Value Added Commercial Real Estate
The VAT Program (Value Added Transaction) has been created by I.C.I.C.. to strategically analyze the best investment opportunities within targeted areas.
INITIAL DUE DILIGENCE
The VAT Program starts with extensive due diligence. The US presents a vast market place with continuously changing areas of opportunity. The VAT Program requires Invictus to continually monitor the changing landscape with emphasis on economic growth and market trends. I.C.I.C. narrows its search on appropriate locations from information obtained from their sources at various highly regarded research institutions.
Once a location has been selected, the VAT Program requires a step by step process commencing with extensive due diligence on local markets and trends. The VAT Program enables Invictus to eliminate most of the risks inherent to real estate development such as the reliance on government approvals, availability of labour force, weather conditions (in order to enable construction), changing markets during the long process of rezoning, design, building permits, and construction. These items can all take several years from the beginning to the end of a development project.
Additionally,the VAT Program does not rely on the continuation of market conditions or appreciation in real estate values. Properties are bought, revitalized and sold based on rental income and available financing. The more the stock market suffers, the more the real estate market thrives. Investment in hard assets such as real estate is always the number one choice in both uncertain and strong economic times.
The VAT Program has established simple effective criteria for its acquisition.
Select Market: After research and extensive due diligence has been conducted on the United States to determine what state and which cities present the best current opportunities, the local market is selected based on the local economy, job growth, strength of recovery, rental demand and demand for revitalized complexes by end-use buyers.
Network: Relationships with local real estate brokers, property managers, contractors, lawyers and accountants are fostered.
Select Building Complex: The building complex must be under-performing in rent rates and occupancies as demonstrated by comparables in the immediate area. In addition, there must be evidence that revitalization will allow for increased occupancy and/or rents. Preliminary due diligence is conducted to determine the complex physical condition and environmental status.
Investigation: In order to determine the cost of acquisition and revitalization, detailed investigation of comparable sales, rental and occupancy rates, labour costs, preliminary revitalization costs, financing costs, etc. must be completed.
Detailed Analysis Reports: In order to determine the viability and profitability of the potential acquisition, detailed information is inputted into a specific analysis reporting system.
Cash Flow: The property must be able to provide the investor with a minimum 10% return during the revitalization process.
Profit: The detail analysis report must indicate a strong likelihood of substantial profit for the investor once the property has been analyzed with the VAT Program. The profit must not rely on simple market appreciation.
Once a property has been run through the entire VAT Program it is either selected for acquisition or rejected. If selected, an Offer of Purchase and Sale is made, and if an acceptable agreement is concluded, a 30 day due diligence period commences.
SECOND LEVEL DUE DILIGENCE
The property is then put through a second, more stringent due diligence process in order to verify that all the information provided by the seller, seller’s broker, seller’s property manager etc. is complete and accurate. Environmental investigation is conducted to ensure the property is in compliance and further investigation is conducted to confirm there are no other issues with title or debt.
A unit by unit tour is conducted and a matrix of work required is compiled on each unit. A thorough tour of the exterior of the buildings and grounds is conducted with an experienced contractor to determine the requirements for rehabilitation. In addition, sustainability procedures are examined and a plan is developed. A firm budget complete with time line is then completed to accomplish the goals. This budget is then compared to the preliminary budget to ensure the profitability of the project.
Financing is also secured during the second level of the due diligence period.
If the environmental reports, survey reports, rehabilitation cost,timeline report and financing work within the proformas, ICIC removes the conditions and moves forward with the acquistion.
Once the sale has closed the revitalization commences with the selection of a local contractor. Decisions concerning the on-site and off-site local property management are also made. I.C.I.C. works closely with both the contractor and sub-trades regarding the rehabilitation as well as the property managers regarding policies, tenant relations occupancy and rent increases.
Revitalization can generally be accomplished and stability demonstrated within 12 to 24 months depending on the size of the project and the extent of the revitalization required.
When the property has been revitalized and stability has been achieved, I.C.I.C., having added value though the VAT Program, will put the property back on the market for resale.