The British Columbia Investment Management Corporation (BCI) will move over 40 Canadian real estate assets into a $7-billion fund in partnership with RBC Global Asset Management Inc. and Quadreal Property Group. The partnership, according to RBC’s Michael Kitt, is the largest CRE transaction in Canadian history.
RBC GAM considers small and mid-level pension funds and other institutional investors its key target market for the fund, which will launch during Q3 2019.
“(Investors) know that here’s a $7-billion diversified core real estate portfolio that I believe is Canada’s largest real estate transaction ever,” Kitt told RENX in an interview following Tuesday’s announcement. He said BCI retaining a 50 per cent interest in each of the assets is a critical aspect of the partnership.
“(Investors) know that BCI will care about the performance, they will care about long-term decision-making and the long-term future of how the partnership and the fund will grow,” he said. “That’s what makes it unique.”
The partners are: RBC GAM, Canada’s largest fund manager and one of the largest managers of Canadian pension assets; BCI, a global investment manager and one of Canada’s largest pension plan managers; and real estate service providers and developer QuadReal, established by BCI to expand and manage its portfolio.
Institutional investors will be able access the portfolio through the RBC Canadian Core Real Estate Fund, which will be established and managed by RBC GAM. It is expected to be open for investment in the third quarter of 2019. Investment will take place in four tranches through 2022 and RBC GAM will become a 50-50 partner in the properties.
About the portfolio
Kitt said the portfolio will include a diverse mix of assets from the office, industrial, retail and residential sectors, with about half of the total properties being office. He said it is focused exclusively in eight of Canada’s largest cities, with about 60 to 70 per cent of the properties in Toronto and Vancouver.
“We love the industrial and residential sectors today,” he said. “They form a significant component of this portfolio. But, so does every other investor love those.
“The retail . . . we’ve got a nice mix of enclosed and open-air,” Kitt added. “We’ve really attempted to diversify the portfolio across asset class, cities and the locations within those cities to make sure we are not making any large, specific bet. We’ve really stayed away from taking development exposure, this is a well-leased, income-producing portfolio.”
Among the properties which will be included in the fund are:
* PwC Tower in Toronto, part of BCI’s Southcore Financial Centre office development;
* Marche Central shopping centre in Montreal;
* 745 Thurlow in Vancouver;
* Bayview at Cole Harbour multi-residential development in Vancouver;
* and several industrial properties in north Mississauga (just north of Toronto).
BCI diversifying internationally
From BCI’s perspective, the initiative supports its objective to internationally diversify its real estate portfolio while maintaining a strong domestic core. QuadReal will continue to manage the properties on behalf of BCI and the fund.
“Over many years, we have diligently acquired and developed a portfolio of premium Canadian properties on behalf of our pension and accident fund clients,” said Gordon J. Fyfe, CEO and CIO of BCI, in the Tuesday release.
“BCI’s real estate portfolio now exceeds $27 billion in value and as we diversify into global markets, its Canadian core will always be the foundation of our clients’ portfolio. The opportunity to partner with a like-minded, long-term focused institution such as RBC Global Asset Management is extremely compelling.”
The most recent statistic available on BCI’s website show its total real estate portfolio was comprised of about 43 per cent office, 27 per cent residential, 15 per cent retail and 14 per cent industrial holdings, in addition to a small amount of hospitality assets.
The agreement is subject to the completion of definitive agreements and certain conditions including capital commitments to the strategy.
The RBC Canadian Core Real Estate Fund will initially be open to institutional and other qualified investors. RBC GAM is actively exploring opportunities to bring the fund and related strategies to market to serve the needs of other client segments including individual accredited investors and advisors.
About RBC Global Asset Management
RBC Global Asset Management is the asset management division of Royal Bank of Canada and includes institutional money managers BlueBay Asset Management and Phillips, Hager & North Investment Management.
RBC GAM is a provider of global investment management services and solutions to institutional, high-net-worth and individual investors through separate accounts, pooled funds, mutual funds, hedge funds, exchange-traded funds and specialty investment strategies. The RBC GAM group of companies manages approximately $425 billion in assets and has approximately 1,400 employees across Canada, the United States, Europe and Asia.
With $145.6 billion of managed assets, British Columbia Investment Management Corporation is a leading provider of investment management services to British Columbia’s public sector. It offers investment options across a range of asset classes: fixed-income; mortgages; public and private equity; real estate; infrastructure; and renewable resources.
Headquartered in Vancouver, QuadReal Property Group is a global real estate investment, operating and development company. The company’s $27.4-billion portfolio spans 23 cities across 17 countries.
QuadReal was established to manage the real estate program of BCI, one of Canada’s largest asset managers with a $145.6 billion portfolio.
QuadReal aims to deliver prudent growth and strong investment returns, and to create and sustain environments that bring value to the people and communities it serves.