achieved through annual rental rate increases and low operating expenses or the ability to pass-through operating expenses to residents, resulting in operating income growth rates above inflation.
Property Technology (PropTech)
The lesson we have learned from the COVID-19 is how fast things can change during a crisis. The Trust has also observed the growing change in how landlords and tenants will conduct payments in the future from traditional cheques or pre-authorized bank withdraws from tenants’ bank accounts. PropTech companies that can provide solutions to landlords from a Business to Business and to the tenant from a Business to Consumer platform, stand a chance to seize an incredible opportunity once the economies across North America recover. The Trust has seen three key opportunities where PropTech can become a solution for rental and utility payments:
Short-term debt financing
In order to provide more liquidity for the Trust, the Asset Manager has investigated a strategy that provides a way to provide greater liquidity than originally planned from April 2019. After feedback from many potential investors on challenges of investing in private equity deals, a big concern was lack of liquidity. Given what the world has gone through over the last few months with COVID-19, some were willing to reduce returns for an offering that provided greater liquidity than originally planned.
Our strategy moving forward is to leave flexibility for the Trust to invest in short-term debt financing opportunities that could be possibly redeemed between 30 days and 12 months to a maximum of 10% of the money raised into the Trust. This will allow recurring cash flow to help cover administration costs and to provide greater liquidity for unit holders. We still recommend that any investor who cannot withstand an investment that could be illiquid for 7 years should not invest in this Trust. That being said, this strategy allows the Trust to redeem in unexpected circumstances by having the ability to redeem short-term debt investments.