On March 23rd 2022, Wealth Stewards hosted a Real Estate Summit to bring together four great minds in different areas of the real estate investment industry. The purpose was to discuss trends and opportunities in the different sectors. If you have not seen the full recording then we would encourage you to watch it here: https://www.youtube.com/watch?v=tGj2FpsYu9w
Below we have included an overview of the discussion from each speaker
Western Wealth invests in multi-family residences in some of the fastest-growing job growth markets in North America. They benefit from a systematic process to upgrade the properties with each acquired building going through an 82 step process in order to transform and modernize the property.
How do you generate a return for investors?
All suites are renovated identically, new floors, stainless steel appliances, bathroom fixtures, light fixtures. Those improvements increase the market rental of the unit and in turn the value of the building. There is a shortage of quality rental accommodation due to a lack of new constructions and with so many new people moving to these cities it creates a huge opportunity for WWC.
How do you work with investors to generate wealth?
We do about a dozen properties a year and typically launch one per month. Individual investors are able to invest in each building they’d like to. What people really like about it is the fact that it’s predictable, highly programmatic, and repeatable. Of the 120 properties acquired, 52 of them have gone through the full cycle, for the 52 that have sold we’ve held them an average of 30 months, investors have had an average annual return on their money of up to 30% per year.
AGinvest invests in Ontario farmland, a limited, yet valuable resource. AGinvest stands in the middle between people who wanted to invest in farmland as an asset and farming families.
What makes southern Ontario special and why is the focus there?
The soil in Southern Ontario is of phenomenal quality, we have consistent rainfall, over 200 frost-free days a year, fantastic logistics with the 400 series highway and a connection to the world through the Great Lakes St. Lawrence Seaway and Ontario is a one day truck ride away from 250 million people.
How has farming changed over the last 10 years and where do you see it evolving over the next 10.
Agriculture and food technology receives an incredible amount of research and development spending money and food security is a priority for most nations. Over the last 10 years the focus has been on productivity gains and farmers producing more food per acre at a cheaper cost. Access to that technology is expensive for farmers so that’s where capital partnerships become so important.
In the next 10 years there is going to be a big focus on sustainable practices as it relates to farming and soil health as well as capturing carbon from the atmosphere.
Why is farmland a good long-term investment?
Over a 75-year track record, the average appreciation of farmland was a little over 8% and so as the demand for farmland moves forward that trend is going to continue. Farmers generally are cash poor and asset rich. We are in a time of rising inflation right now and it’s been shown that farmland has outperformed all other asset classes during times of rising inflation.
What are the tax advantages to farmland?
AGinvest has a couple of different structures, one of these is a corporate structure. This option can provide the opportunity for investors to have access to the small business capital gains tax exemption in Canada. The specifics of this are best discussed with your wealth advisor.
Trez is a lender and seven years ago expanded into providing equity into projects throughout the US. Their primary focus is on the residential sector, including lot development, multifamily construction, self-storage. Trez Capital is involved in developing real estate trends, such as build-to-rent.
What population trends are you seeing in the American markets and what are you seeing happening in the US homebuilding market?
There is a significant undersupply of homes in the US. Some data shows we may need as many as 17 million new homes built over the next 10 years and from 2011-2020 we only produced 7 million. Additionally, there is a migration going on with more people moving from large expensive cities like New York or Los Angeles to places with more affordability and new job creation like Phoenix and Dallas.
What is the trend of build to rent and what other real estate trends should investors be aware of?
Build to rent is a trend wherein entire neighbourhoods of homes are built for the purposes of renting them. This has become very popular for a number of reasons. People moving to these metropolitan areas might not be ready to buy a home, they want to test out the area that they may live in or the schools that their kids go to. The returns have been astronomical on this model.
What are some ways that people can invest in these kinds of opportunities?
We have funds that loan to developers who do these kinds of projects as well as funds that invest in multifamily construction and build to rent. In the past we have had limited duration funds that have done very well but the intention here is that we can hold onto assets for a longer period of time or sell depending on what is the best case for the investors.
Green Soil Prop Tech invests in real estate technologies that are being developed to transform the real estate industry with 2/3rds of dollars invested in carbon reduction technologies.
What are some interesting opportunities that you have invested in?
One company that was invested in last year is called Wynd. It’s an indoor air quality technology. This has become topical with covid, however the application is wider than just viruses. The technology is also beneficial when it comes to wildfires out west or for applications in hotels or apartments. This technology also allows you to detect exactly what the particulate matter in the air is by sensing the shape and size of the particles in the air and it can allow you to target filtration to specific areas of the building.
Another example is a software company that allows multi-family residential building owners to install solar panels on the roofs. This can be complicated because normally these buildings have a split incentive issue where most occupants pay their utility bills directly to the utility company so unless you get occupants to sign up you can only use that energy for public spaces. What this allows them to do is provide occupants with guaranteed savings on their energy bill through a software package and then allow the building owner to create a new revenue stream because now the occupants are paying the building owner for their energy which is generated through solar panels.
What are some trends that you’re seeing in the real estate industry as it relates to technology?
There are really three big trends that we're benefiting from as PropTech venture investors. The first is an increased digitization in the real estate industry, this has been a trend for a while but it is now solidly in the mass adoption phase.
The second are demographics, including generational change in real estate companies and an increase in institutional ownership as well as a change in consumer attitudes. More often the consumer now is looking for a great user experience as well as something that aligns to their values.
The third thing is the climate crisis. 40% of global energy emissions come from buildings so if we are going to try to become carbon net zero then we can only get there by addressing the built environment in real estate