Development Properties: An Alternative Investment with Large Upside Potential
In line with Bayfield’s strategy to provide our high net worth private and institutional investors exceptional real estate investment opportunities, a central focus of our strategy is to identify and capitalize on Canadian property development opportunities in the commercial retail space. Development properties are sometimes the best real estate investment to make: by acquiring a mismanaged property at below market rate and redeveloping it for a substantial appreciation in value brings high financial returns to our investors.
Identifying a Development Property
Bayfield’s experience in development properties throughout the years has helped solidify the process of identifying, acquiring, and executing a successful development plan. When we assess a property for development, we look for the opportunity to make improvements that will allow it to command higher rents, reduce vacancy, and improve the quality of tenants. Bayfield uses the following measures to assess every development opportunity:
Market/Demographics
Is the property’s current lacklustre performance in any way related to a shift in the market’s demographics?
Outdated Design
Can the property command higher rents after a facelift or reconstruction?
Mismanagement
Is the underperformance directly related to the inability of the property’s management team to provide best-in-class service?
Anticipated ROI
We assess our anticipated returns with our projected investment to measure the viability of a substantial appreciation in value upon completion.
Investment Risk = MEDIUM
Development properties are considered value-add commercial real estate investments and are seen as slightly riskier than core investments such as stabilized properties. The main reason for this is the fact that the property is not operating at its full potential when first acquired, and improvements are based on business plan projections.
Is It For You?
If you are an investor who is looking to have a portion of their portfolio dedicated to more aggressive growth, then choosing to add development properties to diversify is an good investment option, as there is the potential upside for a substantial appreciation in value at the time of disposition.
