RE: Reay to Rise !!! You could see it coming. In Q3 of 2008, LREIT committed to Parsons Landing at $395,000 per unit. Now LREIT cannot secure financing for Parsons, and is on the hook big time. You can't blame the banks: who in the heck thinks some wood framed buildings in the middle of no-where, with NOI sustained only by a transient spike in the oil price, are worth a mountain of money per unit. You can get well located, fully detached homes in the GTA for that money. Arni put the viability of the REIT on the line for Parsons:
“The vendor is permitted to sell the property and the Trust may list the property for sale this year.
In the event of the sale of Parsons Landing, the Trust will be liable to the vendor for any shortfall
between the net proceeds of the sale and the acquisition cost payable of $45,233,000 plus
interest. “ page 31, Q2 Financials
Where does this guy get off, betting the house on one Ft. Mac property?
For this kind of reckless, disastrous, asinine management, the REIT is charged millions:
“ The Trust pays property management fees equal to 4% of gross receipts from the income properties owned by the Trust. In regards to commercial properties, Shelter Canadian Properties Limited is also entitled to leasing commissions on new leases of 3% to 5% of base rental payments and leasing commissions on renewal of 1 1/2% to 2 1/2% of base rental payments. Shelter Canadian Properties Limited is also entitled to tenant improvement and renovation fees equal to 5% of the total cost of such work.” page 18
“The Trust incurred property management fees payable to Shelter Canadian Properties Limited
of $493,984 for the three months ended June 30, 2009 (2008 - $548,544) and $1,036,381 for
the six months ended June 30, 2009 (2008 - $1,038,104). “ page 18
“ The Trust pays service fees equal to 0.3% of the gross book value of the assets of the Trust, excluding cash.” page 19
“The Trust incurred service fees payable to Shelter Canadian Properties Limited of $493,825 for the three months ended June 30, 2009 (2008 - $393,241) and $988,687 for the six months ended June 30, 2009 (2008 - $780,483). Service fees are included in trust expense.” page 19
What does that mean? Well, you paid Captain $hithead about $2-million for the first six months of 2009 to create this god forsaken mess. And then you have to pay him again to help get you out of the mess he created:
“ A processing fee of $15,000 was paid to 2668921 Manitoba Ltd. in regard to the loan. The fee
was included in transaction costs.” page 19
The bottom line:
Assets $592-million. Liabilities $572-million!!!