The four founding partners of Axia Real Assets are, from left, Greg Stevenson, Josh Varghese, Darrell Shipp and Kelsey Boland. (Courtesy Axia)

CI Financial Corp. and four longtime real estate executives have joined forces to create the Axia Real Assets LP investment management firm.

“The plan is to leverage our expertise on a global level, our relationships in the real estate world with brokers, asset owners and operating partners, and our access to capital to create what we think is going to be a very large real assets manager,” Axia founding partner Josh Varghese told RENX.

Varghese left his five-year tenure as CI Investments Inc. vice-president and portfolio manager last October to start laying the groundwork for Axia, which will be independently operated and managed by the four founding partners. He’s joined at the company by:

– Greg Stevenson, who retired as chief executive officer of Slate Retail REIT (now Slate Grocery REIT) in March 2020;

– Darrell Shipp, who was with Slate Asset Management for 14 years, as partner and managing director for the past five;

– and Kelsey Boland, who spent four years at Slate Asset Management, most recently as a director on the investment team.

Stevenson was contemplating what to do next after leaving Slate and he spoke with many retail, institutional, family office and high-net-worth investors while trying to figure out what people were looking for. Much of what Axia is setting out to do was derived from those conversations, he told RENX.

CI Financial is a joint venture partner

CI Financial is a Toronto-headquartered independent company offering global asset management and wealth management advisory services. It managed and advised on approximately $236.5 billion in client assets at the end of February.

Kurt MacAlpine became CEO at CI Financial, one of Canada’s largest financial institutions, in September 2019. He’s increased its focus on alternative assets and the joint venture with Axia will give investors the ability to access real assets in sectors and geographies that are currently difficult to become involved with.

“Our goal is to create product that becomes attractive for that group of clients for CI,” said Varghese, who declined to disclose how much investment capital Axia will initially have at its disposal.

Axia’s investment strategy

Axia’s investment strategy will be focused on real estate and infrastructure, with an emphasis on sectors with strong potential for future growth in earnings and capital flows, resiliency through economic cycles and short-term market dislocations, and a role in what Varghese calls the “new economy.”

“The new economy is going to impact how people use real estate and what type of real estate is valuable,” he said.

With increasing allocations to alternative assets for both retail and institutional investors, Axia aims to become a multi-billion-dollar platform to benefit clients through growth and an income component that’s in excess of bonds.

Warehouses, data centres, cold-storage facilities, life sciences facilities, single-family rental homes and grocery-anchored real estate are asset classes Axia is interested in and believes can bring attractive returns to investors.

“It’s a challenge for investors to find good yields and it’s a benefit to investors to reduce volatility in portfolios if they can access an asset class that’s supported by a long-term tailwind,” said Varghese.

North America will be Axia’s immediate priority, while it will also seek global opportunities.

Axia doesn’t yet own any assets and Stevenson said it’s too early to talk about potential initial acquisitions.

“We have a blank slate. We understand private structures and public REITs, and we think there are pros and cons to each. We want to pick the best of both worlds and come up with a solution for retail and institutional clients that are looking for real asset alternatives in their portfolios.”

While sourcing direct assets will be key to Axia’s growth, it will also invest with operating partners that have experience in asset types or geographies that it lacks.

“Having been operators as well as investors, we have the ability to underwrite existing platforms and understand what it takes to be a good operator, but from the investor’s side to also understand that you can’t operate your way out of a bad investment,” said Stevenson.

ESG and staffing

Axia will prioritize environmental, social and corporate governance (ESG) in its culture and investment strategy.

“Investors are increasingly demanding it more and more,” said Varghese. “The right ESG framework can actually improve the value of the underlying real estate.

“Users of underlying real estate are increasingly focused on it. We think it’s a win-win-win that we want to spend a lot of time on.”

While Axia is comprised just of the four co-founders for now, it’s in the midst of hiring and has plenty of room to grow at its downtown Toronto office space at 16 York, a building where CI has much of its operations.

The intent is to assemble a workforce with a diversity of backgrounds and viewpoints, with incentives set out to drive a team mindset.

“We can build a culture and a team one by one,” said Stevenson. “It’s called asset management, but it’s a people business. People are critical to our success as a firm.”