LOCATION: 7899 50th Avenue, Red Deer, Alberta
DATE PURCHASED: November 3rd, 2020
CASH ON CASH RETURN: 7.14% Average over 5 years
COMPOSITE RETURN: 13.9% Average over 5 years
TENANCY: Herc Rentals
YEAR BUILT: 1980
FOOTAGE: 11,550 Sq. Ft.
JOINT VENTURE: Safety First Projects 14 Ltd.
A Commercial Realtor from Avison Young in Edmonton reached out to us to look at a portfolio of Herc Rental and Kal Tire properties in Edmonton, Leduc, Red Deer and Calgary. Initially we passed on the opportunity due to the fact that they wanted to sell all the properties in a group. As time went on we kept in touch with the Realtor and discovered that the Seller did finally agree to split up the portfolio. We initially had concerns about the correlation between Herc Rentals and Hertz Rent a Car who was reported to be in Chapter 11. We discovered by way of a letter from the President of the company that Herc Rentals became a completely separate entity in 2016 and had no financial difficulties. Denise and I went to inspect the property after we obtained an accepted offer and were surprised when introduced to the local Manager that he was most welcoming, engaging and personally showed us the entire property including the roof.
This is another very well-located property on Gaetz Ave, the main artery north and south in Red Deer. This location has been known as an equipment rental property for over 35 years. In addition, the property is located on a corner that affords access from two sides which is a distinct asset for an equipment rental business.
The Cash Return on Investment pencils out to be 7.1% average over the first five years and the Composite Return (distributable cash plus equity gain by paying down loan principal) pencils out to be 13.9% average over the first five years.
This property too should be a great long term holding for our portfolio.