The U.S., Europe, Brazil, places that many companies would hesitate to invest in are the current focus of real estate giant Ivanhoe Cambridge.
“We put a lot of time into U.S. residential, that was a bit of a surprise, it wasn’t part of our plan but we had a fair level of success already and we are going to keep it going,” said Daniel Fournier, Ivanhoe’s chairman and chief executive, at the Real Estate Forum in Toronto recently.
The Montreal-based real estate company has also made “very serious commitments to Brazil,” making 16 purchases in the South American country, “and we want to continue there.” The Ivanhoe CEO admits his company is “as confused as everyone” about Europe but remains entranced by opportunities on the continent.
“The history of our company is we bought in Paris when Paris was absolutely on its knees in 1999. We have heard all the economists, we agree, I haven’t heard a positive thing about Spain in the last six months. The only problem is every month when I look at the numbers of our retail assets in Madrid we have double-digit growth. I don’t understand any of that but we are more open (to investing) than I think the conventional view would be.”
One of the world’s 10 largest real estate companies with $31-billion in assets comprised of 350 investments in 94 cities in 24 countries, Ivanhoe Cambridge has been successful internationally by forging strong relationships with local partners, he said. “Brazil has worked for us for one reason. We have the right partner,” said Fournier. “We have come to the conclusion that (the right) partner, it doesn’t quite trump market, but almost.”
Ivanhoe Cambridge has racked up an annualized return of 12% over the past decade, its CEO said. He attributed much of that performance to its $15-billion in Canadian holdings but also seemed to cast his gaze farther afield. “A big chunk of that comes because we have been long on Canada.”
“It is always going to be at the core at what we do, that is for sure, but the question that we have been asking ourselves is because the last decade belonged to Canada, does that necessarily mean that the next decade will belong to Canada?”
“That being said, again, using our operating platform (and) spending $300 million to $500 million at Oak Ridge in British Columbia makes huge sense to us,” he said. “It is an asset that we know, we like, we own. So when people say what is your development risk, we think that is a very calculated risk.”
Ivanhoes CEO, and fellow panelists from Brookfield Properties and KingSett Capital, said that shrinking cap rates are making development attractive again for an industry that has been characterized more by industry players buying existing properties.
“We talk about the kind of cap rates that exist today, we are starting to see that it makes sense to develop in a controlled way,” said Fournier. “For example in Brazil we are doing Greenfield developments there. We are just trying to follow the middle class and the growth of the middle class that is exploding there. The expansion of the existing retail centers, that is a pretty controlled risk. We have known the tenants, we have owned the centers for years and years.
“Where we have sort of stepped out a little bit is in Paris because we had a core team there for a long time, almost 12 or 13 years so we are taking a bit of a risk there,” he said. “And we have also taken some on 8th Avenue in Calgary that we wouldn’t normally do.”
Running Ivanhoe Cambridge is a bit of a culture shock for Fournier, he said. “My sort of training as a private sector entrepreneur, there is just no way I would do spec development. When you are responsible for a portfolio of $30 billion and you are sitting on huge liquidity, your perspective changes a little bit.”
Daniel Fournier, Chairman & CEO, Ivanhoe Cambridge
Daniel Fournier is Executive Vice President, Real Estate, Caisse de depot et placement du Quebec. In this capacity, he oversees the institution’s real estate investments, including strategy development and portfolio management and growth. He sits on the Caisse’s Executive Committee. In addition, Daniel is the Chairman of the Board and CEO of Ivanhoe Cambridge, one of the 10 largest real estate companies in the world, with over $30 billion of assets in shopping centres, offices, and Multi-residential buildings as of December 31, 2010.
He is also the Chairman of Otera Capital; a company specialized in the underwriting, structuring, syndication and active management of commercial real estate loans, for a portfolio whose net asset value reached $8.6y billion as of December 31, 2010.