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AP Capital REIT

Investment Process

As an exempt market issuer, AP Capital requires all Canadian investors to invest through an approved Investment Dealer or Exempt Market Dealer (EMD).  Dealing representatives from these firms assist in completing the subscription agreements and discuss the suitability of AP Capital for each investor’s overall portfolio.

AP Capital accepts new investors twice monthly (24 unit issuances per year).  With Investment Dealer or EMD assistance, open investors complete the Subscription Agreement after reviewing the most recent Offering Memorandum. Registered investors have a few extra steps as funds must come via approved trustees.

FAQ

Q: What is a REIT?

A: REIT is an abbreviation for Real Estate Investment Trust.  A REIT raises capital from investors and uses this capital to purchase and manage real estate.  A REIT typically focuses on a specific real estate asset class; for example residential apartment buildings, student housing, commercial office, industrial, hotels, or commercial retail (to name a few).

Q: Which asset class does AP Capital focus on and why?

A: AP Capital owns and operates primarily commercial retail and some commercial office.  AP Capital sees great potential in specific types of well located assets in this class.  The challenges of dealing with residential tenants and the concentration risk of industrial are key reasons why AP does not focus on these classes.

Q: Why invest in a REIT vs owning and managing these assets yourself?

A: AP Capital REIT purchases assets in the price range of $10-$30M.   Typically these are priced too high for individual investors and yet can be sources of stable income and upside potential.

Q: Why invest in a private REIT over a publicly traded REIT?

A: The primary difference between these two options is liquidity and price volatility.  These are the trade offs that all investors must consider.  While publicly traded REITs offer investors liquidity, they do so with the risk of price volatility. Public markets can change quickly, and often, for reasons unrelated to a company’s financial performance.  Private companies are valued on their financial performance and are not directly impacted by external factors that often greatly impact public markets and company valuations.  When considering a private REIT be sure to understand the liquidity of your investment as this is the primary difference between public vs private.  AP Capital REIT is a private Real Estate Investment Trust.

Q: Who can invest in AP Capital REIT?

A: Essentially any Canadian can.  With that being said, each province has guidelines and regulations that must be followed.  Each Canadian is in a different financial situation and this determines who can invest how much, and how often.  Speak to your financial advisor or contact AP Capital to learn more.

Q: I represent a financial services firm; how can I market AP Capital REIT to my clients?

A: Please contact AP Capital to discuss.  AP Capital works with many financial firms in Canada, including Investment Dealers and Exempt Market Dealers.

Q: Can a non-Canadian invest in AP Capital REIT?

A: Yes, however restrictions may apply. Please contact AP Capital to learn more.

Q: How does AP Capital REIT, as a private company, raise capital?

A: As a private company that is widely held, AP Capital REIT utilizes an Offering Memorandum (OM) to raise capital.  The OM is an extensive document that details  every element of the business that AP operates. The OM also includes audited statements which gives investors a detailed view into the financial performance of the fund.

Q: How can I monitor the ongoing status of the assets in the fund?

A: AP Capital updates its Fast Facts monthly.  You can find them below this FAQ section or click here for Fast Facts.

Q: How does AP Capital work from a returns stand point?

A: The fund manages its portfolio of real estate assets (collects lease payments from tenants, pays expenses, mortgage payments etc) and 100% of net income is distributed to investors.  The fund’s General Partner (management of AP Capital) has a performance participation on returns greater than 6%.  Full details are outlined in the AP Capital REIT Offering Memorandum (OM).  Investors must receive and read the OM prior to investing.

Q: Who audits AP Capital REIT?

A: MNP LLP

Q: If I wish to speak to MNP in regards to AP Capital, may I?

A: Yes

Q: Does AP Capital REIT have independent representation on its board?

A: AP Capital introduced its Independent Advisory Board in the summer of 2016.  The members of this board are completely independent and provide corporate governance oversight.  The members have seats on the fund’s audit committee and provide ongoing risk and performance analysis.

Q: If I wish to speak to the Advisory Board members, may I?

A: Yes

Q: Will AP Capital REIT enter into joint ventures with investors?

A: Yes, AP Capital will consider joint venture opportunities in some instances with other (typically large) investors on specific property opportunities.  The firm is mindful to every class of investor and acts equitably to all.

Q: How many investors are in AP Capital REIT?

A: As of May 15th, 2017 there are 965 unitholder accounts.

Q: Can I invest registered funds such as RRSP, TFSA etc?

A: Yes

Q: If I invest open/cash, how are returns taxed?

A: As REITs in Canada make distributions to unitholders, these distributions are classified in one, two, three, or four ways on the T3 tax slip issued by the REIT.  The percent allocation to each of the four changes year to year based on several factors.  Auditors ultimately set these allocations.  The four are categorized as:

  1. Other income – taxed at your marginal rate, just like interest income (e.g. the MIC is Interest Income)
  2. Capital gains – taxed at half your marginal rate.
  3. Foreign non-business income – also taxed at your full marginal rate
  4. Reduction in adjusted cost base (also known as Return of Capital/ROC) – When you receive ROC, you are not taxed immediately on the amount. Rather, you subtract the ROC from the adjusted cost base of your units. This gives rise to a larger capital gain, or smaller capital loss, when you ultimately sell your units. Because of the tax deferral, ROC is considered tax-efficient income.

For the 2015 and 2016 fiscal year, 100% of AP Capital REIT’s distributions were #4 – Reduction in adjusted cost base (ROC).  In future years the allocation will be determined by auditors.

Q: Where are the current assets located?

A: For details visit the Fund’s Fast Facts which are updated every month.

Q: How does AP Capital REIT consider “Capitalization Rates” or “Cap Rates” when purchasing next assets?

A: The AP Capital acquisition team focuses on properties that are in the capitalization rate range of 6.5 to 7 cap. “Capitalization rate” or “cap rate”, is the ratio of net operating income to property asset value.

Q: I have a lot more questions, who should I talk to?

A: We are friendly bunch at AP Capital so don’t hesitate to give us a call or send us an email to learn more.  Our contact details can be found here.

Fast Facts

DateSeptember 15, 2017
Currently Subscribed (Investor Capital)$25.11M (CAD)
Total Assets (Audited Dec 31, 2016)$75.80M (CAD)
Net Asset Value per unit (NAV/Unit)$1,000 (CAD)
Number of Investors (Unitholders)969
Investors choosing $70/unit (7%) monthly cash distribution32.46%
Investors choosing $70/unit (7%) monthly Dividend Reinvestment Plan (DRIP)67.54%
Investors with Open/Cash investment84.07%
Investors with Registered (e.g. RRSP, TFSA) investment15.93%
Number of Assets in Fund3
Weighted Average Occupancy of Assets89.82%
Number of Tenants (all assets)76
Gross Leasable squ/ft361,655
 Morrison Centre (Fort McMurray, AB)
  Total Square Feet50,870
  Occupancy85.67%
  Number of Tenants25
  Location/MapMorrison Centre
 Greenway Park Plaza (Phoenix, AZ)
  Total Square Feet212,870
  Occupancy89.21%
  Number of Tenants34
  Location/MapGreenway Park Plaza
 Cobblestone Village (Tempe, AZ)
  Total Square Feet97, 915
  Occupancy93.20%
  Number of Tenants17
  Location/MapCobblestone Village