Last month, British Columbia Investment Management Corporation (bcIMC) joined a select group of Canadian pension plans: those that have their own standalone real estate companies.
bcIMC’s company, QuadReal Property Group, will manage the pension plan’s more than C$18 billion ($14 billion; €12.43 billion) in real estate assets, including C$2 billion outside of Canada. Similar to La Caisse de dépôt et placement du Québec (CDPQ)’s property company Ivanhoé Cambridge, Ontario Municipal Employees’ Retirement System (OMERS)’s equivalent Oxford Properties Group and Ontario Teachers’ Pension Plan (OTPP)’s The Cadillac Fairview Corporation, QuadReal will have a mandate to expand its parent organization’s real estate investments globally.
“The establishment of QuadReal is a natural evolution for a company of scale and ambition and it fits perfectly with our strategy to expand our global reach,” said Gordon Fyfe, chief executive officer and chief investment officer at bcIMC, in a statement announcing the launch.
But while its counterparts were all independent standalone companies before they were acquired by their respective Canadian pension funds, QuadReal will be a brand-new entity that its parent organization is creating with its existing real estate assets.
Those assets will begin to transfer from bcIMC’s three external real estate managers – Toronto- based firms Bentall Kennedy, GWL Realty Advisors and Realstar Group – to QuadReal in 2017. This transition will have a significant impact for Bentall Kennedy – which currently derives 17.5 percent of its assets under management from the pension plan – in particular. Three to four Bentall Kennedy subsidiaries, along with 500 of the company’s staff, are now expected to become part of QuadReal.
The vast majority of the Bentall Kennedy employees who are joining QuadReal are responsible for the bcIMC real estate assets that Bentall Kennedy manages. They include Remco Daal, formerly president of Bentall Kennedy’s Canadian operations, who will now serve as co-president of QuadReal and run the new company’s domestic business.
Given bcIMC’s size – the pension plan currently has C$123 billion in overall holdings and is understood to be growing quickly – the formation of QuadReal was to be expected. “There’s a trend of very large pension funds doing this once they achieve the kind of scale that bcIMC has,” said Gary Whitelaw, group chief executive officer at Bentall Kennedy.
He added that Bentall Kennedy began discussions on a contingency plan for such an event about 18 months ago. “You want to have a plan in place, so should the client make the strategic decision to do something differently, you can ensure that everyone is well looked after,” he told PERE.
bcIMC’s formation of QuadReal closely follows Bentall Kennedy’s sale to SunLife Financial last September, through which both bcIMC and US pension California Public Employees’ Retirement System sold their one-third stakes in the company. Some industry observers have speculated that bcIMC was a major driver behind the Bentall Kennedy sale, as it anticipated launching its own real estate company, but Whitelaw maintains that was not the case. “It wasn’t until early this year that bcIMC began moving in a serious way to evaluating any decision” relating to QuadReal, he said.
bcIMC and Bentall Kennedy will not be severing ties after the transfer of assets is complete, however. For example, Bentall Kennedy will be spearheading the 1.3 million square foot mixed-use redevelopment of the former Post Office building in downtown Vancouver on behalf of the Canadian pension plan for years to come, Whitelaw said. Nevertheless, in creating its own property company, the Canadian pension manager has diluted its ties with third-party managers and will, going forward, better resemble some of its peers.