Renewable
Real Estate
Renewable U Energy’s business model is to partner with companies in their ESG projects . Renewable U will provide funding to an operating partner in qualified renewable projects. Some projects that may interest us are:
Why Ontario, Quebec, British Columbia, Manitoba?
There are several reasons we are looking at these areas of Canada, some of the major reasons being:
The abundance of existing renewable energy sources, including the primary electric supply of Hydro
A major shortage of housing in these areas, with vacancy rates approaching zero in the past year, and forecasted demand far outpacing current new projects underway or under consideration
Many attractive municipal incentives that apply to both multi-family real estate development in general, but also environmentally conscious construction projects
Very attractive provincial incentives geared specifically to ZNE multi-family construction projects
Why are we looking at a build-to-sell project instead of a build-to-own rental project for long term revenue?
Both models were considered when putting this business plan together (and even a hybrid of both), but in the end the build to sell condo plan is safer and creates a better overall return for our investors with less risk. We have seen that in most markets that are desperate for housing, there has been a “lag” of rental rates compared to the steep increase in housing price. To put the current rent trends up against current building prices doesn’t make for an attractive return on our money.
For this reason, many municipalities are forecasting a bigger growth opportunity for real estate purchases over real estate rentals for new projects. We can certainly build a business model on what we “think” the rental market will mature to within the next 2 years, but that is putting a lot of speculation to a business plan, when compared to having real comparable data to existing real estate market conditions in that area and be very assured of returns on sale of new properties.
Why would
Renewable U
build
A project and set presales on current market conditions instead of holding sales and taking advantage of gains over the 2 years to build?
There is an added level of security to the model of a presale model such as this, and it is becoming the “norm” on many projects like these across hot real estate markets in Canada. There is always the ability to carry the entire cost of the project right to the end, and have the units sell for more than they would today under presale conditions, but that also involves more equity needed up front (as the deposits on presales make up part of the equity wedge of the project) so the potential returns are higher, but not as much as you would automatically assume.
The security lies in having the entire project cash flowing out as it’s being completed, on existing market conditions and demand, and not having to “guess” what the final results will be. For those buying the presales, they are creating their own form of business plan where many will purchase the presale units with the intention of marketing the property just prior to completion at a significant gain to their purchase price.
That is certainly a good trade-off for having a portion of the equity wedge covered through their deposits to accomplish that, and everyone wins.
