VIDA is putting its tenants to work as part of its strategy to provide affordable rentals.
Tenants in company-owned apartment buildings are given the opportunity to do everything from painting and caulking to minor repairs and office management to keep operating costs down.
It’s a strategy that seems to be working: Halifax-based VIDA has grown to 2,250 units in more than 150 buildings in Nova Scotia, New Brunswick, P.E.I. and in Winnipeg. Its growth plans call for the company to have 10,000 units by 2027 as long as competitors continue to sell their older assets.
REITs are divesting their residential buildings constructed during the 1970s to the 2000s “and we’ve continued to acquire them,” says Ron Lovett, VIDA’s founder and chief community officer.
VIDA’s most recent acquisitions were 205 units in 20 properties in Saint John, N.B., from Killam Apartment REIT (KMP-UN-T) for $15 million, and 111 units in six buildings in Charlottetown, P.E.I., from Canadian Apartment Properties REIT (CAR-UN-T) for about $12 million.
“What we’re doing isn’t rocket science,” says Lovett. “Our sliver is maintaining affordable stock. It’s a darn tough one and we do it in a very creative way. It’s not easy, but that’s our sliver and I think it’s helpful.”
VIDA started with 12-unit Halifax walkup
VIDA was founded in 2018, a year after Lovett sold his 16-year-old private security company SourceSecurity.
It got its start when Lovett bought a 12-unit walk-up in Halifax that was in rough shape. His good friend, comedian Shaun Majumder, was an investor in the building, but has since sold his stake.
To ensure “people had a sense of pride,” security systems were installed with key FOB entries and cameras, lighting was improved and the building was cleaned.
As there were no amenities, a previously mouse-infested basement storage room was transformed into a small gym. A small garden was added and community events were organized to enable tenants to get to know each other.
Taking a page from his former security firm, which did not have mid-level management and empowered front-line staff to run it, Lovett decided to “tap into (tenants’) untapped resources and skills and get people to feel they belong” by offering them work on VIDA properties.
The company now runs a course in painting, caulking and mudding - which represent the company’s largest repair and maintenance costs – for interested tenants.
Tenants who work for VIDA also take an online course about the brand. After training, tenants become “community contractors.”
A different kind of tenant screening
Instead of screening applicants for credit or backgrounds, VIDA checks how well they’re aligned with the company’s four-pillar approach to delivering socially responsible workforce housing, namely safety and security, cleanliness, opportunity and community.
If they align well, they’re asked: “What are your skill sets that you can bring to this community? Can you paint, mud, caulk, do data entry, customer service calls? Would you want to run this building?”
Tenants have the right of first refusal on any project. If they would like to manage the building, they can be tapped as building ambassadors, somewhat like superintendents. VIDA does not have property managers.
Operating costs are getting out of control, Lovett says, and tapping into its customer base is a real win-win.
“If a unit costs $1,000 to paint and our customer does it for $700, we get a 30 per cent discount and the customer’s made $700 to help themselves.”
Rents are “significantly under market,” Lovett says.
In Halifax, where VIDA has 1,500 units – making it one of the city’s largest apartment owners – monthly rents are around $700 to $900, affordable to people earning between $30,000 and $65,000 annually, he says.
Instead of asking tenants to leave, doing major renovations and jacking up the rents from $900 to $1,500, rents are increased “slightly” – from two to 10 per cent.
“We don’t go in to upgrade units. We’re a cash-flow buyer. We buy buildings that have to be cash-flow positive from Day 1.”
One of VIDA’s strategies is to work with provincial governments “to see if there’s an appetite to help” solve the affordability crisis.
Governments have made capital contributions for new roofs and windows in some VIDA properties.
The company also taps into CMHC’s MLI Select multi-unit mortgage loan insurance.
Different type of owner-tenant relationship
VIDA plans to announce partnerships to sell tenants everything from tele-health to items for their units. The idea is to “add value to your customer and try to create margins that way versus just raising the rents.”
The company is looking to expand to Alberta and Saskatchewan, and is particularly bullish on Edmonton.
However, the economics don’t work in B.C., Ontario and Quebec, Lovett says. “We’re a cash-flow buyer and the cap rates haven’t moved in those major urban centres to make sense to enter.”
VIDA also has its eyes on the U.S., with the city of Indianapolis as a potential entry point.
Lovett says VIDA’s approach when it acquires new buildings is often met with suspicion from tenants who are used to a different owner-tenant relationship.
“Integrating our customer into our model is still a challenge because there’s a lot of distrust.”
For example, he notes that to help add to tenants’ sense of belonging, VIDA paints unit doors in hallways in 11 bright Lego colours and names them, so instead of living in Unit 12 on the third floor they may be in Red Robin or Blue Ocean.
“In comes me to talk about ‘Paint your doors.’ That’s a very different thing for the customer,” he says. “Tenants are like ‘What? You want to do what?’ ”
To help tenants deal with an entirely new form of owner-tenant relationship, VIDA conducts tenant town halls when it acquires new properties.
“It’s not often that when a community or buildings are acquired that the founder and CEO of the company comes down and says ‘Let’s have a town hall. Let’s get your questions out.’ ”
Meanwhile, Lovett maintains acquisition, not development is the only path toward affordability for VIDA.
“There’s so much red tape for developers. I don’t know how they do it. I’d just rip my hair out every day.”