Residential Rental Portfolio Expands Despite Pandemic

The COVID-19 pandemic has organically slowed down the pace of growth for many Canadian businesses, but Calgary-based Avenue Living Asset Management has managed to add over 500 residential units to its Core Trust portfolio this year, with more expansion planned for the rest of 2020.

David Smith, Avenue Living Asset Management’s Chief Operating Officer, said Avenue Living’s Core Trust is looking to add several hundred more units before the end of the year.

Across its five funds, Avenue Living owns and operates approximately 10,000 multi-family units across 19 markets in Alberta, Saskatchewan, and Manitoba, more than 400,000 square feet of commercial space, over 37,000 acres of agricultural land and a growing self-storage business, as well as a recent launch into the U.S. multi-family residential market.

“We continue to expand our presence in Calgary and Edmonton, in strong locations, to leverage the infrastructure of our growing operating platforms in these markets. We closed on two strategic properties in Calgary’s Mission node earlier in the year and continue to try and source additional investment opportunities in the market,” said Smith.

The company has a total of about $1.7 billion in real estate assets under management.

Smith said COVID-19 has slightly affected the pace of acquisitions for Avenue Living in the multi-family sector, but not the overall growth strategy. Many multi-family residential owners have been spending more time evaluating how the pandemic would impact their cash flow, while buyers have been underwriting investment opportunities using a more cautious risk profile.

“I believe it will take a few quarters of consistent performance in the market until the overall investment community tightens underwriting terms. There is a still a meaningful delta between the bid and ask on the investments we have reviewed,” added Smith. “It will take some time for that spread to narrow and for transaction velocity to increase.”

“Within the transaction environment, there really hasn’t been a significant catalyst for owners to exit. The credit market has stayed somewhat buoyant with attractive financing rates, which has also delayed exit decisions,” said Smith.

From a portfolio perspective, Smith said the company would like to increase its allocation in Alberta, specifically in Calgary and Edmonton.
“Our intention is still there. We’ve made a decision and have a long-term view on the Alberta economy, and we’ll continue to add properties here,” added Smith.

Smith said the company’s focus and strategy in acquiring multi-family properties hasn’t really changed. Avenue Living still sees plenty of opportunity in the workforce housing section of the multi-family market.

“In Q1, we acquired a great townhome property in Calgary’s Braeside neighbourhood which has maintained strong performance over the last six months. We see a lot of positive outlook for larger units in garden style properties, located in suburban nodes. As individuals and families become more accustom to working from home, there is tangible value to offering additional space in unit size, whether in townhome or larger apartment units,” added Smith.

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.

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