It took Oscar Belaiche a year to sell close to $ 500 million in real estate in his old job. In his new one, he could move that much in a week.He was the real estate executive in charge of selling the massive Prudential Insurance Co. of America portfolio of office, industrial and retail buildings. After an intense marketing process and a tight bidding war, Oxford Properties Group Inc. and GE Capital Canada Inc. bought it in July for $ 455.8 million. Belaiche’s new job managing real estate mutual funds for Goodman & Co. still consists of buying and selling real estate. But instead of the buildings and their inherent bricks and mortar, he is trading stocks. He’s one of the first real estate operators to move over to the securities side of the business. Industry watchers say more will follow.They will be there because real estate in
Canada is becoming securitized. Property ownership is increasingly held through the stock market – witness the amount of money pouring into real estate stocks and the number of new real estate investment trusts (REITs) launched in the past year.
In 1997, real estate companies or trusts have tapped into the public markets almost 40 times, raising $ 5.5 billion, according to CIBC Wood Gundy Real Estate Ltd. The EdperBrascan Corp. real estate giant, Brookfield Properties Corp., has filled its pockets four times, raising $ 1.6 billion this year, surpassing the $ 1.4 billion the entire industry raised last year.‘Real estate is changing from a privately owned to a publicly owned industry,’ says Scott White, who has also moved from the bricks to the paper side of real estate. For 10 years, he was an investment broker at J.J. Barnicke Ltd. Now he’s an investment banker with CIBC Wood Gundy.The securitization of real estate began in the U.S. four to five years ago and is just beginning in
Canada, he says. Even with current market volatility, the wave of securitization is expected to continue.
‘This is a long-term trend and it’s not going to be upset by a market correction.’About 350 real estate companies are publicly traded in the
U.S., many of them relatively new. In
Canada, the CIBC Wood Gundy Realty Stock Monitor lists 30 real estate firms. These companies are growing rapidly. The Toronto Stock Exchange real estate subindex, consisting of seven of them, has consistently outperformed the TSE 300 index.‘The level of new capital entering the market is unprecedented and is driving the investment market forward at a rapid rate,’ says Ross Moore, vice-president of research at Colliers International. ‘Both institutional and retail investors are anxious to increase their exposure to real estate and are fuelling the demand for more real estate securities.’Belaiche’s job is to keep abreast of the quickly moving markets. His business card identifies him as a vice-president of Goodman & Co., but he is really co-manager with Anne MacLean of Goodman’s Dynamic Canadian Real Estate Fund and the global Dynamic Real Estate Equity Fund.‘Real estate is an emerging industry in the stock market,’ says MacLean. ‘There’s a lot more information in the public domain today than there was two or three years ago on real estate, so there’s a lot more to evaluate.’Expertise like Belaiche’s helps.‘We’re merging the portfolio management theories of the stock side with the portfolio management theories on the real estate side,’ he says. ‘It’s a merging of the skills of the traditional CFA [Chartered Financial Analyst] analyst working with an operating person.‘Before, I was directly buying and selling real estate. Now, I’m buying the companies that are buying and selling real estate.‘‘Oscar is going to find that liquidity is tremendous relief,’ MacLean says, mimicking Belaiche in an imagined scenario. ‘I don’t like that building any more: Oh Gone’ she says with a wave of her hand.The growth of Dynamic’s global real estate fund illustrates how rapidly investments are being funnelled to real estate. In January 1996, with assets of $ 3 million, the fund was, in MacLean’s words, ‘teenie, teenie, teenie, teenie, teenie, teenie tiny.’A year later, assets had climbed to $ 50 million and now stand at about $ 220 million, she says.The much newer Canadian fund was launched last February. Total assets at the end of June were $ 100 million. Its top five holdings are familiar real estate names: Oxford Properties, RioCan REIT, Cambridge Shopping Centres Ltd. and Gentra Inc.Until recently, the Dynamic funds were the only real estate mutual funds in
Canada. But just a few weeks ago, Mackenzie Financial Corp. launched its Universal World Real Estate Fund. And in September, CIBC Securities Inc. created the CIBC Canadian Real Estate Fund.One reason Dynamic has had little competition is it’s tough to find a fund manager for the specialized field of real estate, says MacLean. ‘Who else would you name?’ she asks. ‘There is a real shortage of real estate analysts in
Canada, not so much on the sell side, but there is for sure a lack of them on the buy side.’Ted Cadsby, a vice-president of CIBC’s mutual funds group agrees. ‘There are very few qualified real estate managers in
Canada.’Instead of forming a new team, CIBC has appointed Morguard Investments Ltd., an established real estate investment management firm, to do the job.Belaiche says he won’t miss the glory of the operations side of the real estate business.‘My passion has been in investment,’ he says. ‘And my vocation has been in real estate. This job merges my passion with my vocation, so it’s like a dream job for me.’
