The real estate market is ripe with opportunity for every type of investor. From luxury single-family homes to industrial and commercial properties, to bare agricultural land, there are as many choices of real estate investment as flavours of ice cream; an investor’s preference depends on a variety of factors specific to the individual or institution and can change over time.
For Calgary’s Avenue Living, the real estate investment of choice is workforce housing, a lesser-known subclass of the multi-family market that has proven to be a stable, often growing, niche. The strategy has evolved over Avenue’s 16 years in business to make it one of the largest private real estate owners/operators in Western Canada. With more than $2.8 billion in assets under management, including 12,500 apartments in more than 450 buildings, and five mutual fund trusts, Avenue Living is a dominant player in its market.
“We invest in the everyday,” says founder and CEO Anthony Giuffre. “Those low-density, multi-family buildings that you drive by on the way to work, that you may or may not pay attention to. Typically, in the 20- to 50-unit range.”
Workforce housing tenants are gainfully employed, making between $15 and $50 an hour who, throughout the pandemic, were the essential workers. “They’re the folks that had to show up every single day, put their masks on, and brave it,” Giuffre says. “And they did an incredible job.”
“This demographic needs housing affordability, not affordable housing,” he continues. “They are a cross-section of those who want to own and those that might not, whether by necessity, need or desire. They’ve been incredible customers throughout the years.”
A born-and-raised Calgarian and University of Calgary graduate, Giuffre and co-founder Carl Diodati started the business in 2006, with the purchase of a 24-unit building in Brooks. “I would love to say it was this grand plan that I came up with over 16 years ago, but that would be the farthest thing from the truth,” Giuffre laughs. “After 10,000 mistakes and a whole lot of pivots, we are here.”
The pair had originally wanted to invest in the Calgary to Fort McMurray corridor (during the boom days of 2005/06) but lacked the capital to do so. “So we kept looking out in larger and larger concentric circles, to where we could find a diversified economy with non-sector specific biases that could last the test of time,” Giuffre recalls. “We landed on Brooks, Alberta.”
With a large meat packing plant, Brooks also had a service sector and agricultural land sector, as well as serviced a large trading hub population. “We saw it as a diversified mini-economy,” he explains. “And when we looked at the multi-family buildings in the area, we very quickly determined it was those two- or three-storey walk-ups inhabited by the workforce housing demographic.”
The interesting part, however, came when Giuffre looked at the significant difference in how much rent those tenants paid as a portion of income, compared to the primary markets of Calgary or Edmonton. “There was an opportunity for us to purchase at a reasonable price, make upgrades and increase the rent per square foot to a number closer to that of Calgary,” he says. “It was the same workforce, and the wages were typically standardized across Alberta and Saskatchewan, but rents weren’t.”
The limited access to credit in secondary markets like Brooks further sweetened the opportunity. “It was a lot more work than buying in Calgary, but we were of the view that if it worked in Brooks, it could work in other markets too,” Giuffre says. “We could actualize real rent growth – resulting in net-operating-income (NOI) growth of an asset on a strategic basis.”
The gamble paid off, and with the success of Brooks, Giuffre expanded into other secondary and tertiary markets in Alberta and Saskatchewan. By 2014 Avenue Living owned and operated 5,500 units in Alberta, Saskatchewan and Manitoba.
“In order to operate in all of these small centres we had to create a platform,” Giuffre recounts. “To handle the deal from end to end, and the tenant experience. We had to be able to manage a lot of small assets with individual market specific needs.”
“After numerous pivots and mistakes and challenges along the way, we increased the size of our platform,” he continues. “Today, we cover the end-to-end customer experience: from the call centre straight through to logistics, maintenance staff, construction staff, leasing, services staff, accounting, marketing, finance and legal. We now have a team of eight lawyers that work for the organization.”
One key benefit of the platform was the legitimacy it has provided the company. For example, in 2006 most Canadian banks were reluctant to participate with Avenue Living. Today it is one of the largest customers for most banks in the country.
As the company grew, so did its capital requirements. “Real estate in a lot of cases is very capital intensive,” Giuffre says. “You’re seeking capital for that next acquisition since your rents, typically speaking, are a fraction of the value of the assets. You need capital to grow, to operate the business and maintain your buildings.”
To obtain funds, the company sought to raise its first round of outside capital with the initial goal of $85 million, which was swiftly met through its business networks. Rather than use the capital to acquire more units, the company shifted its focus to those assets it already held and undertook a large renovation program including maintenance and value-add capital expenditures. “We doubled down on our asset base,” Giuffre says, “and saw great operational results. We realized we were onto something and considered what capital we needed to further consolidate the market.”
That insight led to the inception of the Avenue Living Real Estate Core Trust. “We wanted to provide investors with the optionality to get exposure to real estate – workforce housing – and be a part of a growth story,” Giuffre says. Since its creation in 2017, the fund has raised over $450 million and acquired nearly 5,000 multi-family units.
To maximize market potential, an Opportunity Trust was split out of the Core Trust. While the latter holds stabilized, smoothly operating assets, the former buys and manages assets that are in some form of disruption.
An Agricultural Land Trust was also created in 2016 to help diversify the business. The Trust invests in Saskatchewan farmland, and leases it to farm operators for cash rent. Providing an opportunity to decouple the business of real estate and the business of farming, the Agricultural Land Trust now holds over 48,000 acres valued at over $85 million.
“We don’t ‘operate’ anything for the Agricultural Land Trust,” Giuffre points out. “But there is no better commercial real estate tenant than someone with an aligned interest, such as a farmer.”
Avenue Living launched a third multi-family trust in early 2020, the U.S. Real Estate Trust, which also focuses on the workforce housing segment, albeit in the much larger U.S. market. The company purchased seven properties in Colorado, Kansas and Wisconsin (the strategy is to stay in high growth, secondary markets, which is more affordable than the seaboards). The expansion has been successful thanks to the platform. “It’s the same customer, the same platform, obviously a different currency, some different state and federal laws, but for the most part it’s the same business,” Giuffre says. “But about 30 times larger. It’s been doing very well and growing.”
The latest fund launched by Avenue Living is the Mini Mall Storage Properties Trust, which began with the acquisition of a storage business from Giuffre’s father last year. “It was a family business 40 years in the making,” he says. “And at 92 years old, my dad said, ‘Next year, I want to sell it and you’re going to buy it.’ I knew the business well but wasn’t sure if we could fit it into the portfolio.”
After much research the team was confident it had a business case, which has been proved out over the last year as the fund now owns over 1.6 million square feet across 35 stores: “We’re coast to coast now, from the lower mainland into New Brunswick, in five different provinces. And now we’re launching into the U.S.”
The company is also involved with a number of different businesses, all linked to the platform, including a telecom business (Valo Networks), virtual reality training (Circuit Stream), food manufacturing (Noto Gelato), and fashion (the iconic Alberta Boot Company) – all everyday businesses.
Giuffre credits the platform for much of the success of each expansion. Given the size of its application – to all properties and tenants – it provides a means to experiment and implement new technologies, particularly in PropTech and FinTech. In fact, a dedicated team in the organization is tasked with this work.
“We can implement new ideas easily and see if they work, or don’t work,” he explains. “For example, during the pandemic we were able to go paperless for lease signings and renewals.”
Indeed, Giuffre acknowledges the pandemic was kind to the organization and in fact proved out the business, as those workforce housing tenants – essential workers – remained solid renters throughout.
At over 700 employees today, Avenue Living’s team operates on core values of entrepreneurial spirit, honest communication and integrity. Giuffre ensures that everybody is heard and makes himself available once per week for an hour to any employee who’d like to talk.
“Over the last 16 years we’ve attracted some incredible people that are driving the business forward,” he says. “Now talent is coming to us. We’re attracting the best people out there. It’s very encouraging.”
A believer in giving back, Giuffre sits on a number of different boards, including UNICEF Canada, the Calgary Public Library Foundation, TELUS Spark Science Centre, and the Canadian Olympic Foundation. “Whatever I have learned along my journey and my mistakes, I try and lend those to the boards, and just be a part of some really cool initiatives.”
An avid athlete and outdoorsman, he has completed 16 Ironman Triathlons and will complete his seventeenth this fall. “I love being outside,” he says. “I walk 10 kilometres a day with my wife, and this is when we catch up. It’s a really good way to communicate. I love communicating while moving.”
Reflecting on his journey thus far – which included a significant business re-manufacturing appliances with nine retail stores in his teens and late 20s – he’s humble and candid: “When I look back at the accomplishments, I think ‘Geez, years ago nobody would talk to us; now everybody talks to us and wants to do business with us.’ That’s what I deem as success: the growth and the journey, not necessarily the destination.”