The Canadian Core Real Estate strategy aims to provide investors with access to a differentiated, core Canadian commercial real estate portfolio with the aligned oversight of two of Canada’s leading investment managers.
The strategy provides investors with a unique opportunity to invest directly alongside a leading Canadian pension plan manager in one of Canada’s largest diversified core commercial real estate portfolios. In partnership with British Columbia Investment Management Corporation (BCI) and their real estate investment subsidiary QuadReal Property Group, the Canadian Core Real Estate strategy provides investors with access to a portfolio comprising 50 properties across Canada’s largest cities, diversified by asset class, geography, and tenancy. BCI’s commitment to a significant ownership interest in each asset ensures long-term alignment with one of Canada’s largest public pension plan investors.
- Invests in high-quality income-producing commercial real estate assets in Canada’s major centers.
- Assets will be broadly diversified across asset class, geography, and tenancies.
- Resilient net operating income with 90%+ of revenue from Canada’s six largest markets.
- Strong operational and performance alignment with one of Canada’s largest pension plan managers.
Asset class overview
- Tends to have low relative volatility and drawdown risk compared to public markets.
- Contractual leases create an income profile that is positively correlated to long-term domestic inflation.
- Tends to have low correlation to other asset classes, which lowers portfolio volatility.
- Potential to capture private market illiquidity return premium.
Investment philosophy and style
The investment strategy focuses on factors that the manager believes will allow the strategy to benefit from significant long-term urbanization trends, including:
- proximity to long-term drivers such as population, income, and job growth;
- a core asset composition featuring high-quality income-producing properties in large urban areas; and,
- broad diversification across major Canadian cities, property types, and tenancies.
The strategy may also hold cash and cash equivalents, and other money market instruments or money market strategies managed by the manager as a component of its cash management strategy.
In partnership with BCI and QuadReal, RBC GAM has established a well-diversified core domestic portfolio to form the strategy. The principles used to construct the portfolio include:
- BCI and the strategy each hold a meaningful ownership interest in the portfolio’s assets;
- each asset is consistently underwritten to ensure it is income-producing and supports target portfolio performance for the long term;
- the portfolio overall will maintain a focus on resilient income generation with development exposure centered on a “develop to hold” strategy; and
- the portfolio will remain fully diversified across an institutional-quality portfolio while targeting a minimum of 90% of its gross asset value invested in Canada’s six major urban centers.
We believe this approach best aligns the interests of the involved parties and has created an attractive and resilient portfolio for our clients.
We also work in partnership with QuadReal to identify future investment opportunities appropriate for the strategy, including proprietary rights to additional BCI-owned assets along with externally sourced investments. As co-owners with BCI in each asset the strategy holds, we work together on all major decisions, including budget approvals, capital investments, and financing.
The RBC Real Estate team, supported through the deep internal resources provided by both RBC and RBC GAM, is responsible for portfolio management of the strategy. In addition, the team is supported by QuadReal, who provides in-depth support for the asset and property management functions for all holdings in the portfolio. QuadReal performs the same asset and property management functions for BCI, creating natural performance alignment for the co-ownership.
- Portfolio construction: The RBC Real Estate team manages the portfolio construction strategy, including control over all investment decisions. The strategic portfolio decisions are guided by factors that include the macroeconomic and demographic outlook for cities, types of assets, and operating businesses. The portfolio allocations are constantly monitored through detailed performance monitoring (at both an individual asset and total portfolio level) with anticipated or prevailing risks and threats incorporated into the short, mid, and long-term planning. The RBC GAM Real Estate Investment Committee provides performance and risk oversight, including input into annual business plans, investment decisions, and any conflict resolution. QuadReal, in their role as asset and property manager, provides proprietary asset-level, portfolio-level, and broad industry data and analysis that support the team in their decisions.
- Asset management: Our Partners at QuadReal are responsible for asset management of the underlying properties that comprise the strategy. They perform the same function for BCI and have significant experience managing the current assets. The strategy is able to leverage QuadReal’s comprehensive skills and their long-standing market and active asset management experience to provide a competitive operating and investment advantage in the market. This includes ongoing planning for the properties (on a three-year rolling basis), reporting, and annual budget reviews for the properties and the portfolio. In terms of sourcing new opportunities, the strategy has access to QuadReal’s transaction services, and performs market research in cooperation with the RBC Real Estate Team.
- Property management: QuadReal is responsible for property management associated with the strategy’s assets, which includes property operations, maintenance, service, leasing, and property accounting. An internal property management approach has several benefits, which are predicated on the vertical integration of asset and property management synergies gained from information sharing across these functions.