Timbercreek Asset Management recently announced plans to open an office in Zurich to support investments in Europe and has also set up an office in New York as it sets its sights on the U.S. real estate market.
Toronto-based Timbercreek, which manages about $2 billion worth of assets in private and publicly traded real estate funds, has a `three-legged stool` business plan, said Blair Tamblyn, Timbercreek`s Chief Executive Officer.
Two of those legs are well established: a direct real estate investment business in which it owns and operate real estate to produce predictable cash flow over the long term as well as a mortgage origination business in which the company looks to access real estate cash flows as a lender.
About two-thirds of Timbercreek`s assets under management come from institutional investors with the remainder from retail investors and the firm has built a 10-office, 350-person team in Canada to manage and invest those funds.
The third area of business that Timbercreek is aiming to grow is its global real estate securities business in which the firm will make investments in real estate companies, “either publicly or privately, equity or debt, trying to effectively access in the most advantageous way possible, real estate from around the world,“ he said.
That is not something that can be done from Canada, under Timbercreek`s model. “If you are going to be an active manager you need to have people around the world that are able to go and evaluate the markets that the real estate is in rather than sitting in Toronto and reading annual reports and looking at Google maps,“ said the Timbercreek CEO. “We are really big on being active managers and have emphasized that over the years so for our business there isn`t a choice, we need to build a team.“
The “first piece of the puzzle“ fell into place with the luring of Corrado Russo as Managing Director of Timbercreek Global Real Estate Securities and Manager of the Funds.
Russo, a former investment manager with the Ontario Teachers Pension Plan and Citigroup Property Investors has hired on Claudia Reich Floyd to run the Zurich office and oversee analysts in Europe and Australia. The two managed institutional global listed real estate securities mandates together at Citigroup from 2004 to 2008. The third member of the team, who is also a former Citigroup alumni who has worked with Russo and Reich Floyd in the past, will officially join the group next week. He has not been named as yet.
In Europe, there is no particular reason for the European office to be located in Zurich and, in fact, the Timbercreek CEO would be happy to see it move from there eventually. “I would not be surprised if I was able to convince them to move to London,“ he said. “It is certainly more central so longer term that would be our European hub.“
Timbercreek is also looking to start in Europe though lending, replicating its success strategy in Canada with mortgage lending. “There are some great opportunities that are effectively gestating there with the credit crisis in Europe,“ he said. “I think there is an argument to be made that there is an opportunity to make some investments, certainly in the U.K. and (continental) Europe as well.“
The Timbercreek CEO said the initial lend-first strategy makes sense given its newcomer status there. “It is easier to get more knowledgeable in a market when you are a creditor than if you actually have to go and operate the asset. So you will see us pursue that strategy certainly to start with and leverage that longer term either into direct investments“ or in real estate companies.
He describes the Canadian real estate market as currently being “pretty frothy“ or expensive for a firm such as Timbercreek to invest in. “I am not trying to disparage those that are buying but for what we are doing for the capital we are investing, there are not a huge number of compelling opportunities. We certainly do find more opportunity outside of Canada.“
Timbercreek`s new global arm will have a modest start with approximately $200 million of assets under management. “The real key is that the three work together very synergistically, so if you are an institution that wants real estate exposure and don`t have the inclination or capacity to build your own team, we can build a portfolio here which is going to be comprised of direct, debt and listed securities and each really perform a bit of a different function,“ said Tamblyn.
Timbercreek invests for a mix of private and public investors through its public Timbercreek Global Real Estate Fund (TSX: TGF.UN) and the accredited investors geared Timbercreek Four Quadrant Fund LP. The public fund aims to produce an absolute 7% distribution. Timbercreek also runs separate account mandates with a similar investment strategy for endowment funds, discretionary wealth managers and some smaller