Quarterly Updates

Q4-2020

We are pleased to provide this update for REALnorth Opportunities Fund (the "Trust").

The residential property market in Fort St. John continues to strengthen amid the current COVID 19 pandemic. Impacted by the long drawn out bear market for oil and gas, Fort St. John’s economy has really started showing signs of recovery. Over the past few months Fort St. John has become not only the city with the lowest unemployment in British Columbia, but also one of the lowest in the entire country.

Economic strength has been driven by a number of factors. With gas prices continuing to move steadily higher over the past year, the recovery began with an increase of drilling activity in the Montney Formation. Since then, BC’s Premier, John Horgan, has recommitted to completing Site C and construction activity has ramped up. Area pipeline construction activity has also ramped up significantly and just last week Louisiana Pacific announced the re-start up of the Peace Valley OSB mill after being closed for over a year.

REALnorth is optimistic that the increase in job opportunities will translate into increased demand for homes. The close of February has seen positive signs as the number of housing units sold increased by 120% over the same two months in 2020 and average prices have increased $10,000 over January 2020. According to local realtor data and estimates, the real estate market is showing signs of inventory reduction, which is expected to lead to a balanced market by summer, and an under-supplied market change favouring sellers by winter of 2021.

PERFORMANCE SUMMARY

On January 8, 2020, FSJ Residential Development LP (“FSJ Residential”), which is related to the Trust by virtue of having a general partner director/officer in common, purchased 13 of the Garrison Landing lots for $1,236,958, in order to provide the Trust with sufficient funds to repay its mortgage debt obligation. These lots had a carrying value of $1,171,573 as of December 31, 2019. FSJ Residential has begun to build homes on these lots in order to press forward with the Garrison Landing subdivision and thus create positive momentum that will jumpstart the sale of the remaining lots held by the Trust.

On November 27, 2020, the Trust, through its subsidiary, WCPG VII LP, sold one lot at Garrison Landing for a sale price of $95,000 less standard closing costs and adjustments.

PROPERTY HIGHLIGHTS

Carter Industrial Property, Prince George: We sold this asset on August 30, 2018 for $6.75 million. This profitable sale provided the Trust with capital that was used to refinance debt obligations on Trust assets and for other working capital needs.

FSJ Industrial Property, Fort St. John: This asset was originally comprised of approximately 17 acres of industrial property and included four level lots with rail access available. Each industrial lot may be sold in its current condition or further developed with either build-to-suit options or lay-down yards for industrial users depending upon market demands. On March 26, 2020, the Trust, through its subsidiary, FSJ Industrial, sold one of the four lots that comprise the BCR Lands for $650,000 less standard closing costs and adjustments. The Trust continues to market the property and assess opportunities to divest this asset.  

Aurora Acreage Property, Fort St. John: The property is currently zoned as part of the Agricultural Land Reserve; however, the City of Fort St. John has expanded its northeast boundary to include the Aurora Acreage Property. The Trust continues to lobby for zoning changes that will permit residential and commercial development on the acreage, which management believes has the potential to significantly enhance the property’s value.

Garrison Landing Residential Property, Fort St. John: Garrison Landing is a residential development which is being developed in five phases and will generate, in aggregate, approximately 153 single family lots. Two phases comprising 55 subdivision lots are substantially complete and 40 of those lots have now been sold.

DISTRIBUTIONS AND THE MINIMUM RETURN

As a reminder to unitholders, the Trust intends to declare distributions on a periodic basis. Trust unitholders are entitled to a minimum non-compounded annual return of 7% on the net equity then outstanding and a return of capital before any return is paid to the Master GP.

REALNORTH TRUST UNIT PRICING

As at the most recent valuation date of December 31, 2019, each of the Trust’s units have been priced at $649 per Unit. This pricing is based upon a third-party report in accordance with the Client Relationship Model – Phase 2 (“CRM2”) requirements.

The decrease in the value from $933 at the end of 2018 to $649 was due primarily to the economic downturn in FSJ in 2019 and the scale down in operations of both the LNG project and BC Hydro’s Site C Dam.

If your REALnorth units are presently listed as a zero amount in your investment dealer’s client account statement, please direct your investment firm to the valuation page on our website for the most up-to-date valuation report.

More information about REALnorth Opportunities Fund can be found on our website at www.realnorthfund.ca. Our public documents are also filed on SEDAR at www.sedar.com. Should you have any questions, please do not hesitate to contact our office or your financial advisor.