Canada's Pensions Expand Their Global Real Estate
Greystar has raised A$1.3bn (€830m) for the Greystar Australia Multifamily Venture Fund I (GAMV I) fund in its second and final close.
GAMV I, which raised A$370m in February last year, is a four-way partnership with three institutional investors, including Dutch pension fund manager APG and Ivanhoé Cambridge, and plan to potentially invest up to A$5bn in built-to-rent apartments in Australia.
Chris Key, managing director, Greystar Australia, told IPE Real Assets that the third investor was a “large European” pension fund. APG was the first investor in the partnership, and Greystar had a modest stake in the venture, he said.
“We have seeded the fund with two projects in Melbourne. One is a 686-apartment project on adjoining sites in South Yarra, and the second is a separate site for 700-apartments in South Melbourne.”
Key said the fund was actively looking for sites in Sydney. “Our ambition is to close on a number of those deals this year.”
The focus of the new fund would be on key gateway cities, starting with Melbourne and Sydney, then, the economics permitting, Perth, Adelaide, Brisbane and Canberra.
“Looking out 10 years,” he said, “with our equity backing and debt, we are looking at creating a portfolio of at least A$4bn, closer to A$5bn,” Key said.
Today, Ivanhoé Cambridge, CDPQ's massive real estate subsidiary posted this on Linkedin:
We have entered Australia's build-to-rent housing sector alongside Greystar and APG through a new investment vehicle, Greystar Australia Multifamily Venture I (GAMV I), with capital commitments of A$1.3 billion.
It will focus primarily on the Sydney and Melbourne markets to deliver a new generation of high-quality, purpose-built rental housing with best-in-class services and amenities to meet the rapidly evolving needs of the rental cohort.
The importance of rental housing is a key global conviction for Ivanhoé Cambridge, and the partnership is also an opportunity to increase our exposure to Australia.
This is an excellent long-term deal in Australia alongside APG, a well-known Dutch pension fund, and Greystar, a partner of choice for large pensions looking to invest in multifamily properties all over the world.
Recall, a couple of weeks ago, I discussed CPPIB's big investments in real estate and renewables and mentioned another deal with Greystar in the US:
CPPIB has formed a joint venture with South Carolina-based real estate developer Greystar Real Estate Partners to pursue multifamily real estate development investments in certain US markets. The Canadian pension giant will pony up $350 million in equity toward the joint venture for a 90% stake, while Greystar has invested $39 million for the remaining 10%. Under the terms of the joint venture, Greystar will manage and operate the portfolio.
As I stated back then, pandemic or no pandemic, people need to live somewhere and multifamily properties remain a great option for people who can't afford a home and are looking to rent a nice property.
Also, post-pandemic, there will be a new normal between working from home and working at the office, which is another reason why Canada's large pensions are focusing more (but not exclusively) on multifamily properties.
Pattering up with Greystar, a global leader in developing, managing and operating multifamily properties is a very wise decision.
In other real estate news this week, QuadReal, BCI's real estate subsidiary, announced an $800 million logistics partnership with GPT:
The GPT Group (“GPT” or “Group”) today announced it has entered into a strategic partnership with QuadReal Property Group (“QuadReal”), with the establishment of the GPT QuadReal Logistics Trust.
The 50:50 joint venture has an objective to acquire and develop a high quality portfolio of Australian prime logistics assets, with an initial targeted investment of $800 million.
GPT Managing Director and CEO, Bob Johnston, said: “Growth of our Logistics portfolio is a core focus for GPT and we have made strong progress in securing development and investment opportunities in the sector. The logistics market continues to benefit from structural tailwinds driven by growth in ecommerce, food and pharmaceuticals distribution and the recovery in the housing market. GPT is delighted to be building a significant capital partnership with QuadReal that will leverage GPT’s brand and track record in the sector to create value for both parties.”
Peter Kim, QuadReal Managing Director, International Real Estate, Asia adds: “We could not be more aligned with the GPT team. We share a commitment to the fundamental reasons to expand logistics opportunities for the tenants with whom we partner. We also share a commitment to how we will do business together as both organizations consider the best for today and tomorrow in design, execution, environmental stewardship and the relationships we foster.”
The partnership launches with more than 20 per cent of the targeted investment committed across two assets. This includes the acquisition of a $137 million fund-through1 development at Truganina in Melbourne’s west, and a $38 million speculative logistics development at Metroplex Place, Wacol in Brisbane.
The partnership provides an opportunity for both GPT and QuadReal to accelerate the growth of logistics assets under management. GPT has been appointed to provide investment management, capital transaction, property management and development services to the joint venture, leveraging the Group’s strong track record in logistics development and asset management. QuadReal brings its own extensive experience in the industrial sector, owning and managing more than 80 million square feet (7 million square metres) of single-and-multi-tenant industrial buildings across the globe. The organizations share an aligned commitment to environmental, social and governance (ESG) initiatives, which will be incorporated into the joint venture’s activities.
GPT Head of Office and Logistics, Matthew Faddy, said: “The value of the GPT Logistics portfolio has doubled since 2017 to $3.0 billion, and we continue to achieve strong growth through successful developments and targeted acquisitions. As we look to continue driving growth in the Logistics sector we are pleased to partner with a global real estate investor in QuadReal.”
1 Subject to Foreign Investment Review Board approval
About The GPT GroupThe GPT Group is one of Australia’s largest diversified property groups, listed on the ASX and a constituent of the S&P/ASX 50. GPT owns and manages a $24.4 billion portfolio of retail, office and logistics property assets across Australia. The Group’s logistics portfolio consists of 41 prime logistics assets, totalling in excess of 1,000,000 square metres leased to more than 80 tenants. In 2020, the logistics portfolio grew to $3.0 billion with 165,200 square metres of new facilities developed and acquired. The Group has a pipeline of development projects with an expected end value of approximately $1 billion.
About QuadReal
Headquartered in Vancouver, Canada, QuadReal Property Group is a global real estate investment, operating and development company. QuadReal manages the real estate and mortgage programs of British Columbia Investment Management Corporation (BCI), one of Canada’s largest asset managers with a $171.3 billion portfolio. QuadReal manages a $44.2 billion portfolio spanning 23 Global Cities across 17 countries. The company seeks to deliver strong investment returns while creating sustainable environments that bring value to the people and communities it serves. Now and for generations to come.QuadReal: Excellence lives here.
Notice the target market is Australia here too but this time, the focus is on logistics properties, signing a joint venture with The GPT Group in Australia, another solid real estate partner with an expertise in developing and managing logistics properties.
Why logistics? Well, the growth of e-commerce all over the world, especially during the pandemic, explains why.
GPT Managing Director and CEO, Bob Johnston, states it clearly:
“Growth of our Logistics portfolio is a core focus for GPT and we have made strong progress in securing development and investment opportunities in the sector. The logistics market continues to benefit from structural tailwinds driven by growth in ecommerce, food and pharmaceuticals distribution and the recovery in the housing market. GPT is delighted to be building a significant capital partnership with QuadReal that will leverage GPT’s brand and track record in the sector to create value for both parties.”
In QuadReal, GPT gets a solid long-term partner to help it expand its operations well into the future and in return, QuadReal gets a solid partner to help it participate in the growth of Australia's economy through logistics and other properties.
I'm actually quite impressed with QuadReal, Dennis Lopez and his senior team are doing a great job diversifying BCI's real estate portfolio outside of Canada (Gordon Fyfe, BCI's CEO, was smart to recruit him).
Lastly, OMERS' real estate subsidiary, Oxford Properties, has been very busy this year.
Three weeks ago, Richard Lowe of I&PE Real Assets reported it bought fund manager M7 as it plans to pump £3bn into European logistics:
Oxford Properties Group, the real estate arm of Canadian pension fund OMERS, has confirmed that it is buying European fund manager M7 Real Estate.
The C$80bn (€51bn) real estate investor said it was making the acquisition as part of plans to deploy £3bn (€3.33bn) into multi-let industrial and urban logistics across Europe.
M7 Real Estate, which manages about €4bn of assets on behalf of third-party investors, will continue to operate as a standalone business, led by co-founders Richard Croft and David Ebbrell.
Under the new ownership, the company will have access to a greater pool of capital for both real estate and corporate investments.
“Oxford had previously stated its ambition to deploy £3bn of capital into the European logistics sector, and the acquisition gives it immediate scale to do so,” the investor said.
“Oxford will also benefit from M7’s management team’s expertise when considering additional corporate or portfolio acquisitions that might provide it with further access across these target sectors.
“The acquisition of M7 also presents opportunities for Oxford’s investment partners to deploy capital in the much sought-after European logistics sector and grow M7’s third-party capital under management.”
It is not the first time that Oxford Properties has acquired a fund management business. In 2018, it beat Blackstone in a bidding war for the Investa Office Fund in Australia and in November 2020 bought a stake in Investment Office Management Holdings.
Oxford Properties likened its purchase of M7 to that of Investa, and other corporate acquisitions including UK build-to-rent operator Get Living and IDI Logistics in the US.
Jo McNamara, executive vice president for Europe at Oxford Properties, said: “This transaction is a perfect example of how Oxford is creative with its capital to access opportunities in the asset classes and geographies where we have highest conviction.
“We can purchase properties and portfolios, develop, invest in debt or equities, and acquire businesses, all in service of our capital allocation priorities.”
She added: “Across the globe, our investment partners are increasingly asking us to access the opportunities presented by the Oxford platform and portfolio of businesses. Our acquisition of M7 also allows our partners to invest capital with a best-in-class management team in a sector with great growth prospects.”
M7 Real estate was established in 2009 by former Halverton executives to invest in light industrial and urban logistics in Europe. Today, it has 225 employees in 14 countries and manages a portfolio of 620 assets.
McNamara said: “M7 is a market-leading platform, led by a highly ambitious and entrepreneurial management team that has deep-rooted expertise in the sector, through which we intend to significantly expand and accelerate our investment in this asset class across Europe.”
Croft, executive chairman at M7 Real Estate, said: “From a standing start 11 years ago, we have built M7 into a market-leading investment management business with over €4bn of assets under management.
“This transaction provides us with the support and resources of a significant global real estate investor which shares both our entrepreneurial ethos and our strong ambition to grow the M7 business substantially over the next few years to create a truly world-class industrial-focused asset and investment management platform.”
Jo McNamara definitely knows what she's doing and this deal will allow Oxford Properties (OMERS) to significantly ramp up its logistics properties across Europe.
When you don't have enough people in a region, the best way to ramp up operations is to buy a fund, allow the current managers to continue operating and provide them them with long-term capital to finance their new acquisitions.
What else caught my attention? A week ago, Oxford Properties signed three life sciences leases, totaling 113,000 square feet at Pappas Way in Boston:
Oxford Properties Group announced it has signed 113,000 square feet of new life sciences leases at 645 Summer Street, a lab and innovation building at Pappas Way in Boston.
645 Summer Street is now 100 percent leased. Deals include:
A renewal and expansion for a 75,000 square foot, 10-year lease with Akouos, a precision genetic medicine company dedicated to developing gene therapies with the potential to restore, improve, and preserve hearing for individuals living with disabling hearing loss;
A 21,000 square foot, 5-year lease with Ikena Oncology, a biotech company discovering and developing targeted oncology and immunometabolism therapies for cancer patients who need life-saving treatment; and
A 17,000 square foot, 5-year lease with Monte Rosa Therapeutics, a biotech company developing cancer therapeutics that modulate protein degradation pathways.
“Oxford has great local insights into Boston’s leading life sciences market. We also have the sector expertise and tailored, state-of-the-art lab and bio-manufacturing space to help established and emerging companies advance their mission-driven work,” said Abby Middleton Mondani, director of leasing, at Oxford. “These relationships are emblematic of our growing life sciences business, a key area of expansion for Oxford, and our ability to create a dynamic ecosystem for businesses doing important research and development. We welcome Ikena Oncology and Monte Rosa as customers and are pleased Akouos can double its size within 645 Summer Street to more efficiently support development of potential gene therapies for treatment of disabling hearing loss.”
“Akouos has been a part of the dynamic life sciences ecosystem in Boston since our founding in 2016. In collaboration with Oxford at 645 Summer Street, we continue to expand our research and manufacturing infrastructure to support the development of genetic medicines with the potential to address a broad range of inner ear conditions,” said Manny Simons, Ph.D., founder, president, and CEO of Akouos. “We are grateful to have found a space that supports our growing team in its mission to make healthy hearing available to all.”
In 2019, Oxford Properties and Pappas Enterprises partnered to own and operate Pappas Way, a 42-acre business park between South Boston and the Boston Seaport District. It currently consists of nine industrial and lab buildings, an open-air pedestrian route along the waterfront, and public green space offering scenic views of the Reserved Channel.
Growing a substantial life sciences business is one of Oxford’s highest conviction investment strategies and top priorities across its business in 2021. In North America, the initial focus will be on Boston, as well as the San Francisco Bay Area, San Diego, and other emerging locations that Oxford has early excitement over. Beyond North America, Oxford is also reviewing opportunities across Europe as it looks for global exposure to the asset class.
Over the past few years, it has built expertise in the space and deployed capital into the sector through a variety of equity and credit investments and, in the past month, has purchased four assets in Boston and San Francisco for $275 million with a further $500 million of follow-on investment in those assets.
Carolyn Wheatley, Meredith Christensen, and Jeff Landers of CBRE represented the landlord in these transactions. Connor Barnes, Deanne Munger and Sharon Joyce of Cushman & Wakefield represented Akouos.
This is another great real estate deal in Boston, a hub for life sciences and AI.
Recall, I recently covered PSP Investments' big Boston lease with Amazon, and discussed how the presence of Harvard, MIT, top tech companies are all very attractive features of that city but it's also known as a leader in life sciences.
Third, one of Oxford Properties major buildings, 50 Hudson Yards, just topped out at 1,011 feet:
One of the largest office buildings in New York City officially topped out this month. The Foster + Partners-designed 50 Hudson Yards reached its 1,011-foot summit last week, becoming the city’s fourth-biggest office tower by square footage. Developed by Related Companies and Oxford Properties Group, the 2.9 million-square-foot stone and glass structure completes phase one of the Hudson Yards mega-development.
In November 2019, Facebook signed a lease for 1.5 million square feet across three buildings, including 30 Hudson Yards, 55 Hudson Yards, and 50 Hudson Yards. The bulk of the tech company’s lease includes 1.2 million square feet at 50 Hudson Yards.
Asset management company BlackRock will occupy 970,000 square feet across 15 floors, leaving about 25 percent of the office space at the building unleased. The developers expect 50 Hudson Yards to open next year.
“The topping out of 50 Hudson Yards, on schedule despite a global pandemic, underscores the incredible construction team who remained committed to robust safety precautions as they redefined the City skyline,” Bruce A. Beal Jr., president of Related Companies, said.
“New York City has long been one of the world’s centers of innovation and commerce and we know this city’s best days are still ahead, fueled by a new generation of modern office space that will continue to attract the best companies and talent.”
Taking up a full block between Hudson Boulevard and Tenth Avenue between 33rd and 34th Streets, the 58-story office tower will boast massive open floor plates ideal for “large trading floors and other collaborative work,” with space for 500 employees on each floor, according to a press release.
The lobby of the building, which faces the Hudson Yards public square and the 7 subway station, features two artworks by Frank Stella. Tenants will also benefit from its high ceilings and panoramic Hudson River views and amenities like a private porte-cochère, sky lobbies, and outdoor terraces.
Despite pandemic-related delays, commercial construction projects have continued. Nearby, Bjarke Ingels’ office tower the Spiral topped out last month at 66 Hudson Boulevard. The 1,301-foot-tall building contains 2.8 million square feet of office space and ground-floor retail. And late last year, One Vanderbilt, the 77-story skyscraper next to Grand Central, officially opened its doors.
Beautiful building, who wouldn't want to work there?
Let me end by noting AIMCo also entered into a few real estate deals recently.
In December, on behalf of certain of its clients, and Canmoor it completed the off-market acquisition of 10 urban industrial estates in the U.K. from Starwood Capital Group and Barings:
The portfolio consists of high-quality warehouse properties totalling 1.6 million square feet, located in major urban conurbations including Oxford, Birmingham, Newcastle and Glasgow.
The estates typically comprise mid-size units ranging from 5,000 to 30,000 square feet that serve last-mile delivery/trade counter/storage functions. The acquisition positions AIMCo and Canmoor to capitalize on the continued growth of online retailing, heightened by the COVID-19 pandemic, set against the low supply of new industrial estates. The portfolio is approximately 95% let to more than130 individual tenants.
“We continue to have strong conviction in the U.K. urban industrial market. Occupational demand remains strong, set against a backdrop of very limited new supply and low vacancy. This portfolio complements our existing U.K. industrial exposure and is well positioned to capture future growth in the sector. We look forward to working with Canmoor to create additional value in the portfolio,” commented Rupert Wingfield, AIMCo’s Head of European Real Estate.
More recently, Oxenwood and AIMCo acquired a prime London development site:
Oxenwood Real Estate, the UK and European real estate investment management firm, and its joint venture partner, Alberta Investment Management Corporation (AIMCo), on behalf of certain of its clients, have acquired a prime, last-mile logistics development site in west London.
The joint venture, which was set up at the beginning of 2017, targets value-add logistics opportunities in the UK.
The 4.7-acre site at 16 Eastman Road in Acton has been acquired from the occupier, RSN Property Limited. The site comprises a 100,000 sq ft milk processing and bottling facility, which has been leased back to RSN, the UK’s largest independent processing dairy, to allow the relocation of RSN’s business.
Oxenwood will work up plans for a new 100,000 sq ft facility, which it will aim to pre-let to a single occupier.
Jeremy Bishop, co-founder of Oxenwood, said: “AIMCo has been a partner for nearly four years, during which time the logistics market has become one of the most attractive real estate sectors. We are delighted to be adding this new asset as part of our plans to grow the portfolio. The off-market transaction represents a superb opportunity to acquire a prime development site in the London market. During the leaseback period, we will look to identify an occupier with whom we can work to deliver a high-quality last-mile facility”.
Rupert Wingfield, AIMCo’s Head of European Real Estate commented: “We are very pleased to have secured this redevelopment site in Acton. The location offers easy access to the M4 and M40 motorways and is surrounded by densely populated, affluent London boroughs, thereby offering future potential logistics occupiers the perfect opportunity to ‘shorten the last mile’. We look forward to working with Oxenwood over the coming years to deliver this exciting project”.
Alright, I just gave you a glimpse of how Canada's large pensions are investing in foreign real estate.
There are too many deals to cover in one post but the key thing I want to bring to your attention is that our large pensions are diversifying outside of Canada and they're partnering up with the right companies and funds to invest in the best properties all over the world.
I encourage my readers to go see the following websites for more news on other deals:
Lastly, a senior pension fund manager told me I was a bit rough on Daniel Fournier, the former CEO of Ivanhoé Cambridge in some of my comments on the writedowns that CDPQ needed to take on its large retail real estate portfolio.
I probably was a bit rough on him but I still believe he could have done more when he was in charge to drastically reduce those investments.
It doesn't mean the man wasn’t good, he was excellent and did a lot of good things while he was at the helm of Ivanhoé Cambridge and worked very closely with Blackstone's Jon Gray and others to invest across the globe, I just think more needed to be done on CDPQ's non performing retail assets a long time ago.
Mr. Fournier is now the Chancellor of Bishop's University and I hope he's enjoying that experience (I did summer school there when I was 12-years-old to improve my French and loved it).
If Mr. Fournier or others want to write a guest comment on real estate, by all means, the forum is theirs.
Below, Davina Rooney of Green Building Council of Australia talks with Mark Fookes, Chief Operating Officer of The GPT Group, on what they are doing to reduce their carbon footprint.
I also embedded a cool clip on the construction of 50 Hudson Yards in New York City.
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