Lotus Pacific growing quietly from B.C. base

Perhaps it is the left coast location, private fund status or the fact that it is run by a woman, but Lotus Pacific Investments Inc. has a low profile for a company with assets under management of $750 million.
Founded in 1995 by Shenoor Jadavji, the company’s President and CEO, Lotus last month announced its role in the acquisition of a 17-property light industrial portfolio in partnership with LaSalle Investment Management. Lotus Pacific and LaSalle together bought the 1.5 million square foot holding from Niagara Acquisition, an affiliate of KingSett Capital.
Perhaps the deal is a coming out party of sorts for Lotus Pacific, which put out its own version of the announcement after an earlier release failed to mention the Vancouver company’s involvement. The company's web presence is currently under development too.
“This is probably a good time to be doing this sort of stuff in our growth phase,” said Jadavji. “I think it is important and I think it is good for next steps, it is good to be known.”
B-class has A-appeal
Lotus Pacific has had noteworthy spurts of activity in its past. In the mid to late Nineties, the company was extremely active, “we really went off on a big buying spree,” the CEO explained. “We played in all asset classes, we did neighbourhood centres, we did B-office and we did a bit of development in Vancouver, too.”
In that phase, Lotus Pacific partnered with the likes of KingSett Capital and private investors. Wisely, the Vancouver company sold off most of its real estate investments in 2007, prior to the financial crisis and recession, and focused on development in India for a couple years.
In 2010, Jadavji’s focus swung back to Canada and she made some “opportunistic plays in Vancouver which is not a very easy place to play in,” she said. Jadavji also decided to beef up Lotus Pacific’s base of operations, rather than running it as a “deal by deal” organization, staffing up and attracting high-net worth investors with a simple proposition: B-class industrial space.
“We saw an opportunity in the industrial space because it really hadn’t seen any growth in the last cycle,” she explained. The dominant player, ING Summit Industrial was bought and broken up in 2010, leaving the sector more open than it had been in years.
“It was going to be a race … so we wanted to do as much as we could because we felt that there was still opportunity in the west. Still there was a value-add play with respect to income.”
“Out east the game was more about buying well, rents had been $4.50 (per sq. ft.) for 20 years and they didn’t seem like they were going to change and just have stable assets that would not see much growth but (offer) good income.”
Investments in GTA involved leverage play
Making money in the B pool in areas like the GTA demands “buying well, and it also ends up being more of a leverage play,” she explained. “We put a little more on that than you would in some of the other assets.”
The recent Lotus Pacific-LaSalle purchase is representative of its buy smart strategy, she said. The 1.5 million sq. ft. basket of industrial assets, located in Alberta, Ontario and Quebec, has changed hands a number of times in recent years, which makes it difficult to keep vacancy rates down. Whittling vacancies down starts and ends with hard work.
“That is where the opportunity lies. We are not an institution or a REIT that just wants to chip away or has a certain return it has to make. We have to show our investors that we can get the cash flow and then get the appreciation.”
Lotus Pacific, like most in the commercial real estate game, has also been helped by cap rate compression in recent years.
It is clear that suddenly the industrial real estate space is tougher to operate in than ever before as investor capital has flowed into REITs concentrating on that category, she noted.
“If you look at the REIT space and the growth of small caps and little capital pool companies, the majority of those were formed for industrial last year. That space has become so tight and the pricing more difficult.”
Deep pockets push out timeframe
With more wealthy investors behind it than ever before, Lotus Pacific is now hunting for “more income deals now that have stability, more long-term and provide appreciation and income as opposed to just income like the REIT route,” she said.
Having partners helps, especially on larger deals. The Vancouver-based firm previously worked with LaSalle on a 2011 purchase in Western Canada that has proven to be a success. Lotus Pacific last year hired on LaSalle alum Jeany Lee as Vice-President of Asset Management and her ties “were probably instrumental” in the latest partnership, said Jadavji.
The Lotus Pacific’s wish list includes “pursuing income, growth – value add – and legacy deals.” The company is also looking south, as Jadavji, speaking from Seattle, is on the first leg of a week-plus drive through the U.S. market.
“We still see some good opportunities” in markets such as Seattle and Atlanta with an eye to “growing our industrial assets but certainly looking at retail and suburban office where it makes sense.”
Relationships are a strength
Lotus Pacific may not be a household name, but it has been able to keep busy because of its deep relationships in the business. “We have been low key but always had some key relationships,” she said.
“That is why we have slowly gone about what we do, and people don’t know who we are. People that do need to know do, and they give us the product. But at this point with our growth strategy, I think it is important for people to know that we are out, ready to deal and can do them quickly and efficiently.”


Paul is a writer, editor and media trainer based in Toronto with over 25 years of experience as a business reporter. He has written for Canada’s major news services on…

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Paul is a writer, editor and media trainer based in Toronto with over 25 years of experience as a business reporter. He has written for Canada’s major news services on…

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