What is a sign that a developer is good at their job? When projects continually grow in size and scope, it is a solid hint that the people behind them have a level of expertise. Prism Investments sprang to life when Prism Developments, a successful, Calgary-based commercial property development company had projects so large they were becoming difficult to finance exclusively in-house. Since 2005, Prism Investments has been syndicating funds from private investors to embark on some major development projects. With five complete projects successfully tucked under its belt, and three more in the works, Prism has solidified itself as a worthwhile investment in the property and real estate development market.
Unique syndication model
CEO Ali Ghani clearly understands the development business. A family operation, he and his father, Dr. Abdul Ghani, began their first commercial development project with Prism over 11 years ago. He is eager to explain the difference in the Prism syndication model and the benefits it provides to investors—which incidentally, total more than 1,000 at last count. As with other syndication models, the combined equity of both investors and the company itself is used for large scale development projects then sold for a profit. However unlike other developers who are involved with rental projects or reconstructions of older facilities into newer ones—for example an older building converted into condominiums—Prism is strictly involved in ground up developments. “We acquire projects when they are in their raw and early stages of development,” notes Ghani. “What we do best is development and construction; we build something out of it and then sell.”
The method avoids the perils that can sometimes come from rental projects and allows for an endeavour to come to an actual completion. “We pay out our valued investors at the end of each project with the sale of the entire development, close the books for that company, close the project, and move onto the next project,” says Ghani. Though it is admittedly a niche market, Prism has proven that it knows the process well. Building and developing from scratch is the very thing Prism has been doing, long before the inception of the private investments side of the business.
Value is added to projects for investors from the company’s level of expertise in multiple facets of development. “We add value by whatever we do; purchasing the land at the right time and price, the planning, re-zoning for higher and better use, the engineering, the design and re-design work, and finally the construction or development,” Ghani explains. “We overlook the entire process…it’s essentially changing the state of the land and adding value through our services.” The company has a longstanding relationship of trust with its business partners, contractors, suppliers and industry associates, adding further value to investors.
The second major difference comes from where Prism takes its profits, which is upon project completion. Says Ghani, “At the exit point is where we earn our fees through profit sharing.” This is a marked variation from the usual syndication model, where the development company profits prior to project completion from upfront mark-ups or costs associated with the project. Prism projects are brought to the market at cost, enabling minimum investment thresholds for investors, which for many is another benefit.
Capitalizing on the Calgary market
Calgary is without a doubt a red-hot property market, which is precisely why Prism has stuck with the market it knows well. There are investors from across Canada, but the dominant location of those involved is in the West, an understandable pattern. As there are different regulatory requirements for investments in every province, an Alberta-based company is likely to attract those familiar with applicable rules. And without a doubt, Prism’s core business comes from investors based in Alberta. Explains Ghani, “Most of the people who live in Alberta can feel the vibe of Calgary. This is their backyard, so it is easier to get investors involved in projects that are closer to home.”
Even a booming economy like Calgary was not immune to the recent economic decline. How did Prism weather the storm? Due to its intuitive business model, it managed to remain relatively unscathed. Says Ghani, “We are a very lean and mean company; we carry very little overhead and don’t have too many expenses.” The stifling upfront costs that syndication investments often require were avoided by the strategy of profit-sharing upon exit. Comments Ghani, “It is because of that simple and basic set up that we haven’t been affected much.” During a recessionary period, many companies using traditional business models were unable to attract enough investment capital to follow through on projects. Says Ghani, “Their numbers were so skinny for some while others just did not build enough of a buffer…they just couldn’t make it work.”
Weathering a weak economy
Prism was able to make it work primarily because of those particularly unique points of its syndication business model. “There is no profit built in up-front at the beginning of the project,” Ghani explains further, “We do everything at cost and syndicate all of our projects at their purchase price, which is why we have such an easy time getting our investors in. We take our ‘piece of the pie’ at the end of the game. Because of that, we’ve had much more success than other syndication companies out there.”
Ghani clearly understands the complexity of the commercial real estate sector and takes a sensibly unflustered approach to survival. “The trick to a recession is just to hold on to your property and stick to the fundamentals,” he says, reflecting on his business. “It was really just a ‘holding’ strategy.” Asked to elaborate, he cites the importance of keeping an eye on the backbone elements of the business. “It comes down to doing the basic things to keep the project going. Servicing our debts, servicing our interest payments, consolidating higher rate debts for lesser rates—just riding the wave.”
And that, quite wisely, is his attitude to any recession, noting that the economy undoubtedly picks up eventually. While he concedes that some projects’ sales did indeed slow down during the recent period of economic trouble, there has been a noticeable difference already. “There is a lot of money coming to the real estate sector from both international and local investors,” he says, exuding the confidence of a man who is convinced of a turnaround. “Money is moving and more dynamic. Last year everything was static and now things are in motion again.” The Calgary real estate market is red-hot again and Prism is back in full force with its three current projects.
Current development projects
Currently, the three properties in development by Prism Developments are Prism Place, an LEED gold strata-titled downtown-beltline Calgary office space, Heritage Hills Plaza, a retail/office/gas-station/C-store/carwash development set to be built alongside the busy Highway 1A in Cochrane and lastly Balzac Commercial Campus, a 160 acre commercial, retail, business, and industrial land subdivision project in Balzac next to the CrossIron Mills. A syndicate investment always carries a risk, in particular with commercial developments, as there is never a guaranteed return on investment. In the past, however, Prism has fared quite well with its projects, a promising sign for future investors.
The Prism philosophy
Prism has a philosophy that investors should be aware of the project’s developments, good or bad. Transparency, honesty and an open door policy with valued investors is of the utmost importance for the business. Says Ghani, “We have been entrusted with monies from our investors …we want the investors to have access to any and all the information they need.” He emphasizes the importance of trust and honesty. “We strictly comply with the various rules and regulations that are in place to protect and safeguard our valued investors. We are no different than a publicly traded company—without being on the stock exchange,” he explains. The heavy regulation, he argues, is a necessary element in the marketplace, and benefits both sides of the table “At the end of the day we are in a partnership with our investors. We both have our hard earned money on the line, so it is crucial that we are very honest, transparent and always maintain open communication.”
Prism Investments have a successful 11-year history in the Calgary commercial real estate market. In a high risk market, the company has had some impressive developments garner significant returns. For the future, Prism will continue to work toward new projects and foster positive relationships with each and every investor. And as for growth plans? It has an eye on bigger projects, but the Calgary market is undoubtedly our forte. Says Ghani, “We’re going to stick to what we do best and where we do it best, which is exactly that.”