We wish you and yours a very Happy New Year. As we start 2021 we find ourselves reflecting on the truly unique circumstances we faced as a business and we all faced as individuals in 2020. We entered 2020 with a significant volume of loans in the hospitality asset class, as this niche has been a core focus of ours for many years. During the initial stages of the pandemic, we focused our team on the management of our existing portfolio, working with our borrowing customers to ensure they had the financial resources necessary to manage through the ensuing business slowdown from the pandemic. We found that a significant number of our borrowers were well equipped to continue to service their debts in spite of the significant declines in business, and we made payment concessions to certain other borrowers that we expected to be the most impacted by the slowdown in travel.
We are excited to announce that AVANA Companies has acquired a majority interest in Extensia Financial (“Extensia”), a Credit Union Services Organization (“CUSO”) headquartered in Northridge, California. This strategic acquisition increases the assets under management (“AUM”) of our firm to $1.3 billion, and uniquely positions us to expand our loan product offerings and increase the value of our borrower customer relationships.
Solar power has been the face of the renewable energy industry in the United States for decades. Other than seeing the occasional array of wind turbines on the side of the highway, there isn’t a lot of public discussion around the different forms of renewable energy generation. A segment of this market that represents an increasing part of our renewable energy business here at AVANA is Biogas production facilities. These projects manufacture natural gas by processing livestock and food waste through specialized biological equipment. In this month’s update, we have provided some background information on this growing renewable energy technology.
The COVID-19 pandemic has impacted the global economy on a scale we have never seen, particularly in the travel and tourism industry. Hotel loans represent $400 million, more than 70%, of the assets we manage, so we’ve kept a close eye on economic conditions surrounding the hospitality industry.
We’ve been originating loans to small- and medium-sized businesses in the U.S. for nearly two decades. The risk and return profile of these loans is appealing; we believe the interest rates on these assets provide a return in excess of what is warranted based on the underlying risk. Furthermore, providing capital to these small businesses improves the communities they are operating in by creating jobs and facilities to generate clean energy.
Energy policy in the United States has been in a significant shift for many years now. States, municipalities, and public utilities have made long-term commitments to considerable increases in the utilization of renewable energy. This has made way for the transition from large, centralized, and utility-owned powerplants toward smaller, distributed, privately-owned renewable energy facilities. The result has been a new wave of social-impact focused entrepreneurship in energy.