How are Canadian Retail Property Investors Boosting Their Returns?

What can Canadian retail property investors do to elevate their returns now?

Commercial property returns in Alberta and specifically Edmonton are already very healthy. However, it always pays to get ahead of the curve and maximize margins while the opportunity to get ahead is there.

Here are nine ways retail property investors in Canada can improve on their annual and lifetime returns;

1. Curb Appeal

Improving a shopping plaza’s curb appeal, including signage can go a long way to attracting new tenants, earning loyalty from existing tenants and boosting traffic.

2. Parking Spaces

Having a substantial amount of parking spaces and a well-maintained parking lot can encourage customers to continue shopping at the plaza. It can also maintain a positive flow within the centre.

3. Increase Community

Make efforts to build community around retail centers to generate traffic, increase loyalty among local residents and retain prominent anchor tenants.

4. Energy Efficient Improvements

Going green is now expected of many companies. Healthier and more environmentally-friendly spaces not only draw positive attention and boost NOI, it can also enhance employee productivity resulting in compounding improvements over time.

5. Reduce Debt Service Cost

Consider refinancing, buying back shares, getting a better deal on insurance and investigate other ways of reducing holding costs to increase investment yields.

6. Use Technology to Reduce Labour

Technology can be used to reduce labour requirements at all levels when it comes to retail properties. Take advantage of any technology that can help you improve efficiency and maximize your returns.

7. Better Property Management

Property management companies have never been able to add more value than they can today. Professional third party property managers can help maintain daily issues and achieve optimal investment returns.

8. Better Leases

There are many ways to improve the performance of a retail property. One way to achieve this is through smarter leases, which applies to both new leasing activity and negotiating renewals. Consider which clauses and elements could elevate income, reduce expenses and minimize risk.

9. Expand Commercial Real Estate Portfolios

Now is an incredible time for expanding Canadian real estate portfolios. Demand for retail space, properties, interest rates and revenues are only expected to keep heading up. Those with inactive capital or other underperforming investments should consider how to leverage them into profitable commercial investments now.

Ending 2014 Strongly

The end of the year is coming fast. The moves Canadian property investors make now can make all the difference in maximizing 2014 portfolio performance and setting themselves up for a great 2015. Here are some steps that can help end 2014 strongly.

1. Capitalize on Seasonal Acquisition Opportunities

This time of year traditionally yields many attractive real estate acquisition opportunities. Asset prices may rise significantly as we move deeper into the fourth quarter. So take another look at what’s on the market and act accordingly.

2. Take Advantage of Improving Retail Performance

Retailers are headed for a significant boost as we approach the holidays, carrying them into the new year on positive results.

Increased sales mean more revenues and better rental income for retail property landlords. So look out of retail property investment opportunities and opportunities to increase rent or execute performance based lease provisions.

3. Position Properties for Better Dispositions

The end of year can be extremely active for real estate purchase and leasing activity. Make the necessary moves to elevate your positioning now and increase value ahead of new offers to rent and buy your units.

4. Weatherize and Improve Energy Efficiency

Now is the time to weatherize homes and investment properties. Improve energy efficiency before the winter weather arrives. This can keep operating costs down, net income up, all while making properties more attractive to potential tenants and buyers.

5. Giving Tuesday

Giving is just as good as getting, sometimes even more so. Right after Black Friday and Cyber Monday comes Giving Tuesday. Find a way to give can benefit both parties.

6. Optimize Tax Liabilities

Investing in tax preferred vehicles, contributing to plans and making donations ahead of the end of year can increase your tax liabilities.

Adding Value to an Investment Property

Commercial real estate properties are excellent long-term investments. However, many believe to have a successful property investment, vast amounts of time and money needs to be applied. Many don’t realize there are various ways to increase and optimize the value of a property in basic ways.

In fact, one of the easiest ways to increase the value of a commercial real estate property is to capitalize on the Net Operating Income (NOI). Before spending extra money on renovating or updating the space, an initial option property owners can look into is to review their leases.

For example, ReDev Properties Ltd. often shops for properties where tenant’s leases are close to expiry. This way we can re-evaluate the leases and terms to ensure they’re competitive and profitable for both new and existing tenants.

As under-market leases expire, property owners have the opportunity to renew them at higher market rates, which in turn will increase the NOI of the property.
Finally, when looking to sell a property, it’s important to have it fully leased. This ensures the property will receive its highest value, as every portion of the property will be producing income.

Five Steps to Consider When Expanding Your Bank Account

Who wants to be a millionaire? Making smart moves and applying a few proven principles can help continually grow your bank account.

1.  Diversify

Regardless of what type of investment you’re interested in pursuing, it’s always wise to stay diversified. There are few guarantees for the future, technology is constantly changing things and reshaping industries.

2.  Don’t Rush

 There will certainly be moments when Canadians will need to move fast to get in at the right time. However, it’s not always a race. Newspapers are always covering stories of those that took unethical short cuts. Instead, opt for the steady path and leverage the benefits of compounding interests and returns.

3.  Always be Learning

Leveraging the time, knowledge and network of existing experts is a great strategy for learning more about investment opportunities. Investors should strive to constantly learn and understand their investments and the industries they are invested in. This way you can recognize the optimum times to sell, buy or restructure portfolios.

4. Preserve Capital

Rather than chasing the biggest prize in investments, it’s just as beneficial to look for solid investments offering a high probably of return of your investment capital. Making sure your initial capital is safe is key.

5.  Break Bad Habits

 The road to millionaire status is paved with good habits. Developing these habits starts with eliminating the bad one replacing them with better ones.This applies to everything from how you spend your time to overcoming procrastination and taking action.

Diverse Tenants

Multi-tenant commercial properties can offer Canadian investors increased security and work to keep cash flow and investment returns consistent. The strategic diversification of tenants and property types can offer even more protection, higher yields and appreciating property values.

This concept of diversification is not as advantageous in multifamily apartment buildings where similar tenants work best together. In contrast, smart leasing and tenant selection in retail can enable investors to significantly elevate returns over other sectors and competing properties.

So what are some of the tenant types that shopping plaza landlords should be incorporating and what are their advantages and disadvantages?

Brand Name Anchor Tenants

Big name anchor tenants such as Target and Wal-Mart can be very desirable. Other retailers that can be placed in this category may be notable grocery store chains and to a lesser extent popular banks and fast food chains. Name familiarity helps bring in automatic traffic to the entire plaza or shopping center.

Founder of SkyFive Properties in Miami, Kaya Wittenburg, says this goes far beyond having a solid tenant to creating value in brand equity. At the extreme this has been seen in residential developments in South Florida where Porsche and Armani are attaching their names to buildings. Well recognized names in shopping, as with hotel flags can also help when it comes to obtaining attractive financing and can add real value to the price per square foot when it comes time to sell.

However, it is important to acknowledge that licensing names and national credit tenants can come with a high cost. Sometimes this can actually become counterproductive for yield seeking investors, as big name brands have a lot of negotiating power and can be very demanding.

Small Businesses

Small local businesses, boutique stores and startups are often seen as being riskier by experienced property investors and advisors. They typically have fewer back-up resources and may be more likely to fail or leave unexpected vacancies.

However, these tenants can also offer many advantages to commercial property landlords. Property owners have more negotiating power with these tenants, resulting in more opportunities for higher rents and performance-based bumps to rental rates. They can also bring new excitement and buzz to a shopping plaza.

Necessities

Necessity stores and services are the type of tenants that often fall in the middle of the large anchor tenants. Businesses such as auto service companies, pharmacies and coffee shops can bring in steady traffic to retail centers because they offer services that are necessary to the needs of the local community.

Commercial property investors should be careful about preconceived notions when it comes to tenants and property performance. By leveraging the points above, investors can further elevate their returns and create even more equity in their holdings.

Commercial Real Estate vs. Stocks and Equity Funds

Private Canadian commercial real estate investors are continuing to find their edge in direct investment opportunities.

A Globe and Mail columnist recently wrote an appeal to investors stating they should look to invest in real estate rather than company stocks.

In particular, there are two reasons to the media’s encouragement to move away from long-term stock investments; the extremely volatility of the equities market and the vast layers of administration.

The recent news of HP being replaced as a technology supplier to the Canadian government for 10 years is an example of how companies can be susceptible to stock market volatility.

In contrast, direct investment in real estate, even through partnership structures, can provide individual investors with the advantages of tangible investments.

Furthermore, these investment options blend both business and direct real estate investment allowing investors to benefit from the best of both worlds.

Canada Leading the Charge in Ethical and Sustainable Business

Recent news surfaced Hewlett-Packard Co. is now facing a 10 year ban on supplying technology to the Canadian government. The news is unfortunate for HP, however it also indicated the sustainable and ethical direction Canada is taking.

Under new rules, companies face automatic bans if they or any affiliates are convicted of violating rules in Canada, as well as anywhere else in the world.

The rulings are a wake-up call for many major technology firms across the world. Even Apple experienced a similar issue in California after failing to comply with green environmental standards.

While many smaller companies and entrepreneurs in recent years are quickly jumping on this trend, many larger corporations are lagging behind.

Beyond technology, the move towards tougher regulations, more environmentally friendly and ethical businesses will likely also impact the Canadian real estate market in a significant way.

With Canada leading the charge in ethical and sustainable business, beyond just the realms of the technology industry it’s creating an environment of trust and security for investment capital and ultimately more sustainable growth and returns.

Canada has once again found another edge in standing out on the world map.