GLOBAL - Cadillac Fairview, which manages the real estate exposure of the Ontario Teachers' Pension Plan, is focusing on joint ventures in markets outside Canada while its appetite for fund investments has waned.
Over the last 10 years, the wholly owned subsidiary has sought to rebalance Ontario Teachers' property portfolio away from its heavy domestic exposure, but fund manager performance during the downturn has prompted the firm to focus on direct acquisitions with joint venture partners.
Louie DiNunzio, senior vice-president of investments at Cadillac Fairview, said: "Our strategy is always to invest side by side with an owner/operator.
"Their interests are going to be completely aligned with ours because they are not only a manager but they are half owner in the building."
The global downturn "helped solidify" Cadillac Fairview's decision to favour joint ventures over real estate funds because of the poor performance and lack of control, DiNunzio added.
"Once the recession set in, a lot of the funds that had raised capital but not necessarily invested it started changing their mandates, which then impacted on us because we have a very clear focus as to what asset classes we like to be in," he said.
"Those types of changes, which were completely allowed under the fund documentation, were not something we were comfortable with."
But real estate funds may yet still play a role in Fairview Cadillac's portfolio, albeit a limited one.
"What we are using funds for right now is really to study and understand new markets that we are contemplating getting into," DiNunzio said.
Cadillac Fairview has looked at funds focusing on India as a way of becoming familiar with the market.
"India is a very difficult market to get into unless you have established relationships in that market," DiNunzio said.
"Local relationships are very important, and a fund that is focused on India is something that we have looked at because it would allow us to study and understand the market, but do it through someone else's expertise."
DiNunzio said the company would also look at club deals where there was an opportunity to invest directly in assets, but he added that joint ventures remained the preferred structure for markets like London and the US.
"The decisions of the owner/operator would be consistent with how we make them in our own domestic market," he said. "They are not driven by short-term performance hurdles to maximise a management fee."
