Conundrum Capital Corporation’s Q Management LP (QMLP) is taking a step up from being a boutique multi-family asset and property management platform with the sale of a 49 per cent stake to Manulife Asset Management Private Markets.

“We’ve been approached by a number of firms over the last couple of years, but Manulife was a natural strategic partner for us,” said Conundrum chief executive officer Dan Argiros.

“They’ve been an investor since our very first fund and they’ve been an investor in every one of our funds. We have a great relationship with them, we get along, we share the same philosophy and their goal is to take our platform and help us grow it to the next level.”

Manulife Asset Management assistant vice-president of public relations Beth McGoldrick said her company is excited about deepening its partnership with the privately owned Conundrum and praised its track record of managing properties well while raising and investing institutional real estate private equity funds.

“For Manulife, the QMLP multi-family portfolio provides a unique opportunity to further broaden our global private asset management platform by diversifying and expanding our equity real estate capabilities and product offering for our clients.”

Conundrum has shown steady growth since 2000

Conundrum was founded in 2000 by Argiros, chief financial officer Rick Dainard and executive vice-president Gord McMehen. The firm manages $875 million in invested and committed equity, representing $1.3 billion of multi-unit rental residential assets. The firm has a staff of 35 at its Toronto head office as well as 160 on-site property management staff.

QMLP manages 38 properties and more than 7,100 units in the Toronto and Ottawa areas, and new opportunities in those and other markets are expected to arise now that Manulife Asset Management Private Markets is on board.

“We picked 49 per cent for a reason,” explained Argiros.

“It means that they’re a substantial partner from a governance point of view, but management still runs the firm. Nothing changes from an operating philosophy or a strategic philosophy.”

Transaction price not disclosed

Neither Conundrum nor Manulife Asset Management would reveal what was paid for the stake. Manulife will have two seats on Conundrum’s five-member board of directors and the existing branding will remain.

“All of the real estate is either owned by funds that we have or a private REIT that we have,” said Argiros. “The real estate ownership doesn’t change at all. This is ownership in the management company.”

Manulife Asset Management Private Markets’ 49-per cent interest will give current investors peace of mind when it comes to continuity and a succession plan, according to Argiros. Conundrum’s institutional investor base is comprised of financial institutions, pension/endowment funds and family offices and foundations.

Argiros said that some larger sovereign funds that have wanted to work with Conundrum in the past will now have more confidence in doing so due to Manulife Asset Management Private Markets’ involvement. Manulife Asset Management Private Markets had $104.6 billion in private asset classes under management on March 31.

“Manulife’s real estate portfolio is focused on office, industrial and select multi-family and retail,” said McGoldrick. “The QMLP multi-family portfolio is aligned to our growth strategy and we will continue to look for these unique opportunities to grow and diversify our portfolio.”

No change to Conundrum’s growth strategy

No change is expected to Conundrum’s growth strategy of acquiring and aggregating underperforming and undermanaged mid-rise and high-rise residential properties and then enhancing income through professional management and selective capital improvements.

Conundrum has gradually narrowed its focus by exiting from industrial, self-storage and renewable energy platforms over the past three years.

“We decided we’re going to focus on the multi-family residential sector with 100 per cent of our time and attention,” said Argiros.

“That sector is the one that our investors have the most comfort with and the most appetite for. They love the fact that there’s low volatility and it’s a low-risk environment.”

About Manulife Asset Management

Manulife Asset Management is the global asset management arm of Toronto-headquartered Manulife Financial Corporation, which provides financial advice, insurance and wealth and asset management solutions for individuals, groups and institutions. At the end of March, Manulife Financial Corporation had $904 billion in assets under management and administration.