Seizing Opportunity in the Midst of Uncertainty

Despite recent reports painting a bleak picture for the Alberta economy, there are a number of people, myself included, working to change the economic volatility that’s plagued the province for the last 8 months into opportunity for all Albertans.

While the oil slump has definitely impacted Alberta’s economy, it by no means has defeated the spirit or sense of resolve here. This undaunted perseverance is manifesting itself in other industries and sectors — real estate and property development being one of them.

Earlier this month, two luxury condominiums in of the Calgary’s prominent riverfront developments broke a three year downtrend when the units sold for $8.4 million and $5.2 million respectively. The record-setting prices for the 5,000-square-foot and 3,000-square-foot condos located in the same building not only marked the highest prices paid for condo units in the city for three years, it also signaled the city’s steady economic progression out of uncertainty.

This upward trend was further solidified when Calgary’s real estate sales figures for the last year were released in early July by the Alberta Real Estate Association. According to the data, “Overall sales for homes in excess of $1 million, including condos and semi-detached and detached houses, have climbed 8.6 percent this year compared with last year with 317 sold by the end of June 2016.”

There has also been a number of developments in the residential rental property sector over the last year, a sector I know well. When I founded Strategic Group, I built the company around the philosophy of “Creating value others can’t, by seeing what others don’t.” In September this year, myself, Riaz Mamdani, and Strategic Group will officially unveil our most ambitious project to date: a five-storey wood frame residential building, the first of its kind in Alberta history.

The 69 unit building, with a coffee shop and five work-live units on the ground floor, is located on the corner of Centre Street and 20th Avenue N.E. and will add much needed housing options for the population dense area.

The concept of the state-of-the-art wood framed building was made possible after the city’s 2014 announcement stating they would begin accepting variance applications for buildings (up to six-storeys) featuring wood-frame designs.

Aside from offering a unique aesthetic element to any neighbourhood, using wood to build taller buildings is cost effective, easily sustainable and can provide housing solutions for areas that are suffering from urban sprawl or density issues.

Building vertically has proven to be the answer in many different building situations and with municipalities across the country approving the building of low-rise wood frame buildings, I think we will see more unique wood frames sprouting up across the country.

Rollin Stanley, the manager of Calgary’s city planning department, recently told the Calgary Herald using low-rise buildings along transit corridors allows for greater density leading to community revitalization and more affordable housing options.

“Wood projects are more sustainable than concrete, it’s a renewable resource and, particularly when you look at where we live, we have access to wood,” said Stanley. “So that’s a terrific local resource we can capitalize on instead of building all these smaller buildings out of concrete.”

The merits to buying a second property as an investment

Thanks to Canada’s weak performing dollar, the last 12 months have seen an increase in the number of foreign real estate buyers. Spurred on by the impact of their currency in the Canadian marketplace, Chinese buyers have been fueling the condo markets in Toronto and Vancouver, in addition to propping up the housing bubble.

These international investors know that Canadian real estate, especially now, is a smart investment that may offer high ROI. Data released in early April by the Canada Mortgage and Housing Corp. points toward continued growth in the country’s largest real estate markets, thanks in part to offshore money.

“This study suggests that the flow of money has become significant and it is definitely not slowing down. I wouldn’t be surprised if 2016 is a record year when it comes to foreign investment in the condo market,” said Benjamin Tal, deputy chief economist for CIBC World Markets.

According to the CMCH findings, 10 percent of condos built in the last five years have been purchased by foreign buyers. You may be thinking, if the dollar is so low and oil is performing poorly why are foreigners flocking to Canadian real estate?

That answer is complicated, but one of the factors is that on average Canadian real estate performs well and is a sound long-term investment choice.

With the dollar finally regaining some ground and reaching similar levels to the summer of 2015, now is perhaps a perfect time for Canadians who are looking to invest in real estate to take the step forward.  International investors interested in Canadian real estate are also well-aware that the window to take advantage of the currency exchange is finite.

“Real estate investments are very popular today,” notes Jerry Cukier, a Partner with Soberman LLP in Toronto. “Growth in real estate has been faster than the growth of many other investments.”

That fact is promising to those looking to increase their retirement income or portfolio. Real estate investment is unlike investing in say, for example, stocks, partially because the investor has an actual tangible resource to manage. Those who choose to invest in real estate tend to also have more control over their investments. “You know the quality of the building, you know the surrounding market and what the demand is.” To quote Cukier again.

However, purchasing a second home or investing in real estate is a major undertaking that needs to be carefully vetted and inspected before purchase. As a tangible investment, the upkeep and maintenance of whatever property you invest in is dependent on you. 

While some people buy investment real estate for an immediate flip, I find the most potential comes from the ‘Buy and Hold’ strategy. As the name indicates, Buy and Hold simply means: buying a rental property that is slightly under market value and holding it for the long term. The goal is to have tenants gradually pay off the mortgage so that in the end you have a property that is mortgage-free and where rental income is being paid to you indefinitely.

Buy and Hold is a popular strategy because it is one of the most straightforward real estate investment strategies. As long as the property’s income covers the expenses (note that each lender has slightly different ways of calculating this), and as long as you have a minimum 20 percent down payment, it is also the easiest real estate investment to finance.

As the Canadian economy undergoes an upswing, the time to bolster your investment portfolio is ripe. From tech to real estate, a savvy investor can find opportunity for profits as the country regains its economic stability.

How to decipher Canada’s real estate sector

March is considered the busiest month in the Canadian real estate sector. With winter finally waning, many people look to move out of their current home in the third month of the year. This year was no exception and notably was the best sales month in Vancouver.

While some regions of Canada have seen housing markets become so hot they are nearly unbearable, other areas of the country have seen a significant stalling in comparison to previous years.

This nationwide fluctuation can make it hard to gauge whether someone should buy, sell or even rent.

A year ago, when we began to see an unsettling in the Alberta economy, my company Strategic Group refocused our business strategy from building commercial real estate to building multi-unit rental properties.

The shift, in part was initiated by the province’s economic hardships, also echoed the sentiment of many young and fixed-income citizens who have been priced out of the housing market, despite the cooling of the real estate market in Alberta.

Investing in rental units isn’t for everyone.  However, for those looking to invest in the real estate sector, it is a viable option that is expected to continue growing over the coming years.

The trend has been increasing steadily over the last three years. The Canadian Real Estate Magazine dubbed 2013, “The Year of the Multi-Family Property,” citing the growing trend of city dwelling and the demand for rental units in urbanized areas.

“More people willingly forsake space and yards for greater convenience and avoiding car dependency,” mentions the Mortgage Brokers Canada website.

In the second half of 2015, there was nearly 24,000 rental units under construction across Canada. That number was up 52 percent from a year earlier. According to CBRE Canada, the price of rental buildings now sits at an average of $125,000 per unit, up almost $35,000 from $86,000 it cost a decade ago.

Note this quote from Derek Lobo, CEO of Rock Advisors Inc., a brokerage that specializes in apartments: “Canada is at the early stages of a new apartment construction renaissance, really.”

This rental renaissance has been spurred on by housing markets that are too exorbitant and saturated and that in many ways have locked out first-time buyers.

Investing in rental properties also allows investors access to the housing market in a diverse way. “You have big pension funds in Canada that want to grow their real estate allocations over the next five years by $5-billion, $10-billion or $20-billion,” said Adam Kosoy, senior managing director at real estate services firm, Colliers International Canada.

“But Riaz Mamdani, I want to own a home,” is a popular refrain I often hear.

Experts have indicated the market may begin to cool in 2017. However, until then, I would recommend following the suit of pension plans and investing in rental properties. With rents climbing across the country, investing in rental properties now may create the capital you need to purchase a home in 2020.

Building Redevelopment Showcases Calgary’s Undaunted Spirit

Calgary is a resilient city. Born from the Canadian Shield tundra that marks the western side of Canada, the city has grown to symbolize the strong foundation Canada is built on. Hailed for fiscal responsibility and its small-town charm, Calgary has established a reputation for its ability to host world class events, most notably the annual Stampede, known all over the globe as one of the premier summer events in Canada.

In 1988, Calgary became one of only a handful of Canadian cities to host a winter Olympics. Inviting the world to experience Calgarian hospitality endeared the small city with a big heart to the hundreds of thousands of international visitors and even spawned at least two Hollywood blockbusters. The films Cool Runnings and, most recently, Eddie the Eagle, are feel-good stories of perseverance in the face of adversity, which ironically is a familiar story in Calgary of late.

After being battered by the torrential rains that brought the massive floods of 2013, Calgarians were left with the monumental task of cleaning and rebuilding our water-logged city. Few areas were left untouched and those that were, quickly became rallying posts and refuge centers for those who were displaced. 

The entire city collaborated in the massive rebuilding, part of which involved the rapid cleanup of the Stampede grounds to ensure the annual event went off as scheduled. Before we knew it, the city was back on its feet, returning to the bustling prairie city it was before the June rains.

The citywide initiative prompted me to ask myself, “Riaz Mamdani, what can you do to help Calgarians?”

As an avid supporter of charitable organizations in and around southern Alberta, it was easy to step up our corporate wide level of engagement. We routinely support local clothing and food drives and host a variety of events to raise funds for organizations all over Alberta.

However, as a developer, I believe investing in the city’s future through viable, long-term projects can also infuse hope and optimism in residents.

The first post-flood city permit for development was issued to my company, Strategic Group, for 1800 Fourth St. S.W., an iconic building in the Mission area. Despite the area sustaining significant damage during the floods, 1800 (as it is referred to locally) was remarkably unbothered by the deluge of water that immersed the city.  While the water had not affected the building, time had — 1800 had suffered from neglect and was in desperate need of renovation and revitalization.

The unique challenge presented at 1800 was updating the building built in the 1970s, while also creating a building worthy of Calgarians’ admiration, a challenge myself and Strategic Group were ready to accept.

In conjunction with architectural designer Claire Johnson of Manasc Isaac, we have done just that. “The concept of the design is to pull the building together and emphasize the corner, drawing people in and creating a landmark,” says Johnson.

Johnson also commented on the importance and value of reinvesting in the beautiful architecture and heritage of Calgary’s unique buildings. “We have a large existing building stock and it is not sustainable environmentally nor economically to keep building new and discarding the old,” Johnson says.

She also pointed out the immense satisfaction that arises from these restoration projects, from an aesthetic point of view as well as quality of the indoor environment.

The refreshing of the 1800 building has been described as a “compliment to the area”, and the work done on the almost fifty year old building has been called outstanding.

1800 serves as a beacon of resilience in the city and I believe it will illuminate the future of Calgary.

An Alberta executive focused on new hires not lay-offs

Riaz Mamdani, an Alberta executive focused on new hires not lay-offs
Riaz Mamdani, an Alberta executive focused on new hires not lay-offs

CALGARY, ALBERTA—Strategic Group, a Calgary commercial and residential real estate development company, has used the tough economic times in Alberta as a chance to re-align their business focus. Riaz Mamdani, CEO of Strategic Group, has shifted the company’s focus away from office space development to place a higher priority on the rental housing market.

Strategic Group continues to work on a variety of rental property projects in southern Alberta and plans to start at least three more this year.

More importantly, Strategic Group’s realigned business strategy is allowing the company to look at where it must add skillsets to support its business plan objectives.

Strategic Group’s founder and CEO, Riaz Mamdani, has made it his number one priority to ensure that all staff clearly understand the company’s goals, their role in delivering on them and how important to have everyone aligned and working together as a team.

Alberta’s economy has been under pressure over the last twelve months.  So much so that it has caused some companies in the province to downsize and lay off some of their workforce.

Despite the slowdown in Alberta’s commercial real estate market, analysts see the demand for rental housing growing over the next year, which has been a large motivator for Strategic Group’s move toward the rental property market. Strategic Group currently has five apartment buildings under construction and plans to start work on more in the next few months.

Riaz Mamdani believes that it is prudent to be proactive when it comes to the economy and that we cannot simply wait for a potential recovery. Leaders who desire to remain competitive and relevant in the economy must continually strive to meet concrete business goals and, more importantly, must be willing to adapt to new economic environments.

In shifting its business focus, Strategic Group has re-affirmed its culture of accountability and delivery at the company. Each employee is well versed on what their individual goals are and Riaz Mamdani ensures that each executive at his company has the tools they need to achieve their respective goals.

Calgary has faced setbacks before, the 2013 catastrophic flooding described by the provincial government as the worst in Alberta’s history, being the most recent. The resilience of Calgarians has allowed them to persevere in the past and this time will be no different. As Riaz Mamdani and Strategic Group prove, focusing on the future is the best way to ensure Calgary is ready for the next wave of economic prosperity.

Riaz Mamdani’s Strategic Group Return as Title Sponsor of Mayor’s Lunch

Riaz Mamdani’s Strategic Group Return as Title Sponsor of Mayor’s Lunch
Riaz Mamdani’s Strategic Group Return as Title Sponsor of Mayor’s Lunch

CALGARY, ALBERTA — For the fourth consecutive year, Strategic Group, the Calgary real estate development firm, will be the lead sponsor of the Mayor’s Lunch for Arts Champions. The annual event, honours Calgarians who are making outstanding contributions to their community through art, rewarding them with a Cultural Leader Legacy Artist Award.

Seven Cultural Leader Legacy Artist Awards are presented during the lunch gala, which celebrates a range of artists, from up and coming artists to those artists who are paying particular attention to Calgary’s unique cultural mosaic through their artwork.

The Mayor’s Lunch for Arts Champions is a collaborative effort between Mayor Naheed Nenshi and the Calgary Arts Development, the city’s art development authority. The first luncheon was held in 2013 and has been a sellout event ever since.

Riaz Mamdani, the CEO of Strategic Group, is well known throughout the city for his dedication to preserving and enhancing the arts in southern Alberta. It is therefore no surprise that Strategic Group is  the event’s title sponsor with a commitment to promote Calgary’s diverse and robust arts scene.

A celebration of art and diversity is especially timely this year, as Calgary and other Alberta cities face increasing economic pressures.  The 2016 luncheon  is an opportunity for community members to focus on the city’s core values of honouring those who strive to make the city better through art. The midday gathering also serves as a challenge to the city’s prominent figures to continue to invest in the thriving arts community.

“Regardless of the state of the economy in Alberta and Canada, we cannot forget our core values,” Riaz Mamdani explains. “Our collaborative values of education, culture and entrepreneurism have made Calgary a world-class city.  These are the values that we as a community need to continue to support.”

Strategic Group is pleased to be involved with an event of the caliber and magnitude as the Mayor’s Luncheon for the Arts Champions as it continues to speak to the cultural diversity of our amazing city.

The 2016 Mayor’s Lunch for Arts Champions will take place Wednesday, March 16th inside the Palomino Ballroom at Stampede Park.

Finding Business Opportunities Amidst Challenge

Weathering economic instability is a popular topic of late. With the global economy on shaky ground, many of us have been forced to take a long and sobering look at the viability of our business models.

However, what one has to fundamentally realize is that for the savvy and industrious, financial insecurity can be a precursor to success in new sectors and industries.

Thriving in the insecure economic market of today is challenging, especially for Canadians who face the plummeting rate of our national currency. The last 12 months have been a particularly stressful time for the Calgary economy with the oil sector – Alberta’s bread and butter – floundering as the price of oil continues to fall.

As a real estate developer, I have had to refocus the direction in which my company, Strategic Group, is moving. I know that with Alberta’s current economic climate, it’s become more important than ever for Strategic Group to live up to its tagline, “Creating value others can’t by seeing what others don’t”. As the Chief Executive Officer for Strategic Group, I also know it’s my responsibility to lead my team in finding value and opportunity where others don’t.

As the market for commercial properties has slowed, one sector continues to hold promise in the world of Alberta real estate: rental housing. Currently, Strategic Group has five rental property projects underway in southern Alberta and we expect to begin work on at least four more by the summer.

There are a number of points that speak to why it makes business sense to focus on rental housing in Alberta and the city of Calgary.

Calgary has experienced large population growth over the last decade and I expect the population of Calgary to continue to grow, and I don’t think I’m alone in that expectation.

What’s more, the province’s multifamily housing statistics are expected to hit some of their highest levels this year. In Calgary, they are expected to hit their second-highest levels since 1981.

Even more interestingly, last year the Canadian Mortgage and Housing Corp. (CMHC) confirmed in its year end report that Alberta’s rental housing market increased by 3,890 units.

“This represents the second consecutive year the apartment universe increased following declines from 2004 to 2013,” the report states. “Low vacancies in the province over the past three years have contributed to more rental construction. By the third quarter of 2015, the total number of rental starts was already higher than any annual total since 1990.”

It’s true that the rental market is affected by a variety factors. That will always be the case. However, many factors point to the continued strength of the rental housing market in Calgary in the coming years.

Although times are tough, both myself and Strategic Group look forward to unveiling our new units and are optimistic about the future of the city and the province. I am especially proud of my executive team who have been able to refocus their efforts and who continue to find unique business opportunities and value where others don’t.

Why Understanding Net Operating Income and Net Income Is Critical

Starting your own business is an exciting time. You are finally fulfilling a dream and are now your own boss. While it is a thrilling prospect to own and operate your own business, there are some important things to keep in mind come tax time to avoid headaches or penalties.

I am often asked, said Mr. Riaz Mamdani, what kind of advice do you have in beginning a new company?

I strongly advise first time business owners to sit down with a financial planner so they can truly understand the basic elements of business financing. Learning key business terms is a major step in gaining this kind of understanding. I would particularly like to emphasize just how crucial it is that business owners and entrepreneurs know what Net Operating Income (or NOI) and Net Income are, and most importantly, the difference between these two terms.

In my mind, Net Operating Income and Net Income are two of the most important concepts associated with running a business. Net Operating Income refers to the income a business generates after operating expenses have been deducted, but before deducting income taxes and financing expenses. Operating expenses include rent, cost of materials, utilities, shipping and employee wages.

Net Income, on the other hand, refers to the amount of profit that remains after accounting for all expenditures, including expenditures like cost of materials, rent, utilities, shipping and wages, as well as taxes, interest paid, investment income, secondary operational income and payments made for one-time events such as lawsuits, are all considered expenditures.

Investopedia points out an interesting and I think worthwhile note: “Because both figures are subject to manipulation, such as hiding expenses to make a company appear more profitable, it is important to know how each type is calculated. When assessing a company’s viability as an investment, knowing how to calculate net income is infinitely preferable to simply reading the bottom line.”

A business’ Net Operating Income and Net Income figures are absolutely critical company data.  In the event a business performs extremely well and a business owner begins to pursue investors, these outside investors will scrutinize profit and loss statements and a business’ entire balance sheet.  Invalid or inaccurate data or inaccurate accounting will discourage outside investment.  That means that a business owner needs to understand how much profit their business is earning each year, discounting all forms of expenditures.

A business’ Net Operating Income and Net Income not only prove a company’s worth, these are figures that help gauge what a business needs to do to be more profitable and exactly how ambitious it can be financially.

An example of why understanding the difference between Net Operating Income and Net Income can sometimes be complicated. If a business owner uses a bank loan to help finance the business, the interest from these loans is considered an expense and reduces the company’s Net Income. Many first time business owners make the mistake of deducting such payments from the Net Operating Income instead of their business’ Net Income, which affects the bottom line and can cost a business profits.

It’s one more reason why in my opinion it is imperative that business owners have at least a basic understanding of business finance.

Riaz Mamdani sees active community involvement as priceless

I think that community involvement is something that’s in and of itself valuable for any company.

After all, businesses are a function of the communities they operate in, and in my mind, there’s

a mutually beneficial relationship that exists between communities and companies.  Stronger,

more vibrant communities help businesses and business development; successful businesses,

in turn, help their surrounding communities.

In 2001, I founded Strategic Group, a commercial real estate company based in Calgary.  As the

company has grown, I have focused on creating a company culture that values active

community involvement.  The reason for this returns to my belief that there is a symbiotic

relationship and both need each other to maximize their impact.

Over the years, Strategic Group has been involved with organizations like the Project Warmth

Society of Alberta, the Calgary Food Bank and the Calgary Arts Development; we make annual

efforts as well to fun city events like Calgary’s annual Lilac Festival.

Participating in these events and working with these organizations has truly been enjoyable for

myself and my entire team, and I like to think that our contribution has helped in improving our

city and community.

But, other benefits have also come from Strategic Group’s various community involvements.

The advantage of being involved within the community is that you get out of your office and walk

the streets.  Understanding how and what makes our community tick, in an organic way,

positions us to see what others don’t.

I have met many people through community events where we have shared experiences and

conversations that have provided me invaluable knowledge on Calgary and what our city’s

entrepreneurs and business leaders are looking for as far as commercial space.

It is impractical to think you can gain this type of information in a boardroom setting.

What community and charitable events then should business owners decide to participate in?

I think that’s a question with a fairly simple answer.

Participate in events or causes that you as a business owner and your team members are

passionate about.  At Strategic Group, we chose to involve ourselves with the Project Warmth

Society because we are passionate about providing warm clothes and blankets to those that

need them during the winter.  Calgary’s winter months can be particularly harsh, and knowing

that our clothing drives are making a real impact.  A real difference to a child; a mother; a family.

For a similar reason, we’ve supported Make-A-Wish’s Rope for Hope challenges because we

believe in what this organization stands for and for the difference that it makes to children with

life-threatening medical conditions.

Yes, there’s a lot to keep in mind as a business owner, especially if you are a new business

owner or leading a recent start-up.  But, don’t forget community engagement is for you, your

company and your community.  By contributing to a worthwhile cause, you’ll help your local

community, and in the long-run, you’ll help your business by seeing things others don’t.

Lessons learned by property owners in the 2013 Alberta Floods

In June of 2013, Alberta experienced some of the worst flooding in the province’s history.  Affected areas were extensive and included regions along the Bow, Elbow, Highwood, Red Deer, Sheep, Little Bow, and South Saskatchewan rivers.  In Calgary, the flooding caused the evacuation of over 75,000 residents. This ranks as the largest evacuation order in the city’s history.  The Insurance Bureau of Canada called Alberta’s 2013 flooding “the costliest natural disaster in Canadian history,” with property damage in Calgary exceeding $1.7 billion, with another $500 million in lost economic output.

These statistics are ominous however in a disaster of this scale one needs to examine the personal and economic lessons that can be gleaned from an event of this magnitude.

The personal lesson for many Albertans was the demonstration of mankind’s altruistic traits. There have been many incredible and inspiring stories of thousands of people actively aiding friends, family, neighbours and even strangers. The impact has reinforced our community values and has further emphasized what it means to be a caring Albertan.

The economic lessons from this once in 100 year event need to be noted.

As the CEO of a large Calgary-based commercial real estate company, I was acutely aware of the dangers the flooding posed to property in the affected areas. While I was relieved that property damage was not even greater, I recognize that the damage could have been much worse. This more significant economic impact needs to be considered and potentially prevented in the case of a future disaster. Every business must develop a business continuity plan that provides redundant infrastructure for all critical functions. Disaster planning manuals must be created for every significant business addressing matters like employee safety and communication, IT infrastructure, accounting records, banking contacts, asset lists and fan-out strategies. Owners of commercial real estate must implement flood proofing measures and ensure that building operational systems are moved from lower parkade levels to a higher and dryer building elevation. This will take investment and commitment by landlords. I am confident that the benefits of this investment, while hopefully never utilized will provide security in the case that Mother Nature thinks differently.