By Zoe Hardowa, Communications and Marketing Manager at Durum Capital Inc.
Calgary-based company, Durum Capital Inc. stands tall as an asset management firm, navigating the intricate world of private and public markets, catering to a diverse clientele including third-party brokers, individuals, families, high-net-worth investors, and trusts. The company thrives on the patronage of savvy, independent thinkers who understand the value of original thought in wealth creation and retention.
At the heart of Durum Capital’s philosophy lies a profound belief in the transformative power of businesses and innovation that propels overall societal progress. The firm doesn’t just invest in enterprises; it invests in the visionaries driving these enterprises forward. One shining example is the Durum Industrial Real Estate Investment Trust (REIT), a mutual fund trust that has steadily grown to manage assets worth $123 million since beginning in 2017.
Durum Industrial REIT: Driving Success in Western Canadian Industrial Real Estate
Under the guidance of Managing Director Simon Reddish, a seasoned professional with over 15 years of expertise in financial analysis, asset management, development, and leasing within the real estate sector, the Durum Industrial REIT has established itself as a standout player through strategic investments in Western Canadian industrial real estate. The success of the REIT can be attributed to its methodical approach, which includes the adept management of an existing portfolio, expansion through well-planned acquisitions, and the distribution of quarterly returns to unit-holders from operational cash flow.
Strategically positioned, the Durum Industrial REIT is poised to seize opportunities arising from the increasing demand driven by the surge in e-commerce, local production, and the robust economic growth witnessed across the prairie provinces over the past decade.
Economic Outlook: Alberta’s Growth Story
Durum Industrial REIT’s success is closely tied to the economic prospects of the region it serves. According to the Royal Bank of Canada’s report in September 2023, Alberta was expected to lead in economic growth at 2.2% for the year. The stability in the energy sector, supported by the Commodity Price Index, added to the positive outlook, with energy prices predicted to stay favourable despite anticipated increases in interest rates and inflation.
Looking at the Canadian Industrial Market, recent data from 2021 and onward highlights a significant shift in vacancy rates and net rents, underscoring the appeal of industrial real estate. In Q2 2023, the vacancy rate was only 1.2%, and net rental rates stood at $14.03 per square foot, a marked improvement from 2021’s 2% vacancy and $9 per square foot. This resilience and growth potential are further evident in rising capitalization rates, outperforming other asset classes like multifamily.
Durum Industrial REIT’s Investment Approach
The success of Durum Industrial REIT can be attributed to a meticulous investment approach:
1. Buy Right: Acquire properties below replacement cost in markets with potential for value growth.
2. Strategic Upgrades: Make thoughtful investments to improve building conditions and manage the capital structure efficiently for lower debt costs.
3. Strong Partnerships: Build solid relationships with high-quality tenants to ensure business longevity and portfolio stability.
Performance Metrics and Investor Alignment
Durum Industrial REIT aims to provide stable returns of 8-12% per annum, net of fees, serving as an inflationary hedge and income-producing asset class. With an average return on equity of 9.8%, a loan-to-value ratio of 65%, and an average capitalization rate of 7%, the REIT has demonstrated financial strength and stability. Lease expiries strategically align with mortgage maturities over the next 5 years, and the pay-out ratio has remained below 100% over the past 2 years, affirming the REIT’s resilience in the face of current inflation and interest rate challenges.
Importantly, the commitment of management, directors, and affiliates is evident through their substantial personal investments, exceeding $12 million in the fund. This alignment underscores a shared belief in the REIT’s mandate and exemplifies a commitment to success.
Conclusion: A Bright Future for Durum Capital Inc.
Durum Capital Inc. and its flagship Durum Industrial REIT exemplify a forward-thinking approach to wealth management, grounded in the principles of innovation, strategic investment, and unwavering commitment to client success. As economic landscapes evolve, the firm’s focus on industrial real estate in Western Canada positions it as a key player in driving prosperity and stability in the ever-changing financial world. Durum Capital Inc. stands as a testament to the enduring value of astute investment strategies and a commitment to long-term success.