Ivanhoé Cambridge chairman and CEO Daniel Fournier’s mother always asks the same questions when she talks to him: How are the children, his wife — and “How is OUR pension fund doing?” She has no idea, Fournier said in opening remarks to the Canadian Club of Montreal, of the deep reflection she provokes, on issues from the fluctuation of the Brazilian real to the impact of e-commerce.
Indeed, Fournier has a heavy responsibility on his shoulders. The realestate arm of the Caisse de dépôt et placement du Québec, with $48 billion in assets, has enjoyed a healthy average 13.3-per-cent growth rate over the five years since Fournier took the helm.
But growth will be more moderate in the coming years. The Caisse is expecting a growth rate of 7 or 8 per cent over 10 years, Fournier said.
Here are some interesting nuggets gleaned from the speech Monday and subsequent interviews with the media.
— The real estate portfolio is invested 40 per cent in Canada, 32 per cent in the U.S., 19 per cent in Europe and 9 per cent in emerging markets.
— In Montreal, Ivanhoé Cambridge has so far invested $3 billion. It is planning a big push to redesign and link Complexe Les Ailes and the Eaton Centre. “We are talking to all the retailers to rent spaces,” Fournier said, adding that a major anchor at Les Ailes is not necessarily part of the plan.
Other Montreal projects include an observatory for Place Ville Marie, expected to be completed in 2016, the renovation of the Queen Elizabeth Hotel, and a plan to link the Esplanade of Place Ville Marie René Lévesque Blvd. and McGill College Ave. The 27-storey Maison Manuvie is expected to be completed in 2017. (It has two other high-end office projects in the works, Bay Park Centre in Toronto and River Point in Chicago.)
It is looking to open an outlet mall in the Montreal area. “We are searching. We want it to make sense,” Fournier said.
— On the retail side, the portfolio has downsized to 26 shopping centres to focus on the super-regional and outlet centres, Fournier said. More than $3 billion of secondary and tertiary assets have been sold off.
“Sales are doing well — there’s Target, there’s the bankruptcies we all read about. So far, so good,” Fournier said. “But we’re not going to do anything dramatic.”
— On the office side, it’s case by case, he added. In total, Ivanhoé Cambridge sold off about $8 billion in assets last year. For example, in the office sector, it sold three buildings in Paris, including two buildings at La Défense to Gecina, for 1.24 billion euros.
— The company invests in cities, not countries. Fifteen cities are on its list, including Montreal, Toronto, Calgary, Vancouver, New York, London, Paris and Shanghai.
New York is the most liquid and most stable city in the world for real estate investment. Ivanhoé Cambridge has a $7-billion portfolio there.
— Ivanhoé Cambridge’s transformation, begun five years ago, has four pillars: to run Canada’s top shopping centres and office buildings; to grow its U.S. presence; to seize opportunities in Europe and build a portfolio in emerging markets; to augment its presence in the multi-unit residential sector.
— Oversupply, normally a worrisome sign, is not an issue today as it was in the U.S. in 2007-08. “That doesn’t mean there’s phenomenal growth,” Fournier said. But there is a “huge number of buyers, excessive liquidity like we’ve never seen,” causing one to wonder how that affects pricing and value. “Insurance companies in Europe, or even here, need some kind of yield. It’s a fight for any kind of yield.”
Fournier also said that since the 2008 crisis in the U.S., the percentage of renters there has grown from 31 per cent to 37 per cent, with each percentage representing 1 million households, an important trend for Ivanhoé Cambridge to look at.
— Globalization has been a major force, transforming real estate markets everywhere. Three factors affect Ivanhoé Cambridge directly: Huge liquidity and extreme competition from other pension funds but also state funds, creating elevated asset prices, as well as urbanization throughout the world.
— Ivanhoé Cambridge is taking steps in investing in China, with perhaps $100 million-$150 million at a time, not billions. It is also looking at India, “one toe at a time.”