The trials of running a real estate investment firm during a pandemic

Running a cross-border real estate investment business isn’t without its challenges during the best of times, but throw in a pandemic and travel restrictions, and things become really complicated.

Such was the case for Ottawa-based Mada Partners, which raises capital from Canadians for developments in Philadelphia. Mathieu Laquerre, the company’s president, and David Capra would typically visit their job sites, which ranged from flips and rehabs to multi-unit apartments with anywhere from six to 72 units, south of the border every quarter, however, when the COVID-19 pandemic hit they were forced to become creative.

“For a full year we haven’t been able to see our projects and show people what we do, but for the first time we did a virtual tour through zoom with about 35 people and we introduced them to some of our partners in Philadelphia, from real estate agents and brokers to our developer, who put on a hard hat and walked the streets of Philly,” said Capra, Mada Partners’ vice president.

“We showed them some buildings that were under construction and some that were completely constructed so they could see the work we were doing. One way we tried to mitigate the effect of COVID is by finding a way to show investors and prospective investors what was going on down there with our business.”

A crucial aspect of what Mada Partners does is transform C-class neighbourhoods into B-class neighbourhoods. In other words, their projects spur gentrification and breathe new life into undesirable locales. Despite the global health crisis, Mada will complete eight or nine projects this year, and another 20-25 in 2021.

The pandemic provided Laquerre and Capra the opportunity to fine-tune facets of their business that they’d previously been too busy for.

“For 2021, we’ll have better structure to do business in the US,” said Laquerre. “We’re investing in new systems for our business to be more accountable and implemented a CRM and accounting software. At the end of the day, we’re surrounding ourselves with better experts to help us scale business. One thing I enjoyed about COVID is we were on pause for three months and it gave us an opportunity to manage our daily activities.”

The duo have built a stronger partnership with their Philadelphia-based developer, Argo Property Group, because of how much more they have had to rely on each other with travel becoming difficult.

“We’ve got an even stronger relationship with our developer and our transparency is three to five times better than in the past because of the new norm,” continued Laquerre. “You need to let go of the micromanaging and trust the process, trust the people, and trust the product that you’re going to be putting out.”

Raising capital to be sent across the border is an understandably chary endeavour, but closer to home investors needed reassurances that the real estate market would still yield promising returns, albeit perhaps not in the near term.

“From the point of view of the pandemic, it got easier because there were more deals out there stemming from the fear in the marketplace,” said Matt Elkind of Connect.ca Realty and Marco Property Management. “COVID is temporary and once it’s over the world will return to what it was before, including the real estate market. Toronto real estate investors had been waiting for a correction in the market for some time, but it doesn’t come with perfect economic growth. It took a headwind, but that also came with opportunity.”

For his investor clients, Elkind noted that while rents in Toronto have declined, he reminded them why they own investment properties.

“You’re going to have a short-term pullback, but you don’t buy a property for what it’s going to earn you in 2021, you buy it for what it will earn you over the life of the ownership,” he said. “The long-term fundamentals in GTA real estate are stronger than they’ve ever been before. The short-term ones are arguably worse, but it’s virus-driven, not fundamental-driven. That’s the conversation I’ve been having for nine months.”

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