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RBC fund acquires 50% interest in $1B QuadReal portfolio

The RBC Canadian Core Real Estate Fund is expanding its partnership with British Columbia Investm...

IMAGE: IMAGE: RBC Global Asset Management, Quadreal Property Group and BCI Management Corp. logos.The RBC Canadian Core Real Estate Fund is expanding its partnership with British Columbia Investment Management Corp., and its subsidiary QuadReal, acquiring a 50 per cent interest in a portfolio of Canadian industrial and multifamily assets valued at over $1 billion.

The 12 core assets involved in the transaction are located in the Toronto, Vancouver and Edmonton metro areas. This latest tranche brings the scope of the two-year collaboration to more than $9 billion in total asset value and the partners now plan to expand the relationship through at least 2023.

It is also one of the largest transactions in Canadian commercial real estate so far in 2021.

“We hope there’s more to come and I think it’s mutual,” said Michael Kitt, head of private markets and real estate equity investments for RBC Global Asset Management, in an interview with RENX.

“We couldn’t have asked for a better partner. We are in this together and we are going to build this story together.”

Industrial, multifamily assets in transaction

About 70 per cent of the portfolio is industrial and 25 per cent multifamily residential by market value, adding approximately 5.5 million square feet of industrial space and 843 residential rental units to the partnership.

Kitt told RENX the fund was specifically targeting those two asset classes this year.

“Because (BCI and QuadReal) are aligned, they saw merit in adding these 12 new assets and helping us move toward our industrial and residential allocation targets,” he explained.

The industrial component includes a total of 20 buildings at eight sites. Eleven of the buildings are in Mississauga (within the Greater Toronto Area), five are in Edmonton and four are in Vancouver.

“It’s a really nice, diversified industrial package,” Kitt said.

The Mississauga properties are “main-and-main” types of assets, while Edmonton focuses on “primarily big-distribution.” The Vancouver acquisitions include one newly constructed distribution centre which “really fits the last-mile theme.”

The residential properties include two Toronto-area sites in Richmond Hill and North York, as well as buildings in North Vancouver and Kitsilano, both within Metro Vancouver.

The North Vancouver property is the recently constructed Northwoods Village residential and retail development just off the Dollarton Highway.

BCI will continue to own the remaining interest in each individual asset and QuadReal will continue to operate and manage the properties.

Due to the ongoing relationship between RBC GAM with BCI and QuadReal, the transaction was facilitated off-market. It is expected to close on Oct. 29.

The RBC Canadian Core Real Estate Fund

The fund was launched in 2019 and the initial transaction with BCI/QuadReal involved a Canada-wide portfolio of 42 assets then valued at about $7 billion. It will contain 62 assets when the latest tranche closes.

The fund is designed to invest in a diversified portfolio of premium core, income-producing Canadian real estate assets.

“What really resonates with the investors is how we’ve continued to deliver the portfolio characteristics they were looking for. We’re partnered with an institution, I’m from an institutional background, and we wanted to create an institutional-quality portfolio for the investors to access,” Kitt said.

“Why that’s important is it would have the risk and reward characteristics that would be consistent with what someone would expect from a core real estate program including a very conservative balance sheet.

“Our leverage is very low.”

The intention is to provide balanced exposure to the four major sectors of the Canadian commercial real estate market – industrial, office, retail and multifamily – offering smaller and mid-sized institutional-type investors access that is often difficult to achieve for all but the largest institutional investors.

Assets which have previously been acquired within the partnership include:

– PwC Tower in Toronto, part of BCI’s Southcore Financial Centre office property;

– Marche Central shopping centre in Montreal;

– 745 Thurlow in Vancouver;

– Bayview at Cole Harbour multiresidential property in Vancouver;

– Several industrial properties in north Mississauga, within the Greater Toronto Area.

Kitt said the partners are also in the acquisition market together, having jointly acquired five residential assets in recent years for the venture.

“The intent is to continue to grow this relationship together, not just by folding in BCI assets, but also to grow externally,” he said.

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