Sutter Hill Developments’ recent 50 per cent acquisition of a downtown Toronto office building is the latest in the $1.2 billion of transactions it has very quietly completed since 1992.
“Once in a while we’ll put something out in a press release to let people know that we’re real, but we try to keep it pretty quiet,” Sutter Hill president and chief executive officer Karim Kanji told RENX.
“We’re a private company that doesn’t have any investors or partners, so it’s just my father and myself. We’ve never felt a need to scream who we are or what we do. We let our properties speak for us.
“People will go into a building because it makes sense, they like the location, they like the design, they like the feel or it’s at the right price point. They won’t go in it because it’s owned by me or Cadillac Fairview or Oxford or anybody else.”
Sutter Hill’s evolution
Sutter Hill has gone through a number of iterations over the decades, but the Kanji family’s involvement goes back to 1974 when Nizar Kanji — fresh from arriving in Canada from London — joined Abbey Glen Property Corp. as an accounts payable clerk.
Abbey Glen was later acquired by Genstar Development Company and rolled into an existing real estate entity called Sutter Hill, Karim explained.
The elder Kanji rose up the ranks and became head of Sutter Hill’s Eastern Canada division in 1981. He acquired the company and the management contracts of its assets in 1992.
The real estate development, investment and property management company now has a portfolio worth more than $500 million and comprised of office, industrial, retail, multifamily and senior care properties in Vancouver, Ottawa, Toronto and Atlanta.
The American properties, comprised of 1,300 units in multifamily buildings, were distressed assets acquired in 2010 following the financial crisis.
Nizar, also known as Nik, is now 81. His son said he remains active within Sutter Hill and is asset managing the Atlanta properties from his home. The company’s head office, where seven of its 70 employees usually work, is on Consumers Road in North York.
“We look for properties where we can unlock value,” said Karim Kanji. “We like having assets that give us a sense of pride of ownership as well.
“For quite a while we’ve been trying to acquire office buildings in downtown Toronto, which has been tough to do. Seventy per cent of the office towers in the financial core are owned by five pension funds, so they’re very well locked up. The deals that do trade usually trade institutionally or they involve huge dollar amounts that are out of our reach.”
110 Yonge St. acquisition
Sutter Hill already owned the 12-storey Sun Alliance Building at 48 Yonge St. before its latest acquisition, a 50 per cent stake in a 20-storey building at 110 Yonge St. in partnership with Choice Properties Real Estate Investment Trust (CHP-UN-T).
Its share was purchased for $58 million from a client of BentallGreenOak.
“It was very forward-thinking in its design even though it was built in 1967,” said Kanji. “It’s column-free, has terrific views, beautiful architecture, three levels of underground parking, a PATH connection and a centre-ice location.”
Sutter Hill’s investment strategy
Kanji prefers office floor plates of about 10,000 square feet and leasing full floors to tenants so they have more control over their environment.
“They have their own washrooms. They can do their own branding. We see that as a future trend, where office space will be customized and branded for tenants’ needs to fit their specific requirements.”
Sutter Hill is looking to acquire more office and multifamily assets in Canada and the United States, and Kanji believes COVID-19 concerns or hardships on behalf of some property owners may lead to opportunities.
“I’m confident in the office market in major cities,” he said. “Suburban buildings and tertiary markets I’m not so sure about. I have no concerns with multifamily.”
Along with its own money, Sutter Hill’s financing comes from banks and financial institutions. Kanji said the company has considered taking on investors, but “it goes against what we’re trying to achieve, which is long-term family assets.”
Sutter Hill sold a 108-unit apartment building in Oakville last year for $46.5 million. Kanji said the company had owned it for 35 years, as it favours acquiring and repositioning assets for long-term holds. However, it will sell an asset if the right offer comes along.
One of those properties was Parkway Mall in Scarborough.
Kanji had a summer job as a security guard at the mall in the early 1990s when he was attending Western University and Sutter Hill was managing it.
The company lost that management contract but, years later, the Kanjis were walking through the mall, found out it was for sale and bought it. They then sold it a few years later after repositioning it.
Community involvement and philanthropy
Kanji said he’s been on about 10 different charity boards and spends half his time on philanthropic causes, with a focus on those involved in the arts and education.
He’s currently on the board of governors for: Junior Achievement Central Ontario; the Sistema Toronto after-school music and social development program; and Workman Arts, a multidisciplinary arts organization that promotes a greater understanding of mental health and addiction issues through creation and presentation.
Kanji, who has also studied guitar at The Royal Conservatory of Music, is on the board of directors of Seventh Stage Productions. The feminist professional not-for-profit theatre company revolves around women telling stories about women.
“When it would make money, the money would go to different charities involving women’s issues,” said Kanji. “When it would lose, I would just write a cheque and move on to the next. I think it’s important to give back and to have a voice and do what you can to help society in general.”
Kanji has also attended conferences on counter-terrorism and geopolitical issues as vice-president of the NATO Association of Canada, an independent non-governmental organization established to foster a better understanding of the North Atlantic Treaty Organization’s goals and Canada’s role in it.
“You can take skills you learn in different areas and re-apply them to make everything better,” he said.