income for a property (and thus the value of the
property) can be subject to many uncertainties,
including final lease rates, construction budgets/
overruns, zoning laws, mortgage financing terms
and conditions, as well as the overall market for the
developed property if it is sold.
Despite these challenges, the investment risk in
development property may be significantly mitigated
by choosing suitable development land in expanding
urban areas and by partnering with experienced
leasing agents/developers/construction managers
before development. Risks may be further reduced
once the tenant occupancy occurs. If the investor
continues to hold the investment, they will have gained
exposure to a newly developed real property with new
construction, lower ongoing capital expenses and
longer leases within potentially emerging communities
that might not have been accessible or available for
purchase on development completion.
Through several of its funds, ROI Capital has
invested in nine development properties; of these,
six are in the retail sector and three are in the multi-residential sector.
Development Property within a Real Estate Portfolio
In a larger, well-diversified real estate investment
portfolio that includes mortgages, as well as investments
in lower risk property, an investment strategy that
provides a development property allocation can
provide access to enhanced absolute returns. When
managed professionally with experienced partners,
these higher absolute returns can potentially provide a
superior risk-adjusted investment.
1. Avison Young, 2013 Forecast, 2012 Annual Review,
Commercial Real Estate – Canada and U.S.
2. Morguard, Canadian Economic Outlook & Market
Fundamentals, 15th Annual Edition: Jan 2013.
For more information contact:
Compliance and Regulatory Solutions Inc.
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First Canadian Place,
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T 416.915.4219 F 416.915.3177
Established in 2002, ROI Capital is a Canadian investment
firm that specializes in commercial mortgages, loans and private
real estate. With a deep understanding of the fundamentals of
the commercial real estate market, ROI Capital strives for capital
preservation while seeking to deliver returns for investors. This is
achieved by primarily investing in income - producing properties
in large urban markets.
ROI Capital’s senior commercial lending team have an
average of 20 years’ experience in the - financial services
industry, as well as deep relationships with banks, institutions
and brokers. Today, ROI manages approximately $1.3 billion
across 11 funds. For more information visit www.roicapital.ca