The Benefits of Alts and REITs

The Benefits of Private REITs

Like so many at Avenue Living, Gabe Millard’s role as Director, Capital Markets hinges on using good data to make strategic decisions.

“So much of what we do at Avenue Living is driven by data,” says Gabe, who joined the team just over two years ago. “When I first joined, I was focused on making sure we were operating our assets at optimal efficiency in terms of rent price and occupancy. It was setting targets, making plans, and ensuring everyone was swimming in the same direction.”

Over time, Gabe’s role has evolved, moving from asset management to the capital markets — but the focus on data-driven strategy and clear communication has remained the same. Today, he ensures Avenue Living interfaces effectively with its capital raising team and equity partners to coordinate a successful raise for the company’s growth plans.

The Appeal of Alternative Investments

Alternative investments are a popular option for those who want to invest over the long term. They include a wide range of investment vehicles outside of the traditional market of stock and bonds. Avenue Living has built four trusts focused on real estate, including its flagship product, the Avenue Living Core Trust.

Real estate investment trusts (REITs) fall into two categories: public and private. There are several reasons investors might want to look at private REITs rather than public REITs. While both have their benefits, private REITs are not subject to the same market forces as public REITs.

“They’re really about the fundamentals,” says Gabe. “They’re not subject to the same outside forces as public REITs.” Where public REITs “need to remain focused on the next quarter, private REITs focus on the fundamentals of the business. Their equity value is directly based off the performance of the underlying assets.”

REITs have become popular as we continue to exist in a low-yield environment. “The world is starved for yield,” says Gabe. “Bonds are offering record low yields, and central banks are not indicating they’ll raise rates any time soon. So we live in a world where institutions are needing to look elsewhere to reach their fixed-income targets.”

In some “hotter” markets across the country, real estate is trading at a capitalization or “cap” rate — the measure of potential return on a real estate investment — of 2-3 whereas in the Prairies, Avenue Living has found ample opportunity to invest in assets in the 5-6 cap range.

Class B and C assets are often overlooked by investors but tend to serve one of the most stable parts of the workforce: essential workers. These workers make up approximately 40 per cent of Canada’s workforce, and during the COVID-19 pandemic-fueled volatility have remained stable earners — and residents.

Strategic Investment Pays Off

Avenue Living’s strategic, data-driven investment in this asset class has historically generated six to seven per cent yields, as well as potential value gains. As a result, some investors are now looking at adding Avenue Living’s private REITs to their portfolios as part of their fixed-income asset allocation.

“The pandemic has had a lot of counter-intuitive outcomes,” says Gabe, “and what we’ve seen throughout the pandemic is that the performance of our assets has actually improved, which is not what everyone predicted. We’re seeing increased demand for quality, affordable rentals, which, coupled with our focus on cost control, is leading to improved net operating income (NOI).”

Gabe sees the trajectory continuing for Avenue Living as the world recovers from the effects of the pandemic. With a flood of capital from the necessary stimulus spending in response to the COVID-19 pandemic continuing to find itself in the value of hard assets the outlook for real estate is positive. As the world turns to real estate as a hedge against currency debasement, we are seeing increased demand across all our investment vehicles, especially since we operate in markets that were overlooked before the pandemic.

“If you even remotely believe in the economic recovery of the Prairies, Avenue Living is one to watch,” says Gabe. “If we can achieve what we have during tough times, I can only imagine what we’ll do when times are good.”

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.