Deal Structure Matters

Hawkeye Wealth Ltd. • February 25, 2023
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Many factors influence the probability of success for any private real estate investment, including the strength of the market, the quality of the deal operator, and the quality of the asset. However, deal structure is an oft neglected element of risk and return that can lead investors to make poorer decisions and leave money on the table. 

 

We will discuss two common investment structures, individual deals and funds, to help you understand the pros and cons of each and determine which is a better fit for your portfolio.

 

For clarity, we define individual private deals as investments where a specific asset has been identified and put under contract by the operator, with an entity formed for the sole purpose of acquiring that asset. Private funds on the other hand are usually set up with a defined strategy of acquiring multiple assets within the same entity, though those assets haven’t been identified or put under contract yet. 

 

There are multiple reasons one may choose to invest in a private real estate fund, including:



  • Potential redemption options rather than having to wait until an individual asset is sold
  • Built-in diversification due to the fund holding multiple assets
  • Higher degree of passivity for investors as they delegate the responsibility to select which assets they’ll invest in entirely to the fund manager


The pros of investing in a fund are essentially the cons of investing in an individual deal, where redemption options are limited and there is little to no built-in diversification. While individual deals are usually quite passive once you decide to invest, some due diligence to understand the deal before going ahead is highly recommended, whether you do it yourself or rely on companies such as ours. So why might you decide to invest in individual deals and why is this our preferred structure for equity deals with our clients? It mainly comes down to three main benefits:


  • Capital is used more efficiently, often generating higher risk-adjusted returns


Funds rarely have their cash fully invested, which drags down returns. This is for a few reasons. One is that since funds raise money prior to finding properties to invest in, that cash may be sitting for months or even years before being put to work. Another is that some funds offer redemption options, requiring sufficient cash to fund potential redemptions whether they materialize or not. For individual deals, cash is usually put to work quickly and no cash has to be set aside for potential redemptions. This more efficient use of capital results in higher returns, all else being equal. 

 

It is also common for closed-ended funds to get commitments on investment amounts from investors and then only ask for the money as it is needed for deals. These funds often calculate annualized returns only from the time the cash call is made, not from the time of the commitment. This makes returns appear higher because of the shorter amount of time that the cash was with the manager. In practice though, most investors will keep any committed capital in highly liquid and lower risk investments to be ready for any cash calls, likely generating only a nominal return in the interim. As such, many closed-ended funds generate a lower annualized return in practice than in theory.

 

  • No commingling of funds


Another benefit of investing in a variety of individual deals is that there is no commingling of funds. This means that if a particular deal you have invested in performs poorly, there is no impact on your other deals since each deal is in a separate entity. As such, our goal becomes to pick and choose which individual deals have the best potential risk-adjusted returns. 

 

  • Greater control over the assets invested in


Perhaps the biggest benefit of investing in individual deals is we know exactly what we are investing in before doing so, allowing us and our investor group to do due diligence on a deal by deal basis before making the decision to invest. Investing on a deal by deal basis also allows our investors to create a bespoke portfolio of assets according to their individual strategies. 

 

Furthermore, since each new individual deal requires a new investment decision, this strategy forces us and our investors to keep our fingers on the pulse of the market. Not only must we decide if a particular deal is worthwhile, we must also determine regularly whether the broader investment strategy continues to make sense in the current environment or whether we need to pivot. This constant review is something investors are less likely to do when investing in a fund since no new decisions need to be made other than whether to stay in the fund or not. 

 

Something to keep in mind is that pivoting strategies is easy for you, the investor, who just has to change the operator or fund you send the cheque to. Pivoting strategies for operators and funds is much tougher though, as they have often built entire systems and teams around specific investment strategies. As a result, they may be more hesitant to change the strategies they employ, even when the evidence suggests they should. 

 

The ability to pivot with ease can lead to better deal selection and higher risk-adjusted returns over the long run, which is our goal at Hawkeye Wealth. 
 

Which strategy is better for you? 

 

When deciding which structure is right for you, it usually comes down to two main questions. How badly do you need liquidity for your investment and is your portfolio large enough that you can achieve proper diversification across a number of individual deals?

 

Most individual deals are illiquid. As such, you must determine how much of your portfolio you would be comfortable not having access to for longer periods of time, usually at least three years, though often longer. 

 

After determining an amount of capital that you would be comfortable having illiquid, the question is whether that illiquid portion is substantial enough to be able to diversify across a number of individual deals, each with varying minimum cheque sizes. For reference, most of our deals have minimum cheque sizes of $50,000 and $100,000. 

 

If your portfolio is smaller, making you hesitant to take on concentration risk and liquidity risk, investing in public and private funds could be a great option for you. If your portfolio is large enough to achieve some diversification across individual private deals and you don’t require liquidity for this portion of your portfolio, you should consider looking more seriously at investing on a deal by deal basis to potentially earn a higher risk-adjusted return. 

 

We hope you are enjoying the Bird’s Eye View. As always, please feel free to reply to this email or call us if there’s anything we can do to help or you would be interested in working with us on future deals. 

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Investing in Canadian Farmland

By Hawkeye+ Wealth+Ltd. • October 4, 2025
Introduction Canadian farmland hasn’t posted a single annual decline in value since 1992 . Take a second to soak that up. More than thirty years, multiple recessions, inflation spikes, a housing crash and a tech- bubble. Through it all, farmland kept climbing. In a world where many asset classes appear vulnerable to technological disruption or shifting consumer preferences, the core value in farmland is tied to a necessity that will always remain constant. Food. In this edition of the Bird’s Eye View , we discuss the case for investing in Canadian farmland and share the most compelling points and potential risks from our due diligence on this asset class. The Investment Case for Canadian Farmland In our view, farmland has six main features that make farmland investment attractive: 1. Consistent Performance and Low Volatility - A 30+ year track-record of positive annual returns is astounding, even more so when you consider that the average annual increase over that period has been 8.1%. Past performance doesn’t guarantee future returns, but there is merit to the fact that farmland has been remarkably consistent through periods of high market volatility. When considering that the figures above don’t account for any profit from the land, farmland has done an impressive job of delivering returns comparable to U.S. equities, but with a volatility profile that more closely resembles bonds. 2. Natural Scarcity - Most cities are established near fresh water and fertile soil. Thus as populations grow and cities expand, that development inherently reduces the base of potential farmland. While most provinces have some level of agricultural land protection program in place, the fact remains that there is a finite amount of farmable land, and each year there is less of it. 3. Diversification and Inflation Hedge - Farmland has a long track record of holding its value when inflation eats away at other assets. Rising food prices translate directly into stronger farm revenues, which in turn support rental income and land appreciation. Additionally, over the last 50 years, farms have averaged an increase in productivity of ~1.5% per year by adopting new technology and processes (machinery, irrigation, nutrient management), which serves as a natural inflation hedge. Unlike equities or bonds, farmland’s performance has shown little correlation with public markets , giving it genuine diversification benefits. 4. Investor-Tenant Alignment - For anyone feeling exhausted with the rhetoric about ‘greedy developers’, it may come as welcome news that investors and landlords aren’t automatically the bad guy in the farmland space. Research shows that farmers are able to drive higher levels of profitability per acre when renting compared to when purchasing farmland , and that trend is accelerating. While renting doesn’t necessarily outperform ownership over the long-run when accounting for land appreciation benefits, it does improve cashflow. Since farming is capital intensive, renting land allows farmers to allocate funds that would have otherwise gone to land, toward equipment and operations that improve yield and profitability. Since farmers’ profitability depends on sustaining yields, they are naturally incentivized to care for the soil and manage the land well, which not only supports their own returns but helps preserve and even enhance the underlying land value. As a result, the ‘renter’s mentality’ sometimes seen in other real estate sectors is far less common in farming. 5. Comparative Affordability - In housing, the current challenge is that people can’t afford to pay what developers can feasibly build. In comparison, while farms are comparatively less affordable than they were 5 years ago, the gap is far less dramatic than it has been in housing. Farm values and rents have rapidly increased, but the revenue generated by those farms has also substantially increased , which has slowed the loss of affordability. While current affordability levels are still a concern in the space, farmers can still operate profitably at current price levels and as shown on the chart below from Farm Credit Canada , we are nowhere near the peaks of unaffordability that farmers experienced during the 1980’s:

The Affordability Conundrum: Supply Without Returns

By Hawkeye+ Wealth+Ltd. • August 23, 2025
Capital doesn’t flow to markets where demand is slow and supply is surging, it goes to places where demand outpaces supply and prices are rising. That’s not a flaw, it’s the system working as designed, rewarding investment in those markets that most need it.

The Truth about Prefab: What it Can – and Can’t – Do for Canadian Housing

By Hawkeye Wealth Ltd. • July 6, 2025
Canada’s $26B prefab housing bet promises faster, greener builds — but claims of affordability gains don’t hold up under scrutiny.

From Hype to Hard Numbers: The True Scale of Ottawa’s New Housing Push

By Hawkeye Wealth Ltd. • May 31, 2025
Introduction The Liberal Government is in and we are starting to get more clarity on what that means for housing in Canada. In our last article, we compared the Liberal vs. Conservative Housing Platforms , and discussed how the majority of the Liberal housing platform would be positive for housing investors, but that the Build Canada Homes program had the potential to negatively overshadow everything else. One month later, our opinion has softened. The limited documentation available about Build Canada Homes indicates that the government will be (directly) building far fewer homes than we initially anticipated, which has materially lowered our level of concern. Build Canada Homes looks to be far too small to displace private builders or upset private markets. In this edition of the Bird’s Eye View, we review publicly available information on the Build Canada Homes program to determine its scale and potential impact. We then turn to the secondary question of how successful that program is likely to be as we review two of the models that the Liberals have used as inspiration for Build Canada Homes; the Wartime Homes Limited program that saw the Federal Government get directly involved in homebuilding post-WWII, as well as the Singaporean Public Housing model. Build Canada Homes “The Liberal housing plan will double Canada’s current rate of residential construction over the next decade to reach 500,000 homes per year”. Liberal Housing Plan, March 31, 2025 We begin as we so often do with a caveat. It’s important to recognize that there is uncertainty about what this program will look like, as the entire housing plan (at least what is publicly available) is a mere two-page document. The truth is that we really don’t know what this program will look like, even if we know its goals and now have cost estimates. Canada built ~245,000 homes in 2024, which is near the all-time high for annual construction (257,453 units were built in 1974). Getting to 500,000 units by 2036 feels like it borders on impossible, and is potentially much higher than what’s necessary. When we saw the 500,000 homes per year target, alongside the words “deeply affordable,” and the announcement that “the Federal government will get back in the business of building homes”, we saw a very real potential for the heavy disincentivization of private development. If the government is going to compete with private industry while subsidizing costs, why would private industry build anything? Why would private investment fund it? On further review, those concerns are now much smaller than we initially feared. Since we won’t see the 2025 federal budget until the fall , we are limited to the Liberal Housing Plan as well as the Liberal Fiscal and Costing Plan to get a sense for the program itself and how much money the Feds will be allocating to it, but those documents indicate that funding allocations will be small. Here are some of the housing highlights from the Liberal Fiscal and Costing Plan: 

Conservative vs. Liberal Election Primer - Housing Policy

By Hawkeye Wealth Ltd. • April 19, 2025
Introduction Election season is here, and while housing affordability and availability have taken a backseat to how Canada should approach its relationship with the United States, changes to housing policy still feature as central pillars of both the Conservative and Liberal party platforms. What makes their proposed changes particularly notable is that since the 1980s, the Federal Government has played a smaller role in housing compared to Municipal and Provincial governments, influencing markets indirectly through immigration and monetary policy. Those days look to be over, as both parties have introduced proposals that would see the Federal Government take a much more active role. In this edition of the Bird’s Eye View, we review the housing platforms for both the Conservative and Liberal parties, and offer our opinion on how these policies will impact development generally, and real estate investors specifically. Note: We recognize that other parties also have housing platforms, but for brevity, we are only covering the Conservative and Liberal platforms. Policies in Common Between Conservatives and Liberals Before we dive into the novel proposals from each party, we begin with three policies in common: 1. Elimination of GST on new homes Both parties have proposed to eliminate GST on new homes, but there is a massive difference in the size and scope of the two programs:

Analyzing CMHCs 2025 Canadian Housing Market Outlook

By Hawkeye Wealth Ltd. • February 22, 2025
Most investors would be thrilled with the outcomes forecasted in the CMHC 2025 Housing Market Outlook given the level of uncertainty ahead. The question is, how likely is CMHC to be right?

Why U.S. Multi-Family is Likely to Turn the Corner in 2025

By Hawkeye Wealth Ltd. • January 25, 2025
Demand is high and has nearly chewed through the supply overhang in many markets, which should result in rising rents and falling vacancies over the next few years.

The Impact of GDP on Housing Prices: Insights for 2025

By Hawkeye Wealth Ltd. • December 21, 2024
While GDP isn’t a perfect predictor of housing prices, the two tend to run in the same direction. If we do in fact see a decline in GDP from 2024, it would take a unique set of circumstances to see anything more than flat housing prices in 2025.

Population Declines and the Housing Market: What Investors Need to Know

By Hawkeye Wealth Ltd. • November 23, 2024
It doesn’t take a genius to hypothesize that population decreases could cause rental rates and housing prices to soften over the next two years. However, a look at historical data shows that changes in population growth often don’t result in immediate housing price changes

A Poor Man's Guide to Market Assessment

By Hawkeye Wealth Ltd. • September 21, 2024
"We may never know where we’re going, but we’d better have a good idea where we are." - Howard Marks