How Ron Lovett Plans To ‘Transform’ 1,000 Affordable Housing Units In N.S., N.B.
HALIFAX — Halifax real estate company Vida Living made headlines earlier this month when it bought more than 1,000 units of affordable housing in Nova Scotia and New Brunswick from an investment company connected to Telus.
The sale happened in the wake of controversy stirred up by media investigations and tenant protests at some of the buildings.
While the deal allowed Telus to shed assets that were bringing the company negative attention, it more than tripled the size of Vida’s real estate portfolio.
Unlike Telus, which distanced itself from the properties, Vida founder and CEO Ron Lovett has embraced the publicity that came with the purchase.
Lovett says Vida is on a mission to revolutionize affordable housing and sees the deal as one of the first big steps to making that happen.
Tackling The Short-Term
Lovett founded Vida in 2017 after selling his private security firm Source Security. The company owns buildings in Nova Scotia, New Brunswick, and Manitoba that together hold about 600 units.
In a recent interview, Lovett told Huddle his long-term goal is to “provide safe, secure, affordable places that people are proud to live in, provide strong sense of community, and help them get ahead.”
In some cases, that will be a tall task.
Tenants in many of the buildings have for years complained about neglectful and disrespectful management.
At one group of apartments, residents staged a protest at the office of Metcap living, which managed the properties on behalf of Telus Pensions Master Trust. They demanded action after persistent infestations, mold, and broken doors and windows went unaddressed.
Lovett admitted there will be some challenges for Vida in the short term, but he has plans for major long-term changes.
He says his team is already planning what its takeover will look like and said Vida plans to keep Metcap on as property managers for the units.
He said Vida is “a very active operator” and plans to be more involved in the day-to-day business of running the buildings. That will mean taking a more “hybrid approach” to running the buildings alongside Metcap.
“This will be a collaborative effort,” he said. “Actually, Metcap has been great to work with so far. [They are] saying, we get your business model and … are asking the right questions, too, which is great.”
Revolutionizing Affordable Communities
Lovett says his desire to change the affordable housing landscape grew out of his experience running a private security firm.
He recalls becoming fed up with how that industry operated (“they were tendering human beings”) and says he empathized with guards who made low wages and “struggled with affordability.”
“I was very compassionate, empathetic to guards who used to have a three-hour bus ride to get to their site and make $11 an hour… That really hit home for me — I never forget that,” he said.
At one point, Source Security was on the verge of collapse and he had to do some soul-searching. He says that gave him a new outlook on how to operate a business.
“The best question ever hit me when I was down rock bottom and lost almost a million dollars was, what if I had to start this industry from scratch? And that allowed me to get excited and continue on and create value,” he said.
Source Security flourished under the new philosophy and in 2016 Lovett sold the business for a mint. The terms of the deal were never disclosed but Lovett told Huddle the sale left him “very well-capitalized.”
After he left the security world, Lovett told himself he wanted “to connect passion and purpose” with his next venture.
He had been in the real estate business in some way since his early 20s and had always taken the “rough and tough” approach with his tenants: sending security or booting out tenants who fell behind on rent.
So he asked the same question he did at Source, and once again got excited about the answer.
“It seems that, for the most part, the nonprofits have decided they’re going to make an impact for tenants. And my question is why: why is that the case? Why can’t we create a profitable private entity that provides profits to shareholders and value to tenants?” he said.
That became his goal with Vida: to “revolutionize affordable communities.”
Stakeholders, Not Tenants
Lovett says a fundamental part of that is a new approach to being a landlord that relies on treating tenants more like customers.
“When we look at tenants like customers that means we have to ask, ‘what else can we do for this customer? How can we add value for them?’” he says.
For Lovett, the answer lies in creating a sense of community and ownership among tenants at Vida’s properties.
He says he learned those lessons early, with some of the first buildings Vida purchased. Those properties were in rough shape and Lovett says that led tenants to not care about them either.
One tenant was even throwing trash and diapers out of their window.
“At first you look at that and say, ‘I just need to kick you out.’ And then you stop and you try to think of what’s got somebody there for them to be throwing diapers? What has had to happen here?” he says.
“And I think trying to slow down and trying to be more empathetic or patient, and change the direction by saying, hey, maybe times are tough but what if we paid you to actually clean things up? And how do we turn you from a detractor who’s mad about your situation and mad at the landlord and [give you an] opportunity? And then you can convert someone from a disgruntled tenant to a passionate stakeholder.”
Lovett says 22 percent of all Vida’s tenants do some type of work for the company, whether it’s maintenance, social media, writing newsletters, or collections calls.
He believes that kind of engagement, combined with being responsive to tenant needs, helps turn tenants into the stakeholders he hopes for.
Is it financially viable?
Of course, market conditions in cities like Halifax, where apartment vacancy is near zero don’t incentivize landlords to create the customer-business relationship Lovett talks of. It’s often more profitable to kick a tenant out in order to dramatically raise the rent up to the market rate.
Lovett claims Vida won’t do that.
He believes Vida offers more to tenants than traditional real estate firms and that its model will “flourish” in cities with high vacancy rates.
“But we’re not going to change our intentionality around how we do business based on the vacancy rate. We’re not going to get lazy here [in Halifax] because we’re at 1 percent vacancy. We’re not going to take advantage of that,” he says.
Vida’s real estate portfolio focuses almost exclusively on low-income and affordable housing. Lovett says the company’s goal is not to buy cheap properties just to renovate, kick out tenants, and charge higher rents.
Instead, the company focuses on improving the buildings for the tenants that are there now and keeping rents at a reasonable level.
That stands in contrast to many real estate companies that make significant profits by cashing in on the high average rent in cities like Halifax.
Lovett’s business model sacrifices some of that profit in the name of its ideals, but he says he still believes he can make money with his approach.
Right now, he’s bankrolling some of Vida’s operations with the money he made selling Source Security. But he claims the business is making money at the ground level.
“Obviously I front-load [some costs], but at the property level, yes, we’re very profitable,” he says.
He points out that the business is “asset-backed,” produces cash flow, and makes a social impact— three factors he calls a “golden triangle”
He also believes Vida will become fully profitable because he plans to “stay in the lane” of affordable housing which will allow him to focus more fully on getting that sector right.
He also believes the company’s entrepreneurial culture is an advantage.
“The old saying was, it’s the big fish that eats the small fish. [But] it’s now the fast fish that eats the slow fish. And I really believe in we are aligned with that,” he says. “We will continue to be entrepreneurial, we’ll move very fast, give our folks the autonomy to make decisions. embrace technology, always go back to the drawing board — and that makes us a very formidable competitor.”