Smart buyers always ask intelligent questions. Here are a few of the most popular ones.
Q: What is a ‘non-recourse mortgage’?
A: This type of mortgage protects you as an investor. In the unlikely case that the rental yield from any of our Shopping malls is not enough to cover the mortgage payment, you are not liable for any shortfall. In 28 years of business, this has never happened with any of our investments, but we use this type of mortgage to protect your investment.
Q: Canada property value is tied to the value of property in the USA, right?
A: NO. The Canadian and US economies are totally separate and operate independent of each other.
Q: The Canadian Dollar is tied to US Dollar in terms of Exchange rate right?
A: NO. The Canadian banking system is completely separate to the USA system. Its solid, conservative practices have earned it a AAA rating by Standard & Poors and the Canadian banking system is rated as the safest in the world by the World Economic Forum.
Q: Does Canada have a fiscal deficit like the USA?
A: NO. Canada has had 12 years of continuous fiscal and trade surplus, totally opposite to the USA situation.
Q: Does Canada have a trade deficit like the USA?
A: NO. Canada had 12 years of continuous trade surplus and weathered the so called economic recession very well.
Q: What is a ‘Triple-net’ lease?
A: All of our tenants sign a triple-net lease. This means they are responsible for repairs and maintenance of the premises and all management fees. This results in a much more profitable investment than residential rental that does not have triple-net leases. This helps make owning retail commercial properties hassle free and more profitable.
Q: Is REDEV Land Banking?
A: NO. All of our properties are fully functioning shopping malls with existing tenants paying rent. Most have a waiting list of tenants as well.
Q: Is REDEV Bonds?
Q: Is REDEV a Trust Fund?
Q: Is REDEV a REIT?
Q: How secure is my investment?
A: Your investment is very secure. You become one of the actual owners of the Plaza. The debt to equity ratio is approximately 50%. (By comparison, most residential mortgages are 75% ratio meaning higher risk.)
Q: Can I liquidate my asset?
A: YES. Since you are an actual owner, you can sell to anyone at anytime. There is always a waiting list of investors ready to take up your share.
Q: Are there any extra fees?
A: Other than the CAD $500 legal fee for your purchase there are no additional fees to pay to Redev or the lawyer.
Q: How long will the shopping mall be held?
A: The holding time is planned to be 4 to 7 years, however at any time would a reasonable offer be made on the property then a simple vote is taken, if 2/3 of the partners agree, the mall will be sold and all will share the profit according to their related ownership.
Q: What are the risks?
A: The Calgary economy could weaken so much that businesses would start to close and move out of the plaza. However, all of our shopping malls have tenants such as banks, supermarkets, post offices and local shops that supply daily-need items. This means that these businesses are well-equipped to survive, even in tough times.
Q: What is the worst case scenario?
A: it is very, very unlikely that you would ever lose money investing with REDEV. 50% of the existing tenants in any shopping mall we own would need to go bankrupt before the mortgage payment could not be met. This in itself is highly unlikely. As all of our mortgages are 50%, even in this unlikely and worst case scenario, we can still cover the mortgage. We also keep a mortgage reserve fund to cover any shortfall that might occur. Add to this the fact that all our mortgages are non-recourse mortgages, which means you are not liable for any shortfall in the mortgage payment and you can see that your investment is very safe.
The worst possible case scenario is that we would simply hold on to the shopping mall for a longer period of time and keep generating income from it until such time as market conditions are favourable for a sale.
Q: Can I sell my stake at any time?
A: YES. Unlike many other investments we can put your stake up for auction and we won’t charge you a penalty for early encashment or you can sell it yourself, just pay the Canada lawyers a $500 fee to amend ownership. To date investors have received their initial stake with no loss of capital. The whole process takes 2-3 months to complete. Available positions are normally snapped up immediately, though only 5 investors have elected to go down this route as the Redev investment is solid. Usually only death or divorce brings their positions to market.
Q: Why is this investment a good one at this time?
A: The combination of safety and high after tax paid returns makes this investment one of the best on the market at this time. It will stand strong in comparison with any other investment on the market today.
Q: Has anyone ever lost money?
A: NO. We are proud to say that in over 30 years of business, no investor has ever lost.
Q: Are rental increases regulated by the government?
Q: What fees do I need to pay?
A: There are no fees to pay as any fees are deducted and paid from cash flow. The only fee you need to pay upfront is the CAD $500 legal fee. 2% is deducted from the total rental income as an asset management fee and 2.5% to accountants as a fee for cash flow distribution, filing tax forms etc. This nets 95.5% for the investors, much more than owning residential.
Redev also earns a sales commission of 6% for selling the shopping mall or releasing equity back to owners through refinancing. A fee of CAD 50 cent per square foot for increasing rents upon renewal for existing tenants and CAD 1 per square foot for rent increase negotiated on new leases.
Q: Isn’t it better to just keep my money in the bank and wait for property prices to drop more?
A: NO. Do not confuse residential with retail or commercial real estate. You start earning rental income from the first day you invest with Redev. Waiting has never produced any net gains.
Q: I’m ready to go ahead – what are the next steps?
A: it’s easy! Simply fill out the application form and provide us with proof of address – a utilities bill will do, plus a photocopy of some photo ID such as your passport or ID card. We will then prepare the agreement of purchase and sale, plus other closing documents. You will need to transfer payment on or before the day of signing the closing documents. Please note that you will need to pay the CAD 500 legal fee at the same time as you make the payment.