Is fund the perfect Avenue for solid returns?

A growing real estate company has opened itself up to retail investors after an eye-catching rise from 24 apartments to almost 7,000 in 12 years.

Avenue Living has built a multi-family portfolio of secondary and tertiary markets across 14 areas in Alberta, Saskatchewan and Manitoba, and has just launched a new broker-assisted equity raise with the aim of bringing in $75 million to $125 million.

Its group of companies is also poised to cross the $1 billion mark of assets under management. Previously, through friends, family and close business associates, it raised $85 million in its first eight years before adding an additional $40 million through two funds: the Avenue Living Real Estate Opportunity Trust and the Avenue Living Agricultural Land Trust.

Avenue Living’s Core Trust mutual fund, its largest, offers investors between 8% to 12% return and pays a ROC distribution of 6% (7% on the IIROC side). The firm decided to move to a more broker-assisted equity raise in the EMD and IIROC markets a year ago, eventually launching in Q4.

Founder and CEO Anthony Giuffre said the move has been well received by IIROC groups and he has spent considerable time in Vancouver and Toronto drumming up business. He said large family offices and private wealth groups “have really started to jump on”.

Giuffre believes this is the ideal time for people to add exposure to the western real estate market to their portfolios, citing the lack of correlation to the public market indexes and the strong fundamentals of Avenue Living and the Alberta and Saskatchewan regions.

He said: “The assets and geographies that we are investing in or have invested in over the past 12 years have stood the test of time. We’ve been through the larger financial crisis, which obviously affected us all, and more specifically over the course of the last three years, we’ve been in a fairly dark regional recession.

“What’s interesting about Avenue Living compared to other markets is the fact that when we look at the secondary and tertiary markets, and we look at the real estate fundamentals and stats, these are diversified economies.

“While Alberta was regionalised as a dark spot in terms of the Canadian economy, these secondary and tertiary markets did great because they had infrastructure and they still had the diversification of those economies to allow people to stay gainfully employed.”

Giuffre and the firm’s two other co-founders have around $158 million of equity invested – “skin in the game”, as he calls it – and he believes western Canada represents an opportunity.

He said: “When we talk to investors and they talk about investing in multi-family units, especially if they are eastern based, they are thinking about the GTA and the fundamentals associated with that.

“But it’s a different world here – we have no rent controls in Alberta and Saskatchewan; we have an ability to take a very large position in the sub-markets that we are in.

“So the impetus to invest and achieve sustainability from our market place is rather profound. What’s interesting is we raised $85 million and then subsequently another $40 million - that encompassed less than 75 investors on about $100 million of that. The logic was that once they saw this real estate opportunity, they got excited. It’s atypical, it’s different, it’s not momentum driven – it’s based on fundamentals.”

Giuffre also highlighted the fact Avenue Living invested $85 million in capex back into its business, upgrading thousands of units and achieving 90% occupancy.

Why has the company’s strategy worked? Giuffre believes it’s because the low-rise tertiary and secondary multi-family centres – the typical “Canadiana” areas with a Canadian Tire and Walmart infrastructure – have high income per capita, diversified employment and room for manoeuvre in terms of rent.

He said: “We explored the underpinnings - why this type of real estate? We quickly saw that not only did it have a lot of real estate fundamentals, but when we looked at price per pound relative to the primary markets, it had the [potential for] necessary capital improvements to buildings and to move the rent up in lock step with interest rates.”