Avenue Living’s 2018 Year In Review
2018 has been a year filled with landmarks for Avenue Living Asset Management. We had a robust year of acquisitions, including multi-family units in three new markets, bringing the number of markets in our portfolio to 18.
This year, we far exceeded targets and raised $225 Million in new capital. This capital has enabled us to invest in both portfolio growth and enhancements across our management platforms. In May, before the year was half over, Avenue Living reached the major milestone of $1 Billion in assets under management. This achievement was not only a key moment in our company history; it was a significant landmark that established us as a notable presence in the national real estate industry. By December 2018, just seven months later, we experienced still more significant growth.
While 2018 experienced continued headline risk and uncertainty related to the investment temperament in Canada, the Prairies, and the Oil & Gas industry, Avenue Living saw one of our best years yet. This was due primarily to the positive economic factors that influence multi-family and workforce housing demand, including increasing interest rates, changes in government mortgage regulations, minimum wage increases and positive net migration to the Prairies. The results of these factors influenced our continued growth in occupancy and rental rates year over year.
CMHC’s October report highlighted the underlying market fundamentals supporting the positive momentum we experienced this year. Avenue Living’s core portfolio trends were further bolstered by capital investments in our markets. In 2018, Avenue Living invested over $25 million in building improvements, and we continue to commit further investments in the Prairies. These improvements have enabled the portfolio to outpace the broader market’s rent growth trends.
Today, Avenue Living is one of the largest private real estate owner/operators in Western Canada, with $1.2 Billion in assets under management across three investment platforms. Avenue Living’s portfolio includes 8,000 multi-residential units, over 400,000 square feet of commercial space and more than 23,000 acres of agricultural real estate.
We anticipate significant growth momentum in 2019, and we are on track to acquire another 3,000 multi-family units by the end of the year. We have already identified a pipeline of these properties, located primarily in the Calgary, Edmonton, Red Deer and Regina markets.
I’ve included more details below in our annual Year In Review.
Wishing you and yours a prosperous New Year!
Anthony Giuffre, Founder and CEO, Avenue Living Asset Management
$225 Million in Equity Raised in 2018
At the beginning of the year, Avenue Living initiated an equity raise with a target of $75 Million. However, due to robust investor interest and traction, it surpassed expectations by more than double. In total we accumulated $225 Million by the year’s end across the platform, in three investment vehicles: the Avenue Living Core Trust, the Avenue Living Opportunity Trust, and the Avenue Living Agricultural Land Trust.
We have deployed the new capital accretively across the Avenue Living management platform, better positioning our infrastructure for future growth. Equity has also been deployed for de-levering and strategic acquisitions in existing and new markets. Our 2019 strategy continues to focus on portfolio growth and investing in the business platform. Currently we are stewards of $475 Million in equity.
This strong investor momentum shows no signs of slowing down, and is a testament to investor appetites for alternative real estate investments. We’re targeting to raise $250 Million in the next 12 months, across the platform, as we continue to invest in multi-family assets in the Prairies. We see significant opportunity to continue creating value, generating additional cash flow, and creating new jobs.
8,000 Unit Milestone, Totaling $1.2 Billion AUM
Avenue Living Asset Management rounded out the year with a new milestone. We now own and operate 8,000 multi-family apartment units across the Prairie provinces, increasing by 1,800 units since the beginning of the year.
This new landmark was reached thanks to another milestone: the largest purchase in the history of our organization. In December 2018, Avenue Living acquired a townhouse portfolio in Edmonton for $43.5 Million. The 280 units are situated on 17 acres of land.
We continue to see attractive acquisition opportunities across many of our existing markets. Growth enables us to continue scaling our management infrastructure, which enhances efficiencies and returns for investors.
Increased Employee Base to 400
In 2018, Avenue Living increased our employee base by 50% to 400 people across the platform. Not only did we add to existing teams, we created key new roles across various levels in the organization to bolster sales, operations, and corporate functions. These additional and new positions are another progression step as our organization grows in sophistication and expertise. With projected acquisitions of 3,000 units in 2019, we are preparing for growth from a business operations standpoint and increasing benchmark strength for existing property management teams.
$25 Million Invested in Capex
Capital improvements have always been fundamental to the Avenue Living platform, and this year was no different. Even though a massive, large-scale renovation program worth more than $85 Million was completed in 2014 – 2017, Avenue Living continues to add value to our assets and improve building quality for tenants. 2018 saw $25 Million invested in capital improvements on 113 buildings across the portfolio. Edmonton and Saskatoon were strategic priorities, where nearly 50 buildings experienced improvements.
In-suite renovations included kitchen and bathroom replacements, with many buildings seeing brand new roofs and full resurfacing of parking lots. In 2019, we will continue evaluating and completing strategic capital projects to maintain and enhance value to assets.
Rents Increased by 10%
2018 saw a rent increase of 10% averaged across the entire Avenue Living portfolio. Not only was this momentum in line with the trend reported in November by the Canada Mortgage and Housing Corporation, our numbers exceeded the industry average due to the significant investments we made in our portfolio.
CMHC’s Alberta and Saskatchewan market analysis reported improvements in vacancy rates and upward pressure on average rents across both provinces. Employment rates and migration levels into the Prairies are also improving.
As reported by CMHC, Alberta saw a strong vacancy rate decrease year over year, from 7.5% to 5.5%, while average rents in Alberta increased by 2.5%. Similarly, Saskatchewan experienced an overall decrease in vacancy from 9.3% to 8.7%, while rents increased moderately by 0.1%.
New Technology Improvements
2018 was a year of many technological and communication improvements across the company, from the website and social media channels, to electronic leasing and online booking capabilities.
The Avenue Living Communities website was given a refresh, making it more modernized and intuitive for new clients to search for apartments, and more efficient for current clients. Existing social media channels were re-invigorated, while new ones were introduced, creating a multi-channel platform that includes Facebook, Twitter and Instagram.
Avenue Living Communities introduced electronic lease capabilities, allowing rental agreements to be signed digitally and remotely, making the process more efficient and convenient. Technological advancements also allowed the Avenue Living workforce to be more mobile, working on mobile devices and tablets instead of being tethered to office locations. We also invested in technology enhancements for our centralized Call Center.
Overall, the long-term goal is to be an industry leader of modernization and technology, setting a new standard for the real estate industry.
Thought Leadership: Workforce Housing
After detailed research and analysis, we published our first whitepaper in 2018 on Workforce Housing, in order to inform the industry and our stakeholders on the strength and stability of our tenant demographic in this context. Workforce Housing aligns well with Avenue Living’s platform as a premier owner/operator of B and C-class buildings.
Workforce Housing is a term that has been adopted in the U.S. and is gaining traction here in Canada. The term originated from the concept of providing affordable housing in resort/ski communities where disparity in wages and the cost of purchasing/renting homes in town prevented workers from being able to afford living in town. Not to be confused with affordable housing, Workforce Housing caters to a city’s essential workers who are overqualified for affordable housing yet may not be able to afford average market-rate homes, whether for rent or purchase.
Due to various industry factors, we project continued increased demand for Workforce Housing across the Prairies in 2019. Please see the following link for the full whitepaper: Avenue Living Explained ~ The Case For Workforce Housing.