Presima beat out three dozen other companies and was selected by the Massachusetts Pension Reserves Investment Management Board (MassPRIM) to manage a portfolio of global real estate investment trusts (REITs).
“MassPRIM is the state pension fund for the Commonwealth of Massachusetts and is a very sophisticated group that’s been involved in private real estate for decades and decades, and in real estate securities in the U.S. and then globally for a decade,” said Presima chief executive officer Peter Zabierek.
MassPRIM joins Ivanhoe Cambridge and Australian money manager MLC among the 16 clients of Presima, a Montreal-based boutique firm focused exclusively on creating portfolios of global real estate securities for pension funds, financial institutions, intermediaries, distribution platforms and family offices.
The average size of a Presima-overseen portfolio is about $100 million.
Presima was formed in 2004 as the listed real estate management subsidiary of the Caisse de dépôt et placement du Québec public pension fund manager. It was sold to NAB Asset Management, the direct asset management arm of National Australia Bank, in June 2010.
Presima’s two key strategies
Presima’s concentrated strategy keys on growth-oriented total returns with a focus on security selection to add value. It has an average dividend yield of about 3.5 per cent and accounts for approximately 85 per cent of the firm’s activity.
“A more highly concentrated best-ideas portfolio over the longer term is going to outperform any indexing strategy by a higher margin and more consistently,” said Zabierek.
Presima’s enhanced yield strategy comprises the remainder of its business and was launched in mid-2011 to offer a strong income stream with low volatility by focusing on income-producing stocks. It has an average yield of above five per cent.
“Listed real estate gives investors access to some of the largest buildings around the globe and an opportunity to invest in them in a liquid and manageable way,” said Zabierek.
Investment selection process
From the global universe of some 2,000 listed real estate securities, Presima maintains up-to-date investment models on about 250 that meet its criteria for each investment strategy. From those models, it selects 30 to 40 securities for the concentrated strategy and 60 to 70 for its enhanced-yield strategy.
Presima chooses what securities to invest in by analyzing the underlying assets held by a REIT or real estate operating company, interviewing its management and visiting its assets to understand the business strategy, and assessing the market where the security is listed. It also uses its web-based DataBook portfolio management tool and database.
A variety of different catalysts — such as the inclusion of a stock in an index, management changes or corporate restructuring — are also taken into consideration.
“It starts with the fundamentals, but looks at management strategies, assets and catalysts beyond that,” Zabierek said of the selection process. “If we can understand what the fundamental real estate is worth, and then we apply that to our model, we can identify mispricings in the market.
“We’ve found that, over time, there can be some significant mispricings — whether they’re overvaluations or undervaluations. A big part of what we’re doing is focusing on that fundamental valuation and finding the mispricing.”
Staying small and focused
Presima has one office with a 12-member investment team concentrated on one product, which Zabierek said helps keep costs and administrative charges down and enables the firm to maintain its sharp focus.
“We don’t really have to get terribly big to cover our costs and do very well from a business standpoint. Because we don’t have that pressure to get very big, we can focus on being the best.”