The Ontario Municipal Employees Retirement System (OMERS), through its investment arm Oxford Properties Group, is aiming to build a major real estate presence in the US as part of a plan to invest $10.5 billion in the asset class in North America and Europe over the next five years.
Oxford, which is a standalone real estate development and investment company sponsored by the $53 billion pension fund, is planning to increase its real estate investment in the US from $1.5 billion to $5 billion over that period. The company likewise is boosting its real estate investments from $2 billion to $5 billion in Europe and from $16 billion to $20 billion in Canada.
“Oxford has consistently delivered 10 percent-plus returns for OMERS over a 10-year period,” Blake Hutcheson, Oxford’s chief executive officer, told PERE. “It is a proven entity within the OMERS family and one of its single-greatest success stories.” Because of that, OMERS is planning “to have real estate be a huge allocation of the fund.”
Oxford, which has 1,500 employees in its Toronto headquarters, is making a strategic push to bolster its investment activities in the US, with OMERS officially opening a New York office on Park Avenue last week. The company, which previously occupied a temporary location in the city, is planning to expand its seven-person New York real estate team to between 12 and 15 people in the next 12 to 18 months, said Hutcheson. It also is planning to beef up Oxford staff in OMERS’ London office, which opened in 2008, from 8 to 15 people, he noted.
In the US, Oxford is pursuing a three-pronged approach that will focus on the acquisition of long-term office assets in New York, Boston and Washington, DC; real estate debt; and multifamily and retail properties, according to Hutcheson. To date, the company has purchased $300 million worth of performing real estate loans at a discount and amassed a $1 billion portfolio of multifamily and retail properties, he noted.
Oxford, however, has yet to make an office purchase. “Some people are pricing the Class A office market to perfection, anticipating fundamentals to get materially better,” said Hutcheson. “We’ve been more conservative, which explains why we haven’t bought any significant Class A office assets.”
Last year, Oxford acquired a 50 percent interest in Hudson Yards, a 12 million-square-foot master-planned, mixed-use development in New York, in partnership with local developer The Related Companies. Oxford and Related have each invested $475 million in the project, which is expected to be completed over the course of 10 to 15 years and cost a total of $10 billion upon completion.
Oxford, which currently has $19 billion in real estate assets under management worldwide, is embarking on a five-year plan to grow its portfolio to $30 billion, said Hutcheson. This is expected to be comprised of $10 billion to $12 billion in OMERS equity, an equal amount of leverage and $5 billion to $10 billion in third-party equity. Meanwhile, OMERS’ real estate allocation is not expected to change from its typical range of 10 percent to 15 percent, since the pension’s total assets under management also are expected to grow during that period, he noted.