After a period of rapid growth, Avenue Living Communities (Avenue Living) has been nimble as a company, pivoting its business strategy in the face of the COVID-19 pandemic. The company has always been and will continue to be accountable to its investors, with a strong commitment to honouring its fiscal responsibility. This is an aspect that Avenue Living takes very seriously and prides itself on. Having a strong cash balance has enabled the company to remain ‘business as usual’ to investor stakeholders, while ensuring quality is not impacted for its 20,000 residents across the Prairies.
Neal Shannon, Senior Vice President, Capital Projects, said Avenue Living is being very selective in how will spend money at this time, given the economic crisis brought on by the health emergency.
“This isn’t the first economic challenge that we’ve been through,” said Shannon. “Avenue Living has continued to grow, operate and be successful through eight years of recessionary periods – out of fourteen that we’ve been operating. We’ve been successful in challenging times.”
“We dusted off our old playbooks and started operating the way we did in previous recessions, which was to cut down on any discretionary spending. We implemented the same policies almost immediately, once we knew the situation was getting more challenging here in North America,” added Shannon. “One of the ways we’ll get through the crisis is to conserve and preserve our cash. An outcome of our new strategy is that new major capital expenditure projects have been put on hold, temporarily. We have already tempered our capital programs, for the time being.”
While necessary maintenance and improvements will be made, any discretionary renovations (for example, common area upgrades, siding upgrades) have been substantially reduced. While these types of capital expenditures would normally allow Avenue Living to raise rents, the company has enacted measures to support residents facing financial challenges due to COVID-19. Prior to the government-requested moratorium on rental increases, Avenue Living committed to freeze rents for all tenants.
“We are continuing to look after our buildings – maintenance capital expenditures. The boilers are being maintained and replaced when needed. Roof repairs and replacements are being done. That type of work is continuing to happen,” explained Shannon. “Deferring capital costs will not affect asset quality or the rents we’re charging. We stay true to our duty of care to ensure that both our residents and our buildings are well looked after.”
In light of COVID-19, the company is more heavily investing in the cleaning and sanitization of all buildings to help combat the virus’ spread and keep tenants safe.
Avenue Living has roughly 10,000 suites and around 20,000 residents across Western Canada. Last year, the company spent about $85 million in capital projects, renovating just over 4,000 units. “We were pretty aggressive with our building improvements last year, so our portfolio will easily withstand a temporary pause in capital project spending,” Shannon said.
“We are in really good position to wait and assess the situation until we’re on the other side of the pandemic before we start spending more money. We are still reaping the benefits from the $85 million that we invested into our suites last year. It has really afforded us time to take a breath and really recognize today’s situation,” he added.
Avenue Living has been steadily focused on building its portfolio in recent years. The company has acquired 425 units since January 1, 2020 (across all mandates) and is following through on all written contracts.
“The strategy coming out of this will be to continue to acquire new real estate assets. There is talk of potentially adding 2,000 to 3,000 more doors once travel restrictions are lifted. Upon that time, and we will be able to get to the new sites physically to complete our site assessments and inspections. We’re ready to travel as soon as the experts say it’s alright to do so,” said Shannon, adding that the low interest rate environment is beneficial for Avenue Living.
“It’s paused for the short-term, but my team is ready to continue on with growing our portfolio as soon as we safely can,” added Shannon.