CanFirst Capital Management has closed on its first Edmonton area-based industrial property — marking the continued success of a five-year-old fund that has hitherto outperformed publicly traded Canadian REITs.

That fund, the CanFirst IncomePlus Real Estate Fund (CIPREF) fund, is still growing.  

With the acquisition of the 364,912-square-foot facility — which CanFirst bought from Loblaw and immediately upon the Nov. 30 closing of the transaction entered into a 10-year lease with the grocer — the open-ended CIPREF has over $200 million of assets under management across the country.

“When you look through the portfolio, every property in the fund is leased in a single-tenant building and is generally leased for a term of more than five years,” Allan Perez, CEO of CanFirst Capital Management, told RENX.

Distribution centre's strategic location

Located in the heart of the Harwin Park Estate Industrial Park and built in in 1979, 16104 121A Ave. NW is a second-generation building with a 28-foot clear height, 100 parking spaces, 54 truck-level doors and a single drive-in door.

It is currently used as a food distribution centre servicing major swaths of Western Canada and plays a key role in Loblaw's strategy for distribution in Alberta.

Additionally, there’s a 2.35-acre site next door, at 16231 121A Ave. NW, which Loblaw uses for trailer parking.

“This is an important distribution centre because it services parts of Western Canada, but primarily parts of Alberta, where they’re obviously a dominant player, as they are across the country,” Perez said.

“Notwithstanding the fact that they have sold a property to us, it remains very much an important hub for them for their distribution."

Indeed, the property’s location near Yellowhead Highway, as well as its seamless access to the Anthony Henday Drive ring road — giving it robust access to critical highway infrastructure throughout the Edmonton CMA — makes it a strong asset for a fund like CIPREF. 

It is also located near the CN Intermodal Terminal and just over a half hour’s drive to the Edmonton International Airport.

CIPREF’s outsized performance

Launched in June 2018, CIPREF has been very successful for CanFirst with its 11.4 per cent net annual return more than doubling the 4.9 per cent average annual net of publicly traded Canadian REITs, Perez said.

Since it launched five-and-a-half years ago, CIPREF’s compound annual growth rate is 32 per cent.

With CIPREF having surpassed $200 million and because it’s an open income fund, Perez said reaching $1 billion isn’t out of the question.

While preponderantly comprised of private investors’ funds today, CIPREF will soon bring institutional money into the fold, Perez said

“The fund has returned an annual rate to investors of 11.4 per cent, which was in the top quartile of performance within the Global Manager Research Real Estate Universe,” Perez said.

The fund’s focus is industrial properties in major Canadian markets that can be leased in five- to 10-year terms.

A major reason for CIPREF’s success is Canada has experienced very low industrial vacancy, especially in key markets like Edmonton, which are among North America’s lowest rates.

CanFirst forecasts a continuing strong market, bolstering its confidence in pursuing suburban, single-storey flex properties through CIPREF.

Because of the strength of the industrial sector in major Canadian markets, class-A buildings are proving to the greatest boon for landlords seeking covenant and long-term lease terms.

The long-term leases also present the option for converting assets into other uses, depending on what markets may then demand. 

The Loblaws facility acquisition officially closed on Nov. 30, and in becoming CIPREF’s 10th property, the fund now has more than 1.1 million square feet of assets under management.

CanFirst’s pipeline is active

CanFirst is active in major markets across Canada, including the Greater Toronto Area, Montreal, Ottawa, British Columbia and the Kitchener-Waterloo region. While the Loblaw facility marks CanFirst’s first foray into Edmonton, it has historically been active in Calgary.

While Perez wasn’t able to provide details, the federal government’s announcement that St. Thomas, Ont., will be home to a Volkswagen electric vehicle battery plant is something CanFirst has a keen eye on.

CanFirst launched in 2002 and has since closed seven growth funds, most recently in July 2020. In addition to the open-ended CIPREF, the firm launched the CanFirst Industrial Development Fund, a closed-ended vehicle launched in March 2022.

“We’re always looking at assets,” Perez said. “The idea is to continue focusing on, primarily, industrial properties.”

Perez acknowledged that, depending on the fund, the period between fundraising and cash deployment can be a little too protracted for some private investors, but that also partially explains CIPREF’s popularity since it contracts ROI timelines.

“Once we become a fund and sell off all the assets, it takes six months to raise value-add funds and up to three years to deploy capital,” Perez said.

“That problem was the genesis for the open-ended fund, which would allow investors to park capital in that fund and earn a return from the moment they invest in that fund.”