Private equity firm R2 and construction management company Gillam Group have partnered on a north Toronto infill development that R2 believes will be the first crowd-funded real estate deal in Ontario, the Real Estate News Exchange (RENX) reports.
“The Avenue Road project is a corner site, across from the LCBO and a Loblaws grocery store, that will be redeveloped from an existing two-storey building into a five-storey mixed-use property with condos on four floors and ground-floor retail,” R2 founder and chief executive officer Amar Nijjar was quoted as saying.
“There is no major zoning hurdle on the subject site, other than the committee of adjustment/minor variance process that will be needed.
“The total time horizon for building completion is three to four years.”
Traditionally, real estate developments have been considered as alternative investments, open only to accredited investments. However, new crowd funding regulations mean ordinary real estate investors can invest in these projects, Nijjar said.
Under the new rules, small investors can allocate from $1,000 to $2,500 while accredited investors can provide upwards of $50,000 in funds for the Avenue Road development in Toronto, north of Lawrence Avenue West.
“For the first time in the history of Canada, ordinary investors will now be able to invest up to $2,500 per person into commercial real estate projects and see the revitalization of landmark properties in their own neighbourhoods,” said Nijjar.
Toronto-based R2 is licensed with various provincial securities regulators across Canada and provides detailed underwriting and other information to its investors once it fully qualifies them, RENX reported.
Through R2’s online portal, investors can access due diligence material on deals, speak with a financial adviser regarding a suitability analysis, and then make their investments. Nijjar said the portal has more than 2,400 registered investors, while tens of thousands of people receive R2’s weekly newsletters.
Nijjar asserted that the Avenue Road project will deliver a development margin north of 20 per cent. The capital stack will initially be kept close to 50 per cent equity and 50 per cent traditional debt, with the debt portion going higher during the construction stage.
“Beyond the senior debt and deposit structure, we have structured a class of limited partnership units that will allow retail investors to participate on the basis of 10 per cent preferred return per year, with back-end profit participation on top of that,” Nijjar said.