1 Low-Risk Real Estate Value Stock Focused on Great Locations
Wall finances (TSX: WFC) is a Canadian public real estate investment and development company. The company’s historic asset base consists of residential real estate and hotels in the Metro Vancouver area of British Columbia. The majority of these properties were built by the company and continue to be managed by the company.
As of January 31, 2021, the total number of hotel units was around 950 and the total number of residential and commercial units was around 1,400. These properties provide a steady stream of income and capital appreciation that can be used for further asset growth, investment in development properties for resale, and dividends paid to shareholders.
Diverse sales segments
The company operates in three different segments of the real estate industry. This includes the ownership and management of profitable residential and commercial properties, the ownership and management of hotel properties as well as the development and sale of residential units, also known as development properties.
Most of the residential units are rented for one year and all leases are subject to the Residential Tenancy Act (British Columbia). Rental rates are increased due to tenant fluctuation or, in the past, on the annual anniversary of each tenant’s move-in date. However, in response to the COVID-19 pandemic, the state government has decreed that no rent increases may be issued to existing tenants until July 1, 2021.
Robust capital improvements
The company also owns and manages two hotel properties in Metro Vancouver and has been in the hospitality industry since 1994. The average turnover rate for all corporate units is around 20% annually. In order to maintain the competitiveness of the properties, the properties are regularly modernized to ensure that the company achieves rental prices in line with the market. Older properties are usually refurbished when they are acquired.
In February 2020, the company purchased two additional units on the 1050 Burrard property for $ 1.8 million. On January 30, 2019, the company acquired a 50% interest in a property in Vancouver for $ 7.6 million.
The story goes on
Low risk development
The company is active in the development and sale of residential real estate. It is Wall Financial’s policy to only purchase land for development that is zoned for intended use or where necessary re-zoning is under consideration and encouraged by government agencies. All construction projects are carried out via fixed price contracts with general contractors or subcontractors.
Most of the company’s assets are located in Metro Vancouver and are solely related to the real estate industry in that market. Vancouver’s economy is influenced by the demand for new housing in the area, which is mainly influenced by interest rates, job growth, migration and general economic conditions.
Focused on great locations
The company’s main risks are general economic and local market conditions, reduced sales growth with increased vacancies, the inability to increase rental prices due to oversupply, restrictive state legislation or changes in government legislation, and the failure to maintain properties at competitive levels. The company controls these risks through a high maintenance standard and only invests in the locations sought after by tenants. This should guarantee above-average risk-adjusted returns in the future.
The post TFSA Investors: 1 Low-Risk Real Estate Value Stock Focused on Great Locations was first published by The Motley Fool Canada.
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The Motley Fool has no position in any of the stocks mentioned. Fool Nikhil Kumar has no position in any of the stocks mentioned.
2021