Dissecting Avenue Living’s Extensive Investment Strategy
Running a flourishing business with billions of dollars in assets under management (AUM) requires a sound and astute investment strategy. For Avenue Living, our growth from 24 doors in 2006 to more than 12,500 doors today is a testament to our organization’s highly researched investment strategy and all that goes into targeting specific markets, cities, and buildings to reposition.
We sat down with Jason Jogia, Chief Executive Officer, Opportunity Trust and Chief Investment Officer, Avenue Living, to glean insight into how we make such strategic investments, and what we offer to our residents.
“Our business is rooted in a number of different principles, and we know our customers,” Jason said. “Typically, when you have a business model to serve those customers, you have to build an infrastructure to appropriately serve them and provide a housing experience that would be deemed best-in-class.”
We provide homes to people for attainable rent prices, while still offering an institutional level of customer service. As an organization, we have consolidated buildings that would be classified as low-density workforce housing buildings and built a robust management system to serve those customers to the best of our capability.
“We’ve taken an active approach to management, and we’re agnostic to geography. We’re going to go where the fundamentals hold up,” Jason said. “We’re across the Prairies right now because the Prairies have some of the most affordable real estate across Canada, and on the flip side, some of the most reasonably-priced rents. We have taken a significant position in properties and plan to continue to double down on the Prairies because there’s a lot of room to run.”
Since 2015, we have invested $340 million in capital expenditure projects, repositioning buildings across the Prairies, bringing stark improvements to vintage buildings and neighbourhoods.
We are able to buy assets below replacement costs, renovate those assets, and then reposition those assets for the same demographic, but provide a higher offering and ensure they remain cost-effective for that tenant base. We always have our eye on affordability, which, according to the Canadian Mortgage and Housing Corporation, means that rent is 30 per cent or less of a person’s pre-tax income.
We diligently research markets and areas with the customer experience at the forefront. Access to public transit, employment areas, and parking is important. We study those markets and demographics, taking a top-down approach with the macros in the market. We also look at historical data and dive into past economic cycles. It’s all part of our investment strategy.
“It’s what we’ve been doing for 16 years. We’re buying where the people are and where they want to live. The Prairie provinces have robust service and employment sectors. What they lack in population density, they make up with infrastructure. We aim to serve those people,” Jason said.
So, what does all this mean in terms of Avenue Living’s strategy and long-term outlook?
“A lot of these buildings were built in the 1970s, ‘80s, and ‘90s. They have been owned and operated by the same family and group for many years. We are seeing pressure for them to exit. Baby Boomers want out because real estate is hard to manage,” Jason said.
There are many assets and buildings, circa the 1990s and early 2000s where the same finishes, customers, and rents have not changed for years. For Avenue Living, those properties present a unique opportunity: we can acquire them at a deep discount, upgrade the finishes, and implement active management.
“We’re a business that knows our product. We take an owner-operator approach. We have built our infrastructure to manage it. We are in a once-in-a-generation wealth transfer movement where the opportunity to buy is there. It’s a self-fulfilled prophecy now after just over 16 years of getting here,” Jason said.
With any successful business, it’s the road already travelled that helps determine the future. “We are in a very interesting position. Our barriers to success are behind us. The road that’s in front of us — we have a window to capitalize on,” Jason said.
As we continue to raise capital, and deploy creatively, we create a sustainable value and model, and build a larger stream of revenue, creating more incremental dollars to reinvest into the organization. This is why we’ve been able to build a platform of services — including technology, property management, logistics, legal, business analytics, and marketing services — to support our growth and accelerate new ventures.
“A lot of people talk about investment strategy without talking about operations. They talk about investment strategy without talking about how the market is or the macros on the market,” said Jason. “But our investment strategy is our investment strategy because we are an owner-operator. This is a unique differentiator in the industry. If we weren’t an operator, we wouldn’t be buying what we’re buying. We are consolidating what needs to be consolidated.”
This commentary and the information contained herein are for educational and informational purposes only and do not constitute an offer to sell, or a solicitation of an offer to buy, any securities or related financial instruments. This article may contain forward-looking statements. Readers should refer to information contained on our website at www.avenuelivingam.com for additional information regarding forward-looking statements and certain risks associated with them.