Jamie Ziegel brought 37 years of real estate experience into Ziegel Advisors Inc., when he launched the company this summer, and he's using it to assist a stable of clients which includes The Canadian Urban Real Estate Fund (CU7).
Ziegel had spent the past dozen years as managing director and head of property brokerage for TD Securities, before he branched out on his own.
He was involved in over $50 billion of equity raises, asset and portfolio sales during his tenure at TD Securities and is utilizing his experience and contacts in the new venture. Ziegel Advisors is offering a range of services including equity raising, transactional consultation and brokerage services, strategic positioning consultation for assets or portfolios, and co-brokerage opportunities.
One of his first major roles involves the Canadian Urban fund.
The firm is an investment, asset and property manager that works with institutional and private investors and focuses exclusively on Canadian commercial real estate. It utilizes a return-to-core strategy that prioritizes small- to mid-size properties with strong value enhancement potential.
Launched in 1971, it has $1 billion in assets under management, with offices in Edmonton and Toronto.
The MSCI/REALPAC Canada Annual Property Index ranked Canadian Urban first overall in income returns and fifth overall in total returns from 2000 to 2022.
National industrial and retail portfolio
Ziegel has been enlisted to attract investors into CU7, which owns a 1.5-million-square-foot national portfolio of properties that were acquired one at a time and have an appraised value of $385 million.
The CU7 portfolio has delivered an internal rate of return of 16.7 per cent and a cash yield of 5.1 per cent since 2011.
Eighty per cent of the portfolio is industrial, with the remainder being food-anchored/strip retail properties, some of which have potential residential intensification upside, according to Ziegel.
“The industrial assets are in specific nodes where we believe strongly in the node and we can create economies of scale and grow this fund,” Ziegel told RENX.
The industrial portfolio includes properties in Montreal as well as Cambridge and Brampton in Ontario.
Ziegel said 5700-6150 Henri-Bourassa Ouest in Montreal is a four-building, multi-tenanted industrial property with a gap from contractual to market rents of approximately 80 per cent, which allows for significant income growth and subsequent value gains. While industrial is currently the best use for the property, Ziegel believes the longer-term value proposition is to convert it to multifamily.
On the West Coast, there are three retail properties, including one on United Boulevard in Coquitlam, B.C., that Ziegel said has three tenants in flex commercial/industrial buildings adjacent to a new 96-acre, mixed-use residential development.
Seventy-five per cent of the portfolio’s appraised value is located in Ontario and Eastern Canada, with the rest in Western Canada.
The portfolio is more than 99 per cent leased, but the current gap to market of the existing rents is more than 55 per cent. The properties have a weighted average lease term of under four years, so there’s significant upside to be shared with new owners.
Mid-market assets can be very attractive
The typical value of each asset is in the $20 million to $80 million range, which Ziegel said makes it easier to repurpose or sell them to owner-users if they ever become vacant.
“Mid-market should be considered an asset class the same way as office, retail and industrial are,” Ziegel said. “With assets that are $20 million to $80 million in value, it doesn't really matter what type they are.
“They’ve outperformed, over the past several cycles, all the other asset classes. They’ve been the most liquid at the bottom of cycles and coming out of cycles.
“Right now it’s a lot easier to sell a smaller building than a larger one. You’ll get a lot more offers. Mid-market has just been more resilient and returns have been oversized.”
The main issue with the mid-market sector for large institutional buyers is the time and expense it takes to acquire scale, according to Ziegel.
He said this problem has been solved with this offering, seeded by a Canadian automotive industry pension fund which he declined to name.
Pension fund will remain involved
The pension fund intends to leave all of its equity in the fund to seed the growth of the portfolio to a target of $1 billion.
“They would like to be part of a bigger plan with like-minded investors, because that even further reduces the risks and increases the return upside when you can achieve economies of scale in these nodes,” Ziegel said. “There are better returns to be had as we grow this.”
Ziegel would like to see CU7 become the No. 1 choice for mid-market strategic allocations for institutional investors across the country.
The portfolio is appraised by a third party every quarter and Ziegel said this buy-in opportunity is at fair market value with no premium to be paid.
“A lot of people are trying to raise money to start funds to go buy assets. We have the assets and this is an opportunity for someone to buy into something that's here and strong and the type of real estate everyone's looking for.”
Ziegel said there has been significant early interest in the opportunity. One investor could acquire the entire available position or a number of smaller groups could each invest between $25 million and $100 million.
Ziegel also represents Arkfield
Another client Ziegel is working with is Arkfield, an integrated real estate investment group that acquires and actively manages development and value-add projects across Ontario.
Its portfolio totals approximately 3.4 million square feet of residential density with an estimated completion value of $3.5 billion.
“That’s a great relationship for them,” Ziegel said. “It’s a beautiful project.”
Arkfield is also involved with several other proposed low-, mid- and high-rise residential projects at various stages of development in the Greater Toronto Area and Hamilton.