The Caisse de dépôt et placement du Québec (CDPQ) has become the latest major Canadian investor to initiate a dramatic realignment of its real estate holdings, announcing Wednesday that Ivanhoé Cambridge and Otéra Capital will become investment groups within its holdings.

Although both Ivanhoé Cambridge and Otéra will retain their respective brands within the marketplace, the corporate services teams will be integrated with CDPQ’s teams. This is forecast to save up to $100 million in annual expenses, and will also result in the departure of Ivanhoé Cambridge president and CEO Natalie Palladitcheff when the integration is complete in 18 to 24 months.

"This integration stems from a vision of an integrated CDPQ that maximizes its impact and performance to offer our depositors the best service for the most efficient cost” Charles Emond, president and chief executive officer of CDPQ, said in the announcement. “It allows us to further leverage our subsidiaries' deep real estate expertise and the best talent in corporate services from all three organizations to execute our strategy and position CDPQ well for the future. 

“We want to work as one team — one CDPQ — and build on the unique know-how of our talent to create value for our depositors.”

Integration to begin next week

The integration of the real estate subsidiaries will begin on January 29, with the corporate services teams beginning to report to CDPQ next week. The corporate services teams support the investment groups' activities in areas including finance, operations, digital technology, human resources, legal affairs, communications and risk management.

The subsidiaries' investment teams will then become CDPQ investment groups on April 29, and will continue to conduct their activities in the market under their respective brands, Ivanhoé Cambridge and Otéra Capital. 

In addition to the expected efficiency gains, CDPQ states the benefits of integrating the real estate subsidiaries include:

• increasing focus on investment expertise;
• maximizing business relationships and partnerships;
• consolidating global presence across all asset classes and seeking investment integration opportunities;
• harmonizing governance;
• strengthening analytical capacity;
• optimizing corporate services; and
• providing richer opportunities for talent development and mobility.

As part of the integration, CDPQ will acquire all the interests held by minority shareholders of Ivanhoé Cambridge and Otéra Capital, becoming the sole shareholder.

Palladitcheff to leave organization

Upon closing of that transaction, the governance of the real estate subsidiaries will be integrated into CDPQ and Palladitcheff will depart the organization.

"Since joining CDPQ, Nathalie has distinguished herself by her vision and strong leadership, which allowed her to take Ivanhoé Cambridge even further,” said Emond in the announcement. “The context in which she executed her mandate was marked by the dual challenge of the atypical environment caused by the pandemic and the profound transformation of the real estate sector. 

“Nathalie accomplished a lot for CDPQ and our depositors by leading the transformation of the Ivanhoé Cambridge business model and by repositioning the portfolio toward promising sectors with her teams," Emond said in the release. "I would like to sincerely thank her for her continuous support and important contributions to achieving our strategy."

The appointment of a new leader for the real estate investment group is to be announced by the end of the transition period.

"Over four years ago, we began to significantly transform Ivanhoé Cambridge during a period of profound change in our industry,” Palladitcheff said in the announcement. “I'm very proud of the colossal work accomplished with my teams and our portfolio is well positioned for the future. Being able to put all our energies into our core profession—our real estate expertise—will be decisive for creating value in an environment that continues to be complicated.

"My transformation mandate will conclude at the end of the transition period, in which I will be fully engaged.”

Otéra  president and CEO Rana Ghorayeb will continue to oversee the investment group and sit on the CDPQ executive committee after the transaction and integration.

"Otéra Capital has evolved tremendously in recent years, particularly by growing our portfolio and diversifying our products and markets. We also multiplied collaboration opportunities in all sectors with our colleagues in the CDPQ group, which has greatly contributed to these advances made by our teams. This integration will allow us to continue moving in the same direction and to further leverage the expertise and strength of the entire CDPQ group," Ghorayeb said in the announcement.

The move follows a similar initiative by Ontario Teachers' Pension Fund, announced last June.

It is splitting its real estate subsidiary Cadillac Fairview into two entities under a new operating model. That move led to the retirement of longtime president and CEO John Sullivan. Ontario Teachers' established an in-house real estate group to oversee its real estate investment activities.