Now that Blackstone has formally opened its Canadian office in downtown Toronto, the world's largest private equity investor is doubling down on its stated goal to increase its Canadian real estate holdings.
Nadeem Meghji, Blackstone's Canadian-born senior managing director and head of real estate Americas, told RENX the company has increased its Canadian holdings by over $1 billion (all figures Cdn unless otherwise noted) during the past year and is targeting the industrial/logistics and multifamily sectors to grow that portfolio.
“We continue to have really high conviction in logistics, rental housing, data centres,” Meghji said during an interview. “Over time, our focus has been the top three cities, Vancouver, Montreal, Toronto in terms of population.
"We’re going to continue to prioritize those markets but we will be open to investing in other parts of the country as well as opportunities arise.”
There are a lot of factors the company likes about Canada, he went on to explain. In terms of Blackstone’s company-wide investments on all platforms (the global firm surpassed $1 trillion US in assets earlier this year), Canada ranks third among all the world’s countries.
Canada ranks third in Blackstone's overall investments
“Canada is third, only behind the United States and the U.K. in terms of our largest geographical exposure as a firm, in terms of the capital we have deployed. That includes a number of different pools of capital and strategies within Blackstone.
“What we see is the benefit from population growth that’s five times what we see in the United States, that has a handful of major cities that have very dynamic technology ecosystems, a significant and growing technology workforce, abundant tech talent. Those are things we look for when we want to invest.”
Meghji said Blackstone's Canadian portfolio is about $15 billion US today ($20 billion Cdn).
Formally opening its Toronto office at 333 Bay St. in Toronto’s downtown financial district will offer the company a number of advantages.
“We’ve been building the business here for many years. It has culminated with hiring Janice Lin a year-and-a-half ago to run our Canadian business, and now opening an office and building a team around her, and really expressing with our actions our commitment to the Canadian market,” Meghji said.
“Real estate is a local business and we are a global firm. The way we can marry those two is by having boots on the ground. That is really something we’ve been quite successful with in other parts of the world and having an office here has been a long time coming.”
Industrial remains Blackstone's main Canadian sector
While Blackstone has investments in multifamily, seniors living and several premium office properties (including part ownership of the multi-tower downtown Bentall Centre in Vancouver), the vast majority of its Canadian portfolio is in the industrial sector, through its Pure Industrial subsidiary.
Blackstone and Canadian investor Ivanhoé Cambridge are partners in that venture.
Virtually all of Blackstone's Canadian portfolio growth during the past year has been via Pure.
“That said, we want to find and are actively pursuing other areas simultaneously,” Meghji explained. “One of the things that is very clear is that there is a need and an opportunity to build more housing in this country and if there are ways we can be part of the solution we’d love to explore that.
“That is really consistent with how we see the world. We are thematic investors, trying to find places where there is a supply-demand imbalance where our capital can be part of the solution.
“Warehouses represent one of those opportunities - that’s our biggest exposure globally - but rental housing is another one of those areas and that is a place where we think there is an opportunity here in Canada.”
Meghji declined to offer any specifics about potential multifamily investments, but the company already has forged partnerships with Starlight Investments and Tricon Residential.
It also has a seniors housing partnership with Groupe Selection, though the future of that is uncertain due to financial restructuring proceedings involving Groupe Selection. Meghji said he was not able to comment on that venture.
Data centres a key area for growth
One area Meghji did expand on is potential in the data centres subsector. It does not have a Canadian presence in the sector but demand is growing globally and Blackstone’s QTS subsidiary is moving to fill some of that need.
“There is a mega-trend today around the cloud digitization and artificial intelligence. That is driving demand for GPUs, for servers and is driving demand in turn for data centres,” Meghji said.
“This is a global phenomenon, not just a U.S. phenomenon. For that reason we are actively developing data centres not just in the United States but in places like Japan, places like India, and increasingly in places like Europe and other parts of Asia.”
He expects QTS to move into Canada at some point, in part because many of the major companies eating up space in the U.S. are also active north of the border.
“Canada really to us represents an opportunity because it's the same companies that operate in the United States and are looking for data centre capacity to operate in Canada,” he said.
“There are a small handful of very, very large tenants who today more than ever are making very large data centre commitments because they have growing workloads. So we think there is an opportunity to deliver data centres for those customers in the Canadian market.
“In the medium term, we expect to establish a data centre footprint in Canada.”
How Blackstone might grow in Canada
As to how its growth in Canada might occur, Meghji said all options are on the table, from development to acquisitions of individual properties, to corporate acquisitions to add both scale and local expertise.
“We’ve had a lot of success historically buying platforms and then growing them, we have a long history of doing that,” he noted. “In fact buying Pure Industrial is an example of us doing exactly that.
“You buy a company that has expertise in one area and then you leverage that team and that platform to grow. Having that platform allows you to operate in a really differentiated way, the opportunity that others might not.
"That has been the calling card for our business over time. But that doesn’t mean it’s exclusively that, because we are more than happy to buy or develop individual assets as those opportunities arise as well.”