QUOTE (thomasbeyer2000 @ Feb 5 2008, 01:20 PM) We use OlympiaTrust .. and we use 2 offering memorandums !
One is for the RRSP @ 5% .. a subsidiary of a public company issues a bond (let`s call this company A) .. company A then lends this money at 5% to company B, and arms-legth transaction / loan, where you the investor (not the RRSP) invest 10 cents for every $100 in bonds .. so for a $50,000 RRSP investment or 500 bonds you would invest $50 into company B as shares. Company B invests / buys LP units in our apartment building LP. The shares in company B will provide the equity upside, if any, paid as dividends (not capital gains).
Since these are then both officially securities (i.e. a non-guaranteed return), it has to be registered with the various security regulators, and they are all NOT GUARANTEED with various risk disclosures and risk disclaimers.
Timeline is usually 5 years minimum.
Cost to the LP is about $30,000 to set this up .. so a sizable amount has to be raised to make this worthwhile. We`re raising $15M right now, probably about 20-25% will be in the RRSP pipeline.
So, it is "fractional apartment building ownership"
2nd option, for a fixed return, would be a (syndicated) mortgage, a liability and not a security. We chose the former option, but the latter is also used by some firms. A syndicated mortgage assumes an existing buidling and a willing 1st mortgage lender .. often not the case as we often don`t have a building yet when we raise funds. A mortgage woudl work AFTER the fact, once you own an asset, and THEN add a 2nd syndicated mortgage !
Wow... LOTS of great info in there... I`ll file that away until we`re a bit bigger I think
We`re trying to do our first RRSP 2nd and I`m loading up on info to field questions I`ll undoubtedly be asked.
That does sound like a brilliant way to provide your investors with the best of both worlds (unless I`ve misread it) fixed rate of 5% plus an equity upside (although not guaranteed (so it`s a security)) OR a guaranteed fixed rate syndicated mortgage (liability).
Has the first option made it past the CCRA, with the RRSP funds untaxed by the investor if they choose to go elsewhere after the term has expired?