First U.S. Acquisition, Colorado Springs, Undergoing Successful Capex

Our first acquisition in the U.S. took place in October 2020 in Colorado Springs, CO. We purchased a distressed asset for $13.9 million USD comprised of six buildings on three separate lots with a total of 129 units. We are now almost a year into the redevelopment process and looking at a successful transformation of the property.

We have conducted extensive exterior and interior renovations, added attractive amenities, and unlocked value through strong and active asset management. Bettina Oslanski, Vice President, U.S. Asset Management, explained how we demonstrate to our residents that we take care of the property and community and how the renovations improve the overall living environment.

“We identified the opportunity to transform a collection of separate underperforming assets into one contiguous and well-managed community. The pivotal change we introduced was the removal of fences between the properties and connecting the three lots by extending the pavement, allowing us to join the parking lots,”

Bettina added that all but one of the exterior projects are complete, and that the interior renovations of roughly 75 per cent of the suites are estimated to be completed in Q1 2022. The total budget for the project was just under $3 million USD.

“We have helped transition the neighbourhood,” Bettina said. “The revitalization of the area had already gained momentum through significant capital injections into other assets on the block — we realized that this presented a particularly favorable environment for our investment and redevelopment efforts.”

The interior renovations follow the natural turnover of this asset, which means suites will be renovated as residents move out, allowing us to avoid “renovictions.” The suites have seen extensive work — we’ve repainted, replaced flooring, cabinets, and vanities, as well as installed new light fixtures, faucets, doors and door handles. We have also established new amenities such as a dog park and barbecue area, which help create community at the property.

This work has helped elevate the asset to a higher standard. We inject capital where it makes the most sense to achieve positive leasing trends, high retention, and maintain a good reputation. With the population of Colorado Springs expected to grow at twice the rate of the U.S. average, we believe that Colorado Springs and our presence in the market contribute to our continued growth and excellence in the multi-family market.

Leaning on the experience of a local property management company, their team was able to provide valuable insight into the market and what they thought the asset needed. The property managers were involved during the due-diligence process to inform our assumptions and give recommendations on capital projects with the greatest return potential. Our team researches and analyzes markets and assets with the objective to streamline operations, realize efficiencies, facilitate net operating income (NOI) increases, and improve the resident experience.

For our community in Colorado Springs, the rebranding of the combined property from Mallard Meadows to “The Monroe” marked a significant achievement in the redevelopment process. Since January, we have seen a remarkable increase in NOI of 64 per cent. “After purchasing for $13.9 million USD and investing another $3 million USD, current NOI trends suggest a significant increase in the overall valuation of the asset to somewhere in the $20-25 million USD range,” Bettina said.

Our data-driven market selection model can be a catalyst for positive performance, and we strive to enhance the market momentum through capital expenditures focused on items that improve the resident experience, such as investment into amenities and curb appeal.

“The model helped compile a short list of cities that are more attractive than others, and Colorado Springs is ranked in the top three through every iteration we’ve run,” Bettina said.

With the U.S. having strong commercial real estate data available on cities and markets, it has allowed us to develop a model that digests variables such as employment systems, unemployment rates, industry diversification, and rent growth forecasts.

Due to its rapid growth, the U.S. is an enticing market for us as we seek other assets to add to our portfolio. “More and more people are jumping from larger, more expensive markets to secondary markets for a better cost of living, and that migration pattern has provided new opportunities for us — especially given our recent entry to the U.S. market,” said Bettina. “We are focused on where we strategically target next.”

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.