BGO has already made four acquisitions after securing $247 million in capital commitments to close its BentallGreenOak Canadian Value-Add LP.

It’s BGO’s first value-add real estate strategy in Canada and is tailored to help meet growing investor demand for higher return strategies. 

“Globally, BGO already had value-add funds operating in every major region — except Canada,” Chetan Baweja, the company’s managing director and head of the Canadian value-add and separately managed accounts platform, told RENX in an email interview. 

“We recognized that our vertically integrated Canadian platform was exceptionally well-positioned to execute a value-add strategy. Over the years, BGO has built a strong track record of successful asset repositionings and developments in Canada.

“In addition, we saw a growing pipeline of value-add opportunities emerge amidst heightened volatility in the commercial real estate market — driven by the ripple effects of COVID-19 and the rapid rise in interest rates.”

Successful fundraising in a challenging environment

All of the capital in the fund was received from nine Canadian institutional investors, including financial institutions, insurance companies and corporate and university pension plans.

“The capital-raising environment has been challenging over the past couple of years,” Baweja said. “Both our internal team and external investor relations groups consistently described this period as one of the most difficult fundraising climates since prior financial crises.”

While it’s a closed-ended fund, BGO expects to continue to raise capital for co-investment opportunities that will enable it to execute on larger investments or portfolios. 

Acquisition strategy and execution

BGO identifies assets it believes can be attractively acquired because they’ve been under- or mismanaged, offer outsized income growth or have unpriced intensification potential.

These opportunities then flow through a comprehensive underwriting process with input from BGO’s research, investments, leasing, property management, asset management, development and sustainability teams. Nearly $6 billion of opportunities were underwritten to secure the first four closed investments for the Canadian value-add strategy. 

The company then leverages its more than 1,000 employees across leasing, operations and property management to drive performance at the asset level as well as best practices and economies of scale on capital projects, contracts and procurement.

The primary focus of the value-add investment and development strategy is on the industrial and multifamily sectors in Greater Toronto, Greater Vancouver and Greater Montreal. Fund managers will also look at select growth-oriented markets and potential opportunities in retail, office and alternative asset classes such as student housing. 

“Our investment activities are data-driven,” Baweja said. “Strategy is set by our portfolio management team working closely with our investments and in-house research teams to identify locations and assets where we see the greatest opportunity to enter at an attractive basis, drive strong income growth and exit within a three- to five-year time horizon. 

“Once we identify our targets, we leverage our extensive network of relationships with intermediaries, operating partners, owners, developers and lenders, both in Canada and globally, to create a high quality deal flow. 

“The breadth of our platform, strong reputation and relationships provides us with a competitive advantage to execute on marketed transactions and off-market opportunities.”

First four acquisitions

BGO reported three of its first four acquisitions were done off-market and involved a mix of private and institutional vendors.

“Our only on-market opportunity was our industrial portfolio in Montreal,” Baweja said. “We saw an opportunity to acquire a very well-located asset from an institutional group that needed to recycle capital.

“The other three assets in the portfolio are residential assets located in Greater Toronto, Hamilton and Vancouver. Most recently, we closed on a land site located in Coquitlam that will bring 197 much needed rental homes to the area through the development of two six-storey wood-frame purpose-built rental buildings.”

The Coquitlam acquisition, at 184 Inlet St., is a joint venture with Anthem, which has a portfolio that includes: 44,000 homes that are complete, in design or under construction; and retail, industrial and office space, as well as land, across North America. 

BGO did not provide further details about the acquisitions.

The acquisition pipeline

BGO is a global real estate investment management advisor and provider of real estate services that serves the interests of more than 750 institutional clients. It had approximately US$86 billion of assets under management as of March 31.

The Canadian investment market is experiencing more dislocation and forced sales than in prior downturns, which BGO expects will create compelling buying opportunities over the next 12 to 24 months. The volatility created by the ongoing U.S.-Canada trade war is also creating further pockets of dislocation on which the fund is looking to capitalize. 

“We are currently assessing a pipeline of approximately $1.4 billion of investment potential,” Baweja said. “The pipeline is currently more weighted towards multifamily development because of the huge opportunity we see to deliver much needed missing middle housing.”

BGO is also assessing industrial, retail, office and conversion opportunities. The fund is focused on the middle market where there’s more off-market deal volume and less institutional competition.

Input on potential acquisitions is provided by a 10-person investment committee that features senior leadership members from Canada and around the globe, including co-chief executive officers Sonny Kalsi and John Carrafiell. 

The global members are consistent across other BGO value-add fund committees.