Prestigious Properties acquired Spruce Manor, a 12 unit building in

www.prestprop.com
A Proven Track Record In Apartment Building Investment
With a focus on the growing economies of Western Canada, we take underperforming rental properties to new heights,
providing investors with cash flow, tax-free equity growth, and hands-free management.
Working with financial, administrative and property management experts we have successfully transacted over $170,000,000
in assets over the last decade.
As of Q1 2013, over 600 individuals have invested about $43,000,000 and share over $85,000,00 in assets.
Tenants and communities benefit as well.
20 Suites – Edmonton, Alberta
SOLD
ROI: over 70% in 1 ½ years
Purchased in May 2002 for $712,000 with $150,000 cash – turning a building with 25% vacancy to near 0% in 3 months. Sold
in Oct 2003 with no vacancies to an Asian investor for $1,000,000. This purchaser then sold it again for $1,800,000 in fall/winter
2009.... we sold way too early.
24 Suites – Edmonton, Alberta
SOLD
ROI: over 60% in 2 ½ years
Purchased in March 2003 for $1.2 M with $200,000 cash. Converted to 24 condos, and sold in October 2005 for $1,470,000 with a
rent roll exceeding $14,000 and $1,175,000 of assumable mortgages (in hindsight this building would be worth $1,000,000 more,
or another 250-270% ROI to investors in fall/winter 2012/2013... we sold way too early!).
24 Suites – Edmonton, Alberta
SOLD
ROI: 42% in 3 years
Purchased in May 2003, with 9 co-investors with $250,000 cash. Substantially renovated, and sold in summer 2006 for $1,488,000 or
$62,000/door (in hindsight, this building in fall/winter 2012/2013 would be worth $960,000 more, or another 200% ROI to investors...
we sold too early!) A low ROI due to bad location, overspending, initial poor management (we have learned and improved since) and a
sale that was poorly timed. Oh well, when did your mutual fund company send an apology for a 42% ROI?
21 Suites – Red Deer, Alberta
SOLD
ROI: 112% in 3 years
Purchased in early 2004 with 6 co-investors and $240,000 cash. Rents raised over 30% since acquisition with exterior and interior
improvements. Sold for $1,597,500 in Feb. 2007 for an investor profit of over $270,000 (in hindsight, this building in fall/winter
2012/2013 would be worth $500,000 more, or another 100% ROI to investors... we sold too early!).
*ROI is ROI to INVESTORS, if you had invested in these ventures, before tax, but after all closing costs, commissions, management fees or our share of equity/profits (that differs from venture to venture) – based on actual sales,
appraisals or if sold today at fair market value. Asset ROI is ROI for the specific property, excluding tax, closing costs, commissions, management fees and equity/profit splits. Because these assets are part of active LPs we chose
an asset ROI as opposed to a LP ROI to isolate the various assets an LP usually contains. The asset ROI is typically higher than the LP ROI as the LP has management fees, overhead, and equity/profit splits. Past performance is not a
guarantee for future success .. but a look at the past might help you decide if you wish to invest with a winning team! Please read our offering memorandum carefully. Eligibility rules apply – depending on province.
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Selected Investment Summary/Track Record
12 Suites – Edmonton, Alberta
SOLD
ROI: 65% in less than 10 months
Purchased in Dec. 2003 for $492,500 with 3 co-investors with $100,000 cash. With renovations, new management philosophies,
impeccable property management and tenant “clean out” we sold in August 2004 at $585,000 to a local investor... a class B
building in a class C neighborhood (no, we won’t do that again!). Of further interest, the next owners of this building sold it for
over $83,000 per unit in winter 07/08. Had we waited, there would have been an additional 200% ROI for our original investors.
47 Suites – Stony Plain, Alberta
SOLD
ROI: over 260% in 6 years
Purchased in April 2004 for $2,140,000 with $400,000 cash and long-term CMHC insured mortgage. Sold for $4,395,000 in
summer 2010, with significant upside for purchaser.
39 Suites – Edmonton, Alberta
SOLD
ROI: over 250% in 3½ years
Purchased in Dec 2004 for $1,900,000 with $450,000 cash for a long term hold with a 4.58% interest 5-year mortgage. Sold in
August 2008 for $3,900,000, with a total return of over 272% to investors.
120 Suites – Edmonton, Alberta
ACTIVE
ROI: at least 250% in about 8 years.
Near West Edmonton Mall, purchased in Dec. 2004 with $850,000 cash for a $5,050,000 building with 25% a vacancy rate.
Refinanced in fall 2007 with all investor $s repaid plus 120%, plus investors still own their share. Value today approx. $11.0 to
$12.0M. If sold at market value today for $90K/door investor profit would be at least $2,500,000. Likely a long term hold or
possible condo conversion down the road.
101 Suites – Edmonton, Alberta
SOLD
ROI: by itself, over 385% (70% of $5.5M) in 21 months, for a total of 50%+ for 2005 LP1
investors at $5000/unit and 25%+ for 2006 LP1 investors at $6000/unit.
Five-building complex one block from NAIT, an expanding major technical college in Edmonton. Purchased for $4,160,000 with
$700,000 cash in fall 2005 as part of LP1. Invested over $300,000 in upgrades. Sold for $9,929,000 in July 2007 with a total profit
of over $5,500,000.
38 Suites – Fox Creek, Alberta
SOLD
ROI: 50%+ for 2005 LP1 investors at $5000/unit and 25%+ for 2006 LP1 investors at
$6000/unit
In Fox Creek, a small gas producing town 2 ½ h NW of Edmonton along the major highway to Grand Prairie. Purchased in
Dec. 2005 for $1,300,000 with $200,000 cash down. Sold for $1,564,000 resulting in over 150% cash-on-cash ROI for this building
when calculated outside of the LP.
20 Suites – Fox Creek, Alberta
SOLD
ROI: 50% for 2005 LP1 investors at $5000/unit and 25%+ for 2006 LP1 investors at
$6000/unit.
In Fox Creek, a small gas producing town 2 ½ h NW of Edmonton along the major highway to Grand Prairie. Purchased July 2006
for $730,000 cash, and sold in 2Q 2008 for $1,350,000, which is $620,000 over our purchase price.
42 Suites – Camrose, Alberta
SOLD
ROI: over 150% in 6 years
Purchased in June 2006 for $2,150,000 with $600,000 cash. After investing in suite interiors and curb appeal, rents in 1Q 2009
rose to approximately 75% over initial going-in rents. Partially sold as condos in mid 2008. Remaining 20 condos sold in Q1 2012.
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84 Suites – Camrose, Alberta
ACTIVE
Asset ROI: over 25% in approximately 1½ years
Purchased in Summer 2007 for $6,700,000 with $2,300,000 cash (incl. allocatable LP and building startup expenses) with plans to
raise rents 33% to over 60% on newly renovated suites while investing into curb appeal and suite interiors. Value today is approx.
$7.2M, with plans to hold long term and potentially convert to condos in the future.
104 Suites – Wetaskiwin, Alberta
SOLD
Asset ROI: over 30% in approximately 8 years
104 suite building complex as 26 4-plex style townhomes. Purchased in May 2007 for $8,125,000 with $2,800,000 cash (including
allocatable LP and building startup expenses). Rent is 25% higher than at acquisition after investing into curb appeal and suite
interiors. Re-financed in January 2009 with a $7.9M CMHC-insured 5-year mortgage at 3.5%. Sold in October 2012 for $9,568,000
and we will carry a VTB mortgage for 3 years.
45 Suites – Yorkton, Saskatchewan
SOLD
Asset ROI: over 100% in approximately 7 years
Purchased summer 2007 for $1,050,000 with $370,000 cash (incl. allocatable LP and building startup expenses) with plans to
raise rents 10% to over 50% on newly renovated suites through investment into curb appeal and suite interiors. Appraised at
$1,899,000 in February 2010 and refinanced in the same year. Sold in September 2011 for $2,610,000. We will carry a VTB mortgage for 3 years and still own the two lots subdivided out of the property.
25 Suites – Yorkton, Saskatchewan
SOLD
Asset ROI: over 65% in approximately 6 years
Purchased in 1Q 2008 as part of PRISM A LP for $875,000 (or $35,000/unit) with all cash and plans to increase revenues in
6-12 months after investing in suite interiors. The property was acquired at less than 40% of replacement cost. Pulled out the
majority of the initial cash outlay in Fall 2009 with refinancing through a CMHC insured 5-year mortgage of $935,000. Sold in
September 2011 for $1,592,900 and we will carry a small VTB mortgage for 3 years.
65 Suites – Campbell River, BC
SOLD
Asset ROI: over 40% in approximately 4 years
Purchased for $4,290,000 in fall 2008 with a $3,698,600 CMHC insured mortgage at 4.37% interest. Spent $293,000 on capital
improvements to the common areas and inside the suites. Mortgage was paid down by approximately $375,000 over 4 years.
Sold in November 2012 for 5,192,375.
93 Suites – Sudbury, Ontario
ACTIVE
Asset ROI: over 30% in approximately 4 years
Purchased for $3,950,00 in April 2008 with a $2,928,075 CMHC insured mortgage at 4.29% interest. Change of property manager
and significant capital improvments over time. Mortgage has been paid down by approximately $310,000. Current value is
estimated at $4,700,000 based on an offer to purchase.
120 Suites – Calgary, Alberta
ACTIVE
Asset ROI: over 120% in approximately 24 months
Purchased in December 2010 for $14.65 million with a roughly $5 million cash investment shared by two of our limited partnerships. Even when adjusting for $69,000 we spent on replacing all existing flush toilets and some unexpected capital expenditures, the property still ended in 2011 with $22,000 net positive income and a mortgage paydown of $216,000. This building was
appraised in January 2012 for $16,600,000, almost $2M over the purchase price just 13 months earlier. An offer to purchase for
$19,800,000 was received in fall 2012, however, we decided not to sell because we felt market value was higher.
308 Suites – Denton, Texas
ACTIVE
Higher rent =
higher value in a normal market
140,000
120,000
$
Revenue (net rent collected)
100,000
80,000
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Located in a Dallas suburb with three large universities. Purchased September 2007 for $13,320,000 with 25% vacancy.
Property stabilized since fall 2008 with ongoing property
upgrades and approximately 3% year rent increases. Valued
at $15.3 M in fall 2012.
160,000
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Selected Investment Summary/Track Record
SUMMARY NOTES
Some properties better than others, but no one has lost money with us.
Many investments look good on paper before the project starts. We have made some mistakes early on, but have
learned from our experiences. We constantly review our portfolio, weeding out those properties that do not perform up to our expectations and in this way we maximize profit across the range of properties contained within
each Limited Partnership.
For example: We bought a 45 suite apartment building in Detroit, MI because it was “cheap”. We bought for
$650,000 ($250,000 and issuance of $400,000 worth of LP4 units) or $14,400 per door. We sold this asset after 1 ½
years for $100,000 to rid ourselves of a management headache, ongoing required major upgrade requirements,
rent collection challenges, and negative cash-flow, especially in winter. This loss represented about 6% of LP4’s
total investment of over $10M – an unfortunate but very tiny comparable loss.
Over more than a decade, we have purchased in excess of 30 properties, and in only 2 cases did the properties
go down in value compared to our purchase price. One of those 2 properties are located in the United States,
where the property market has experienced the greatest property market
collapse since the 1930s. The only Canadian property sold below what
we paid for it, was a 64-suite building in Powell River that we sold in
Properties worth LESS
December 2010, and this still yielded a 50% ROI to the limited partthan purchase price
ner investors who purchased it in 2005. In fact, our overall record
of success in the face of such turbulent times is a testament to
Properties worth MORE
the strength of our business model.
than purchase price
The ROI is usually a combination of cash-flow, mortgage
paydown and equity upside. Equity upside is achieved
though time/inflation, impeccable property management,
value improvements, rent increases or re-positioning. In any
investment you should look first at a return OF your money, then at
a return ON your money!
>93%
CURRENT THINKING
Maintain focus on the bottom line.
In today’s uncertain economic climate we are fortunate to be invested in apartment buildings in regional
economies that continue to have a bright future. Some property markets have lived through a market correction,
such as that in Alberta, and now it is time to buy there again as underlying market fundamentals return to the
fore. A good example of this is the 120-suite Calgary building pictured at left, which
we purchased in December 2010 for $14.65 million. This building was appraised in
January 2012 for $16,600,000, almost $2M over the purchase price 13 months earlier.
Our unrelenting focus on minimizing overhead at Prestigious Properties corporate
head office, and on a building-by-building basis, will continue to be our guiding
philosophy through 2012. We consider the belt-tightening of the last few years
to be the new normal-- a lesson that some banks, investment companies and
governments around the world still fail to fully appreciate.
Today, we still find decent properties with excellent upside and value improvement potential in BC, AB, SK, and
yes, in Ontario or the US, in places like Texas, although currently we are primarily focused on AB and SK. Rents are
rising in Western Canada and select US growth markets with strong in-migration. Construction costs and building
replacement values are much higher than with older buildings, leaving much room for growth with cash-flow for
years to come.
We like to point out that we do not aim for 0% vacancy but for maximum revenue. Much like airlines or hotels we
strive for yield management or load management, such that the less vacancies in a building, the higher the rent for
the same suite. Ultimately, the value of a multi-family real estate investment is dependent on the cash flow it is able
to generate, and this can be greatly affected by even small improvements in how we do things anywhere along the
value chain. From researching and executing the initial purchase, to capital and operating improvements, working
with banks, marketing and management over time, to eventually selling the asset. When you own a building, the
“Kaizen” approach works best: continuous small improvements to the properties and their managers, including
head office. When you own a property over a number of years these value amplifications through Kaizen really add
up for our investors.
Past results are not a guarantee for future success. This is not a solicitation for an investment. Investments void where prohibited. No return
is guaranteed. You could lose all your money. Investments are sold via offering memorandum only. Please read it carefully. Minimum investment amounts, eligibility requirements and minimum hold periods apply.
Document Updated: February 2013
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