Avenue Living Asset Management Ltd. has restructured its residential funds and plans to aggressively grow its rental footprint, targeting the workforce housing market in what it calls “the North America Heartland.”
The Calgary-based firm has just completed incorporating the former Avenue Living U.S. Real Estate Trust into the Avenue Living Real Estate Core Trust. The Core Trust fund now includes 11,409 doors in 18 Canadian markets (Alberta, Saskatchewan, Manitoba), 978 units in the U.S. in four states (Colorado, Kansas, Wisconsin, Ohio) and $2.4 billion in assets under management.
“The company has established a tax-efficient, cross-border corporate structure to hold and invest in U.S. real estate assets, providing our investors with the opportunity to participate passively in the consolidation of multifamily residential real estate in the United States,” said Anthony Giuffre, Avenue Living’s founder and CEO.
“We’re entering our 16th year at Avenue Living and what we’ve been able to do is continuously define and refine what we are.”
Workforce housing in Canada and the U.S.
The firm started out investing in what’s now called workforce housing in secondary and tertiary markets, he explained. The focus was on the product type, mainly low-density multifamily.
“But as we started to grow our business over the course of the last 16 years, we very quickly identified who our customer is and really identified our why.
“What we’ve now been able to do through the Canadian Prairies . . . is really focus on what we do well, which is aggregating low-density housing and focusing on a customer, a resident, that we now understand, which is the workforce housing element.
“It’s really that $15- to $50-an-hour person in terms of their income.”
Giuffre said Avenue Living decided about three years ago to beta test and familiarize itself with expansion into the continental U.S. The American Heartland became attractive to the company and a standalone fund was established to invest in the market. The first acquisition was in October 2020.
Avenue Living found it could manage its U.S. assets with the same back-end platform it was already using in Canada.
The potential size of the American market is immense, with the “heartland” comprising over 100 million people. So the next step has been to take the American investment fund and incorporate it into a broader strategy, via the first North American workforce housing fund.
“We see an opportunity to rebalance the portfolio over time to have a much larger representation from the U.S.” Giuffre said. “Right now it would be a 90-10 split – 90 per cent in Canada and 10 per cent in the U.S. It is our intent obviously to move that metric higher than that.
“Certainly our next goal . . . would be to get to 80-20 and then obviously we’ll continue over the years to try and rebalance from there.
“The broader strategy is a North American workforce housing trust which is very unique, because it now allows us a massive footprint to really buy and really use the experience of over 15 years of understanding our customer and our asset base.”
Avenue Living’s expansion offering
Jason Jogia, the chief executive officer of Opportunity Trust and chief investment officer of Avenue Living, said to facilitate the U.S. Real Estate Trust transaction in such a short amount of time, the company decided to conduct an expansion offering.
The initial $60-million offering was extended to a new goal of $85 million due to investor demand. The extra capital will facilitate additional identified acquisitions in Canada and the U.S. and will be executed in the first half of 2022.
He said the former U.S. fund was in the process of acquiring 400 to 500 units, which are expected to close in Q1 2022.
“I would safely say we’ve got another 1,400 doors to execute on in Q1 and we’ve increased the expansion offering,” said Jogia. “When we look at what’s available in Canada, what’s available in the U.S . . . there are literally thousands of units available.
“We have now created the first Canadian domicile North American strategy.”
He said Avenue Living’s best-ever capital raise is an affirmation of that strategy.
“If we see this continue, there’s no reason why the Core Trust won’t be more than 15,000 units, 16,000 units, by the end of 2022.”
The Avenue Living portfolio includes more than $3.1 billion in assets across four private real estate funds.
In addition to its residential rental assets, the company also has 450,000 square feet of commercial space, 48,000 acres of farmland and more than two million square feet of self-storage space.