2nd Quarter Newsletter * July 2017
We are delighted to present the second issue of The Centurion for 2017. In this issue, we feature two articles from Centurion President and CEO Mr. Greg Romundt, one on the movement of Canadian interest rates and the other a fitting update on Centurion. 

This issue also contains information about proposed changes to the REIT's Declaration of Trust and revisions on our redemption and account minimums, together with fund updates for the second quarter of the year. In our corporate news, we share a recent media article on Mr. Romundt, our latest volunteering activity, senior appointments, as well as our executive management's participation in a  panel discussion during AptCon 2017 held June 5th and 6th in Toronto. 

We hope you'll enjoy the second edition of our newsletter for the year and we look forward to sharing more exciting news in upcoming issues.
Where Interest Rates Are Going and Why
By: Mr. Greg Romundt
"There has been a lot of commentary lately that interest rates have finally, at long last, turned higher now that the Bank of Canada has increased rates, and that the US Federal Reserve seems intent on continuing to increase rates as well. The belief seems to be that we are now on a path towards "normal" interest rates."

In his insightful article, Centurion President and CEO Greg Romundt analyzes why, in the short-term, Canada will experience increasing interest rates, which will be short-lived. He also stressed that the long-term trend of decreasing interest rates and ultimately, negative interest rates, remains intact.

Centurion Update
We are only halfway through the year but much has happened in Canada's economic and political landscape that undoubtedly affected the real estate industry.
 
Given these developments, Mr. Greg Romundt shares his insights on the current state of the market and how Centurion leverages on these opportunities to continuously provide income and stability to investors.

Annual General Meeting
The Annual General Meetings (AGMs) for Centurion Apartment Real Estate Investment Trust and Centurion Real Estate Opportunities Trust will be held in Toronto on September 19, 2017.
 
Historically, Centurion's business strategy has been to find niches and exploit them by allocating capital where the opportunities were best -- smaller markets, smaller buildings, student housing, mezzanine lending, and new construction. Management feels it again needs to adapt to shift tactics to adopt to market conditions which constrain opportunities for return and to manage risk.
 
At the AGM, Centurion will be seeking two adaptations to the Declaration of Trust of Centurion Apartment Real Estate Investment Trust ("REIT").
 
The first adaptation relates to the REIT's mortgage lending portfolio. Currently the REIT has operated under the constraint of having a 20% limit on these types of investments. This is why Centurion Real Estate Opportunities Trust ("REOT") was originally developed -- to permit the REIT to participate in what Management saw as an attractive opportunity with a broadly diversified portfolio. REOT has grown significantly and management continues to believe that there are substantial growth opportunities in this area. Further, Management believes that the risk/reward metrics have shifted in favour of debt investments over equity investments in today's environment. As such, Management intends to seek a change at the AGM of Unitholders to remove the mortgage investments constraints to allow management to position the portfolio for the best opportunities on a risk/reward basis.
 
The second adaptation concerns the REIT's geographical constraints inside Canada. Management believes that there are significant potential opportunities for portfolio growth in the U.S. The U.S. is a market many times larger than Canada and one that trades much more actively (in part due to taxation advantages in the U.S. relative to Canada). While no transactions are imminent, management intends to seek a change at the AGM of Unitholders to allow for expansion into the U.S. on an opportunistic basis.
 
Management believes that it needs to adapt its tactics to market conditions on a continual basis to position the portfolio for success and to reduce risks in the long term. Management believes that these changes will help Centurion achieve these goals.
FUND UPDATES
REIT
  • The REIT NAV as at August 1, 2017 is $13.385, a 5.5% increase from July. 
  • It  is  difficult for t he REIT  to  find  property investments that meet its return requirements .
  • The Trust continues to improve operating margins of existing properties.    
  • Ontario's recent 25% Hydro discount has benefited the REIT's property operating margins.
  • Despite the recent 25bps increase in interest rates, the REIT has been able to decrease its debt financing costs.
  • Due to the very limited number of available units, particularly in Ontario, the REIT's average yearly tenant turnover rates have declined by about half.
  • The fund is able to adjust rents to market rates for new move-ins.  
REOT
  • The REOT NAV as at August 1, 2017 is $11.014, a 1.3% increase from July. 
  • Of REOT's $378 million in committed loans, $43 million were funded in Q2.
  • For the 1st half of the year, REOT saw $14 million in repaid loans.
  • As bank lenders scale back their commercial mortgages books, the Trust is being presented with more first mortgage financing opportunities at very attractive rates.
  • REOT's loans with equity participation are expected to continue performing well. 
CFiT
  • The CFiT NAV as at August 1, 2017 is $10.00, unchanged from initial offering price. 
  • CFiT's first non-real estate loan in the US medical clinic consolidation space is performing as expected.
  • CFiT is being well received in the advisor community with the Trust now approved at 13 dealerships and with a number more engaged in due diligence.
  • Deal flow is robust and the Trust is currently in discussions to syndicate loan opportunities with institutional co-investors.       
  • The Trust is currently weighted approximately 50% to corporate loans and 50% to real estate. 
New Redemption and Account Minimums
  • Minimum redemption amount: $1,000
  • Minimum account size to be maintained on accounts opened prior to August 2017: $5,000
  • Minimum account size to be maintained on accounts opened after July 2017: $25,000
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IN THE NEWS
Centurion President and CEO Greg Romundt on Real Estate Professional's Hot List 2017
Our very own President and CEO Greg Romundt was featured as one of the 75 "industry heavyweights" who help shape the real estate industry today. In the article, Mr. Romundt talks about the role of real estate agents in making off-market deals possible. Read the full article here.

Real Estate Professional (REP) is KMI Media Ltd.'s new online publication dedicated to Canadian real estate agents, brokers, realtors, and representatives. REP's annual Hot List is a collection of the most influential individuals/partners in Canadian real estate.
CORPORATE NEWS
Centurion President and CEO Greg Romundt and VP for Mortgage Investments Stephen Stewart at AptCon 2017
Held on June 5th and 6th, the 6th Annual North American New Apartment Construction and Mixed-Use Symposium and Expo (AptCon 2017) brings together North America's  experts in n ew apartment construction, mixed-use, multi-family residential, and student housing sectors  to address critical and timely issues in the industry today.

On day 1 of the event, Centurion President and CEO Greg Romundt was one of the panelists in AptCon 2017's "Valuation Panel: So, What's A Newly Constructed Apartment Building Worth?" Together with other industry experts, Mr. Romundt discussed  how buyers and sellers need to shift their perspective when buying and selling old versus new assets.

Our Vice President for Mortgage Investments and Joint Ventures Stephen Stewart presented during the "A Financier's Perspective: Financing New Apartment Construction, Repositioning, and Intensifying in Canada" panel on day 2. The presentation focused on understanding the flexible financing options that are available to real estate developers in today's competitive market.
Centurion Shares the Warmth of Summer in Scott Mission
On June 27, Centurion employees helped serve hot lunch meals to the needy at the Scott Mission on Spadina Avenue, Toronto. 
 
The Scott Mission was founded in 1941 and is a non-denominational Christian organization responding to the needs of the poor, homeless, abandoned, and vulnerable of all ages. 
 
SENIOR APPOINTMENTS
Clint Kooger
Director of Finance

Mr. Kooger has over eight years of senior finance experience supporting public and private real estate companies focused on development, construction,  and asset management within the GTA and across Canada. In his most recent role with a small private asset management company, he implemented new processes, controls, and systems to support over $400M of Assets Under Management growth in under two years. 
 
Prior to this role, Mr. Kooger held positions at Dream Unlimited Corp. and Minto Group Inc. as Corporate Controller and Director of Finance, respectively, supporting both companies in achieving significant growth milestones while improving reporting quality.  Earlier in his career, Mr. Kooger was an Audit Manager with Deloitte for over eight years servicing global clients in real estate, technology, telecommunications, and manufacturing. 
 
Mr. Kooger is a CPA, CA and a member of the Charted Professional Accountants of Ontario. He holds a Honours Bachelor of Business Administration from Wilfrid Laurier University.
OUR PORTFOLIO
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