This week’s acquisition of the 1.4-million-square-foot Edmonton City Centre (ECC) office and retail complex is the latest investment for LaSalle Investment Management’s LaSalle Canada Property Fund (LCPF).
LaSalle and its existing German clients, Universal-Investment and Bayerische Versorgungskammer, are the new majority owners of the property. North American Development Group (NADG) and Canderel have smaller stakes as managing owners. ECC was purchased for “north of $300 million” from Oxford Properties, LaSalle Canada chief executive officer John McKinlay told RENX.
LaSalle had existing relationships with NADG and Canderel and McKinlay said they’re “best-in-class” at what they do.
“We have a strong alignment throughout the entire active operations group and we’re very happy with how it was put together in terms of how everybody is going to contribute.”
Why LaSalle acquired ECC
The LCPF, which was launched in 2017, is an open-ended fund targeting core properties in the six major markets across Canada. It aims to provide investors with exposure to a portfolio comprised of mispriced office, industrial, mixed-use, retail and multifamily assets.
ECC fits that bill. It spans three city blocks in Edmonton’s financial core and is comprised of: the 23-storey Oxford Tower; the 29-storey TD Tower; the ECC shopping centre; the Centre Point Place office conversion space; and 2,500 parking stalls.
McKinlay sees ECC as a defensive investment providing stronger tenant depth, long-term liquidity and a diversified income stream for the LCPF. He believes Edmonton and Calgary are early-cycle markets that have gone through tough times in recent years but have historically been “viable and strong markets” that will recover with time.
“Given what’s transpired in the global economy, and particularly in Alberta over the last 10 years, we very much consider this asset stress-tested more than most,” McKinlay said of ECC, noting its component buildings are averaging from 92 to 94 per cent occupancy.
Praise for Oxford
McKinlay said Oxford has spent money on and taken care of ECC and it isn’t in need of renovations. However, without revealing details, he added there are “a number of mid- and long-term strategies” to increase density.
Negotiations to acquire ECC took up a good part of this year. LaSalle and Oxford also have a long-term relationship, according to McKinlay, who credits its contributions to a process he said satisfied business strategies for all involved.
“It was a complicated deal with a lot of moving parts. There are different complexities and nuances when you’re bringing international capital into a domestic market. It all takes time,and that’s why it’s always good to have a patient and sophisticated vendor on the other side that has also worked internationally and understands the nuances.”
Growth of the LCPF
LaSalle has executed more than $6 billion in Canadian real estate deals since 2000 and has $1.9 billion in assets under management. The LCPF portfolio has grown to 13 assets spanning five million square feet over the past two years.
“Our capital raise response, internationally in particular, has been terrific,” said McKinlay. “Our growth has exceeded plans.”
The LCPF’s returns have outperformed the MSCI/REALPAC Canada Quarterly Property Index since its launch, according to McKinlay.
Other major properties in the LCPF portfolio include: Ottawa’s Minto Place (a 33-per cent share), Toronto’s 70 University and Vancouver’s Airport Square office structures; as well as Montreal’s Le Sommet 3475 multifamily building, as part of a joint venture with Timbercreek.
McKinlay is optimistic about further growing that portfolio in 2020, as he said there’s a “terrific pipeline” for acquisitions.
“We are doing a number of deals, all in major markets, and many of them are relationship-based with groups that we have a terrific trust basis with, and have good alignment and a good meeting of the minds, not dissimilar to our approach on ECC.
“That seems to be a good recipe for success in our marketplace right across the country right now.”