Triumph Real Estate Investment Fund I and II 2019 Q3 Report

31/10/19

If I had to summarize Triumph Real Estate Investment Fund I activities during the first three quarters of 2019, I can clearly say that the fundamentals upon which we have built the Fund are working.

One such fundamental that we have continually emphasized is “we acquire only multi-tenant properties”. One of the main reasons for this philosophy is that even in times where we have a vacancy within a property, we will always have enough income to pay the Mortgage, Property Tax and other expenses related to the property from income from our remaining tenants. While this can result in lower income from net rents until we re-lease vacancies, we are able to comply with our financial obligations to our lenders, the municipality, and ultimately our investors.

Over the past 6 months we have focused on leasing our vacancies as well as renewing important tenants in our various properties.

Renewed Tenants include:
Rumor’s Pub at Triumph Bell West Ranch in Phoenix area;
GA Telesis in Triumph Panorama in Denver area; and
Gorgio’s Pizza place at Triumph Carling in Ottawa.

New Tenants:
Jersey Mike’s
Smokez City
Edward Jones
Health New Medical

We are pleased to report that we have made great progress decreasing vacancies and increasing occupancy throughout our portfolio. For example, in Triumph Panorama Place in Denver we experienced 27.5% vacancy after two large tenants left. Our leasing broker in Denver has done a great job re-leasing the vacant spaces and now we are at 96.4% occupancy. Our hope is to be fully leased by the end of fall. As you all know there are costs associated with renewing tenants, and getting new tenants into our buildings. Such costs include, demolition, constructions, real estate fees and tenant improvement allowance. These costs are paid from net revenue, and as such our last two distributions were impacted by the cost associated with re-tenanting our vacancies. Once all new tenants start paying their full rent, our distributions will bounce back to previous levels.

A second fundamental we have highlighted to you is the need to diversify to different markets; not have all our eggs in one geographic basket. Our portfolio is comprised of 219,074 sq. ft., where the overall vacancy is 9.37%. However, when analyzing the vacancy per location, it is not surprising to learn, that as a result of Calgary’s recession, our South Airways property in Calgary represents 5.37% of the overall portfolio vacancy, and all other 8 properties combined have 4.00% vacancy.

The last fundamental I think we can all appreciate is commercial real estate is a long-term investment. Adding value by leasing vacancies as well as fixing the property and increasing rents takes time. As commercial real estate leases are long term leases (usually a 5-year term), you need patience and persistence to make it work, and the management team of the Triumph group of Funds adheres to this principle – Patience and Persistence, whilst strictly maintaining discipline to its fundamentals.

As previously reported, we have listed Triumph Bell West Ranch in Phoenix and Triumph King Street in Spruce Grove for sale. The two properties are performing well, and we believe the markets are strong enough to find buyers. We previously had Triumph Bell West under contract however the buyer couldn’t secure bank financing and had to pull out of the deal, so we have returned to the market to find a new buyer. Triumph King Street is currently under contract with the City of Spruce Grove and we anticipate a sale pending conclusion of their due diligence.

Other news includes a mortgage renewal at Triumph South Airways in Calgary.

Lastly, we acknowledge our last distributions for Q1/Q2 2019 were late. There were unanticipated variables which lead to this, and we will ensure such have been mitigated in order to avoid such delays in the future.

Triumph Fund II

On September 23rd, 2019 we acquired our first property in Triumph Fund II in the Greater Denver Area, Triumph Hillcrest Plaza in Northglenn. It has been a very slow process acquiring this property. The main reason for the lengthy process has to do with a very minor environmental contamination that needed to be resolved to our lender’s satisfaction. The property is comprised of approximately 34,000 sq. ft. of mixed use commercial and office, majority is main floor retail shops with some second-floor offices. Major tenants are: Budget Rent A Car, Fast Signs & Santiago’s. Our first distribution from this property will be Q4 2019.

We keep on looking for properties in Ontario, Alberta and Saskatchewan as well as in the US, and we keep focusing on our entire due diligence process without any short cuts as we always remember the phrase “shortcuts are written in blood”.

Regards,
TRIUMPH REAL ESTATE INVESTMENT FUNDS

Suite #200,
407 – 8th Ave SW Calgary, AB
Canada T2P 1E5
Phone:
403-290-0178
Fax: 403-262-1314

Triumph Real Estate Investment Fund II was created in order to offer investors the opportunity to strategically invest in multi-tenant industrial, retail and office buildings alongside a strong and experienced management team with over 40 years combined experience.

The Fund will focus on identifying undervalued and undermanaged properties located in Ontario, Saskatchewan and Alberta in the Canadian Market, as well as Texas, Arizona, Colorado, Nevada, Oregon and Washington in the U.S.A. Market.

To learn more about
Triumph Real Estate Investment Fund II:
Visit our website

David Wallach, CCIM
President

Office: 403-290-0178
Fax: 403-262-1314

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