Fiera Real Estate has completed the divestiture of its closed-ended GPM Real Property (11) Limited Partnership fund for $249 million after a series of asset sales which began in 2019.
“We’re very pleased with the results and that we were able to move that portfolio out at the valuations we did,” Fiera Real Estate senior vice-president and fund manager David Pappin told RENX. “I think our investors are extremely happy. That’s the key.”
The fund was the 11th in a series of 12 closed-ended investment funds focused on small to mid-sized industrial assets across Canada which have raised $857 million. The previous 10 have also all been sold.
Twelve institutional investors provided an initial equity base of $148.5 million for the fund in 2008. A three-year acquisition period followed and netted 36 assets. The fund’s value grew by about 73 per cent during the ensuing nine-year investment holding period.
The fund’s total net return to investors of 10.9 per cent exceeded the initial investment target return of seven to nine per cent.
Pappin said the fund’s portfolio was primarily comprised of industrial assets in Quebec, Ontario, Alberta and British Columbia.
There were some single-tenant properties, while most were multi-tenanted. They varied in size from 12,000 to more than 150,000 square feet.
Opportune time to sell
Fiera Real Estate executives decided midway through last year the time was right to start considering its divestment strategies for the fund.
“We were seeing continued rental growth and we were seeing continued cap rate compression,” said Pappin.
“We just decided that we wanted to move forward on a real strategic approach and get out in front of it and capitalize on the valuations that we were enjoying in the marketplace and the liquidity we were enjoying in the marketplace.”
The properties in the portfolio could have been sold as a large single block, in smaller clusters or individually.
Pappin said a considerable amount of market reconnaissance was done before a decision was made on what approach to take.
When all was said and done, some properties were sold individually, some were divested in small portfolios, and the largest block was nine Alberta assets.
Institutional investors, private capital investment syndicates and end-users were among the purchasers.
Pappin said interest in the Ontario and Quebec portfolios was very strong. While interest wasn’t as deep in Alberta, he confirmed there were multiple bidders for each asset.
No major COVID-19 impact
The divestiture was completed in April. All of the deals were either closed or under contract before the COVID-19-related economic shutdown, so it had no impact on the process.
Fiera Real Estate employees are working from home due to COVID-19 and Pappin said the business continues to operate well. He noted some tenants are having greater challenges than others when it comes to rent payments.
“Some tenants are open, some tenants are closed, some tenants are considered essential businesses and some are not,” said Pappin, who added the pandemic hasn’t affected Fiera Real Estate’s overall business strategy.
“We’re all hopeful that this is a moment in time. The focus at the moment is to get through this pandemic and service our investors and service our tenants as best as we possibly can.”
Fiera Real Estate Small Cap Industrial Fund
Fiera Real Estate continues to offer investment exposure to the Canadian industrial and logistics sector through the open-ended Fiera Real Estate Small Cap Industrial Fund.
The fund’s portfolio — 61 single-tenant and multi-tenant assets encompassing approximately three million square feet in Atlantic Canada, Quebec, Ontario and Alberta — provided a total return of more than 16 per cent for the 12 months ended March 31.
While Pappin said the goal is to grow the fund over time, he acknowledged certain assets may be sold.
“You can prune portfolios as you grow them and maintain allocations, and take advantage of opportunities in the market when they present themselves.”
Fiera Capital Corporation and Fiera Real Estate
Fiera Real Estate is a global real estate investment management platform serving investors in Canada and the United Kingdom.
It has offices in Toronto, Montreal and Halifax and was managing more than $6 billion of office, industrial, retail and multi-family assets through its investment funds and accounts at the end of 2019.