2007 annual report aveiro investment corp. - First West Properties

During the 2008 fi scal year, the Company has committed to
make principal and interest payments of $335,000 in regards to
the mortgages payable on the Lethbridge Warehouse property.
The Company has entered into leases on that property which
will provide an aggregate of $776,000 of net rent during the
same period of time resulting in excess cash fl ows of $441,000
generated from the Lethbridge Warehouse.
The Company has also entered into a lease agreement for its
Saskatoon Warehouse, which was acquired subsequent to the
year end, which will result in net rent of $240,000 from this
property. The Saskatoon Warehouse is not currently encumbered
by any fi nancing.
CAPITAL RESOURCES
The Company’s capital resources include both equity capital
from the issuance of Common Shares and debt capital secured
by mortgages on properties purchased by the Company. The
Company had made no commitments for capital expenditures at
June 30, 2007. On August 28, 2007 the Company issued 1,238,095
Common Shares to purchase an industrial warehouse property in
Saskatoon, Saskatchewan.
OFF BALANCE SHEET ARRANGEMENTS
The Company did not have any off-balance sheet arrangements in
place at as and during the year ending June 30, 2007.
RISK MANAGEMENT AND FAIR VALUE
The Company is exposed to both interest rate and credit risk.
The Company is exposed to interest rate risk on its variable rate
mortgages payable. It minimizes this risk by restricting mortgages
payable to 75% of the purchase price of the property.
As an owner of real estate the Company is exposed to credit risk
in that tenants may become unable to pay amounts owing under
lease agreements. Management mitigates this risk by carrying
out appropriate credit checks and related due diligence on the
signifi cant tenants.
The fair values of the Company’s cash, accounts receivable,
restricted cash, accounts payable and accrued liabilities, and
mortgages payable approximate their carrying amounts.
RISKS AND UNCERTAINTIES
In evaluating Aveiro and its business, the following is a brief review
of certain of the potential impact different risks and uncertainties
may have on the Company’s operations.
Dependence on Key Personnel
The success of Aveiro will be largely dependent upon the quality
of its management and personnel, including the offi cers and
employees of the Manager which provides strategic management
services to Aveiro (see “Results of Operations - Expenses”).
Loss of the services of such persons, or the inability to attract
personnel of equal ability, could materially affect Aveiro’s business
operations and prospects. Aveiro has not purchased “key man”
insurance on any of its directors, offi cers or key employees, and
has no plans to do so.
Real Estate Industry
All real estate investments are subject to varying degrees of risk
depending on the nature of the property in question. The value
of Aveiro’s investments in its properties is subject to changes in
general economic conditions (such as the availability and cost of
mortgage funds), local conditions (such as the over supply of a
real estate product or a reduction in demand for properties in any
particular area), the attractiveness of such properties to current
and potential tenants, the competition from others with similar
developments and the ability of Aveiro to adequately maintain and
improve its properties pursuant to its business plan at an economic
Aveiro Investment Corp. | 2007 Annual Report | 23