Frequently Asked Questions
A: REIT (Real Estate Investment Trust):
- Is a like a mutual fund, except that it buys real estate and not stocks or bonds as its primary investment
- Manages its properties for stability of cash flow and long term growth of capital
- Distributes the cash flow from the properties on a regular basis to Unitholders
- Usually REIT´s are focused on a particular asset type (apartment buildings, offices, retail, hotels or industrial space).
Centurion Apartment REIT focuses only on residential rental properties.
Q: What is a Qualified Investor?
A: Depending on where you live in Canada, the provincial securities commissions impose different qualifications for investing in a private REIT like Centurion. The information below is only a general description of exemptions and isn't comprehensive. You should speak to your advisor and/or our investor relations department for further information or to seek clarification.
Outside of Ontario and Quebec the requirements are generally that you:
(a) are an Eligible Investor (1)(2)* OR
(b) obtain independent advice as to suitability from an Eligibility Advisor(1)(3)* OR
(c) invest no more than $10,000 OR
(d) live in the province of BC, NB, NS or NL OR
(e) invest a minimum amount of $150,000 (the "Minimum Amount Investment Exemption"(1)(4)*)
In Ontario the requirements are generally that you either:
(a) are an Accredited Investor(1)(4)* OR
(b) you invest a minimum amount of $150,000 (the “Minimum Amount Investment Exemption")
In Quebec the requirements are generally that you are an Accredited Investor(1)(4)*
* Notes:
(1) As defined in National Instrument 45-106
(2) An Eligible Investor is generally a person who has either:
(a) net total assets in excess of $400,00 OR
(b) an annual income before taxes, in each of the 2 most recent years, in excess of $75,000 individually or $125,000 with a spouse
(3) An Eligibility Advisor is:
(a) a person that is registered as an investment dealer or in an equivalent category of registration under the securities legislation of the jurisdiction of a purchaser and authorized to give advice with respect to the type of security being distributed, and
(b) in Saskatchewan or Manitoba, also means a lawyer who is a practicing member in good standing with a law society of a jurisdiction of Canada or a public accountant who is a member in good standing of an institute or association of chartered accountants, certified general accountants or certified management accountants in a jurisdiction of Canada provided that the lawyer or public accountant must not
i. have a professional, business or personal relationship with the issuer, or any of its directors, executive officers, founders, or control persons, and
ii. have acted for or been retained personally or otherwise as an employee, executive officer, director, associate or partner of a person that has acted for or been retained by the issuer or any of its directors, executive officers, founders or control persons within the previous 12 months
(4) An Accredited Investor is generally a person who has any ONE of the following:
(a) net financial assets (5) in excess of $1 million; OR
(b) net total assets of $5 million; OR
(c) an annual income before taxes, in each of the 2 most recent years, in excess of $200,000 individually, or $300,000 with a spouse.
(5) "financial assets" means
(a) cash,
(b) securities, or
(c) a contract of insurance, deposit or an evidence of a deposit that is not a security for the purposes
of securities legislation
Your home and other real estate are not considered part of your "financial assets" for the calculation in (4)(a) but are included in the calculation (4)(b) above.
Q. Where can I find historical returns and monthly Net Asset Values (NAV's)?
A. You can find historical return charts and graphs along with monthly NAV price information posted on our website here. REIT Unit prices are also posted to Fundata.com monthly.
Q. How do I invest in Centurion Apartment REIT?
A. Contact us and we will send you the information you need to invest, including the Offering Memorandum, the Declaration of Trust and the Subscription Agreement. You may also invest through an Investment or Financial Advisor. The REIT is available via FundSERV. The FundSERV Codes are CEN100 (DSC Class), CEN101 (Low Load Class) & CEN 102 (Front Load Class).
Q. Are you registered with any securities regulators?
A. The asset management company of the REIT, Centurion Apartment REIT Management Inc. is registered with the Ontario Securities Commission under the category of Exempt Market Dealer. You can confirm this on the OSC website by clicking here.
Q. When was the REIT Established?
A. The REIT evolved over many years out of an apartment portfolio which has been built up by Centurion since 2003. This portfolio became part of a growth oriented private apartment investment fund called Centurion Apartment Properties LP ("CAPLP") which was founded in March 2006. CAPLP was mostly an institutionally oriented investment fund. In 2009, the process of converting this fund into the REIT began. Centurion Apartment REIT was established by Declaration of Trust on 31 August 2009 with the properties of Centurion Apartment Properties LP becoming the initial portfolio. After the establishment of the Trust, the REIT began to accept subscriptions from qualifying investors to continue its diversification and growth.
A. Yes! Many investors have borrowed as low as 2.25% to invest. We can refer you to a bank, mortgage broker or financial planner that can help you borrow at the lowest rate to invest. This technique, when properly executed, is a great way to save taxes and build wealth. Of course, using leverage does entail risks and you should understand these risks in determining whether using leverage is the right strategy for you.
Q. How do I Calculate What My Monthly Cash Flow Would Be?
A. Use this formula to calculate your monthly income
Monthly Income = Amount of Your Investment x 8% / 12
As an example, if you invested $100,000 your monthly income would be
$100,000 x 8% / 12 = $666.67 which is $8,000 per year at the current rate of distribution
Distribution rates depend in part on the performance of the portfolio and may go up as well as down and are not guaranteed. Please refer to the Offering Memorandum for full details.
Q. Are There Management Fees on My Monthly Cash Flow Distribution
A. The distribution you receive every month is net of all management fees already.
Q. Do you have a DRIP (Distribution ReInvestment Plan?
A. Yes we do. If you choose to receive your distributions in Units rather than cash, you get a 2% discount on the Units purchased this way. Based on the current 8.00% distribution yield, your compounded yield is approximately 8.50% per annum.
Q. How will distributions be taxed?
A. REIT cash distributions are generally very tax efficient and in some cases may be tax deferred until you sell your investment, giving you years of tax deferred cash flow and growth. These gains, when realized, will then be capital gains and taxed at the lower capital gains rate. Please see this article on The Potential for Tax Efficient Investment Growth with REIT Investing
Q. What are the different types of real estate?
A. Click here
Q. How do I get my money back if I want to cash out?
A. There is a monthly redemption window for investors. See the Offering Memorandum for full details
Q. Will there be capital growth on my investment?
A. An investment in Centurion Apartment REIT is the closest thing to buying apartments directly yourself, but without the hassle. Over the long term, rents tend to rise with inflation and since investment real estate is valued by its cash flow, capital growth generally follows
Q. Where is the portfolio located?
A. The properties in the portfolio are invested in 13 Canadian communities in 22 separate properties. You can get a map here. We will, over time continue to add to the portfolio and diversify our holdings as accretive opportunities become available.
Q. I´ve owned condominium investment properties before and my income was never as good as you are offering. How do you do it?
A.There is no magic. Individual investors often look at condomiums or houses as a direct way to invest in real estate. While this may be suitable for some, remember that houses and condominiums are mostly bought by individuals looking for a home, not an investment. There is often no income or investment criteria that a homeowner applies to a home purchase. As a result, the income yield on a condominium or house is usually very low and often negative after financing. However, an apartment building, bought by professional investors, is designed to be an investment. It is the home for the investors money and not for the investor themself.
To compare these two approaches to real estate investing on an equal basis, let´s consider the following examples.
Let´s assume:
You use 70% leverage (ie you put down 30% equity and get a mortgage for 70%)
You can get a mortgage at 5% interest rate per annum
1) A condominium purchased for $300,000 as an investment. It rents for $1,500 per month
It has the following expenses:
Property Taxes $3,000 / year
Insurance $150 / year
Repairs $1,000 / year (not covered in condo fees)
Condo Fees $4,500 / year
Management $1,800 / year (for leasing and property management fees)
Vacancy $360 / year (about 2% which is very low)
Total Expenses $10,810 / year
Net Income Before Financing Costs = $7,190
Financing Costs = $300,000 x 70% x 5% = $10,500 / year
Net Result : -$3,310 / year (-3.68% yield a year)
You are losing $3,310 / year and must count on the market going up just to break even or make money.
2) An apartment building bought for $3,000,000. It has an unleveraged yield (capitalization rate) of 7%
Rents $420,000
Expenses $209,650 (vacancy & bad debt, repairs, property taxes, insurance etc)
Net Income Before Financing Costs $210,350
Financing Costs = $3,000,000 x 70% x 5% = $105,000 / year
Net Result: +$105,350 / year (+11.71% yield a year)
If we put the above into a chart to compare side by side we get the following:
| Apartment | ||||
| Assumptions | Condo | Building | Difference | |
| Purchase Price | $300,000 | $3,000,000 | ||
| Number of Units | 1 | 50 | ||
| Price / Unit | $300,000 | $60,000 | $240,000 | |
| Rent / Month / Unit | $1,500 | $700 | $800 | |
| Rent / Year | $18,000 | $420,000 | ||
| Operating Expenses: | Property Taxes | -$3,000 | -$63,000 | |
| Utilities | $0 | -$63,000 | ||
| Insurance | -$150 | -$4,250 | ||
| Repairs | -$1,000 | -$35,000 | ||
| Condo Fees | -$4,500 | $0 | ||
| Management | -$1,800 | -$21,000 | ||
| Superintendent Wages | -$15,000 | |||
| Vacancy (2%) | -$360 | -$8,400 | ||
| Total | -$10,810 | -$209,650 | ||
| Operating Income before Financing | $7,190 | $210,350 | ||
| Rental Yield on Purchase Price | 2.40% | 7.01% | ||
| Financing Expenses | 70% Mortgage @ 5% | -$10,500 | -$105,000 | |
| Net Profit | -$3,310 | $105,350 | ||
| Equity Investment | 30% Down Payment | $90,000 | $900,000 | |
| Leveraged Rental Return (Net Profit / Equity Investment) | -3.68% | 11.71% | 15.38% | |
| 2% Capital Growth | $6,000 | $60,000 | ||
| Leveraged Total Return * | 2.99% | 18.37% | 15.38% | |
To summarize, you are making $105,000 / year on a $900,000 equity investment which is 11.71% per annum even before considering capital growth. Of course there are expenses of the fund (like management, audit, printing, accounting etc) but the difference between the cash flow on an apartment and a condominium is large. Also, this $3,000,000 apartment may have 50 apartments ($60,000 per suite), with 50 tenants, giving you the diversification that you never could have with a single condominium or house.
In this simple example, an apartment investment beats the cash flow available to a condominium investment by a wide margin of 15.38%. If both the apartment building and the condominium appreciate by 2% per year, the return on investment (cash flow and capital growth) would be:
Condominium 2.99% per year
Apartment Building 18.37% per year (before management costs)
This is assuming the same interest rate, use of leverage and capital growth rate for both investments.
* There are certain critical assumptions that were made in creating this simple comparison of these two approaches to residential real estate investment and this example was designed to help demonstrate some of the major differences between these two approaches. There are other costs associated with each of these strategies that are beyond the scope of this simplified example that must be considered as part of any fullsome investment comparison.
Check out our Real Estate Investing Resources pages for other interesting information on real estate, apartments and investments.
Here is a good article from the Globe and Mail on why buying a REIT is more profitable than a condo
Q. Who audits Centurion Apartment REIT?
A. BDO Dunwoody LLP
Q. Is my investment CDIC insured or otherwise guaranteed?
A. Centurion Apartment REIT is not a deposit taking institution and the REIT isn't offering a deposit product. Your investment is not CDIC insured or otherwise guaranteed. The REIT offers qualified investors an opportunity to invest equity in a portfolio of apartment properties. Please refer to the Offering Memorandum for full details.
Q. Is the REIT listed on a stock exchange?
A. Centurion Apartment REIT is not publicly traded on an exchange like a stock. It is a private REIT which is open only to Qualified Investors via Offering Memorandum. Click here for a description of the differences between public and private REITs.
Q. I own an apartment building that I'm tired of managing. Can I exchange my building for REIT Units?
A. Yes subject to our standard due diligence process, and agreeing on a fair price, we have a number of options available to owners of apartment buildings that allow them to exchange their building for REIT Units on a tax deferred basis potentially saving or deferring a significant amount of taxes
Q. Will the REIT enter into joint ventures with other investors?
A. Yes, the REIT will joint venture in some instances with other (typically large) investors on specific property opportunities. This permits the REIT to broaden its portfolio and participate in deals that it may not be possible for the REIT to complete on its own.
8% per annum
- Paid Monthly
- Growth Potential
- Tax Efficient
- RRSP, RESP, TFSA Eligible
- Min. $5,000
Qualified Investors Only
for more information.