September 2016 Shareholder Update
Dear Azcan Investor,
We are now just over halfway through the extension period on your Promissory Notes. As you may recall, we have been working with Habitribe LLC as our fix and flip manager with a national mandate in the US. They have been focusing in Chicago, Seattle and Florida over the last 18 months. While our investments with Habitribe have been profitable overall (we have averaged a 6% return per flip), the returns are not as strong as they should have been in this environment. As a result, Azcan has made the decision to bring the acquisition, renovation and resale of the homes in house.
Azcan’s US Manager, Scott Clay, performed all of these functions in developing our Phoenix portfolio. After careful analysis over many months, we believe we can manage the portfolio more efficiently and effectively ourselves while reducing ongoing management expenses for investors. We have been active in Chicago since 2014 and we will now have an exclusive focus on Chicago for the balance of the extension period. Focusing on one geographic area will allow us to be more efficient as we manage the portfolio, which should both reduce costs (less travel time and resources, etc.) and increase returns (by being able to focus on one area and have the time and resources in place to manage one portfolio). We have bought a number of homes already and expect a number of sales prior to January 31, 2017, the next interest payment to Note holders, and we look forward to reporting to you on the results.
Some of the reasons we like the Chicago market:
- 10 million people in the greater Chicago area creates many opportunities and the market is active;
- Prices in Chicago are significantly less than many other major US cities allowing Azcan to acquire a larger number of properties thereby diversifying and reducing risk;
- Many areas near the downtown core of Chicago are in the process of being gentrified creating very good fix and flip opportunities;
- The Chicago area has generated 500,000 jobs since 2010 meaning more people can purchase a home and service a mortgage;
- The number of months of supply of houses (measures how long it would take to sell all the homes listed at the current rate of home sales) in the Chicago market has hovered between 4 and 6 months for the last two years. A balanced market is generally considered 6 months’ supply, thereby indicating the Chicago market is balanced to strong, an ideal flipping environment.
Lastly, part of the recovery plan developed last year included the use of short term financing to acquire houses. We have now been able to set up several relationships in Chicago with lenders that will provide this type of financing. This is a key step for Azcan and will provide the ability to acquire more homes and be more active in the market.
Please feel free to contact me directly if you have any questions, concerns or comments. My contacts are below.