IMCO's Joint Venture With Tishman Speyer

Last week, the Investment Management Corporation of Ontario (IMCO) and Tishman Speyer announced the creation of a joint venture established to build a valuable portfolio of new developments and repositioned office and multi-residential properties in major US gateway cities:
The planned investment program bolsters IMCO’s commitment to generating strong results for its clients through high-quality assets and developing long-term and mutually beneficial strategic partnerships. For Tishman Speyer, the venture will facilitate the expansion of its presence in major U.S. markets specifically by taking advantage of value-add opportunities.

With IMCO’s initial commitment of $500 million (USD), and additional co-investment opportunities of $250 million (USD), IMCO and Tishman Speyer will jointly acquire and develop property in major supply-constrained U.S. markets. This includes New York, Washington, Boston, Los Angeles, San Francisco, Chicago and Seattle. Investments will target new development opportunities and well-located office and multi-residential assets in need of renovation – converting them into modern, class A properties.

“IMCO has partnered with Tishman Speyer to leverage its worldwide presence, as well as deep local market knowledge,” said Jean Michel, Chief Investment Officer, IMCO. “This partnership allows us to access larger transactions where few bidders can compete. Tishman Speyer has a consistent track record in project delivery, which makes it an ideal partner for us.”

Tishman Speyer President and CEO Rob Speyer commented, “Demand is very strong for high-quality office space and multifamily housing in U.S. gateway cities, and we believe that will be the case for the foreseeable future. This alliance will help to fuel our ability to help meet that demand, working with a partner that is financially well positioned and experienced in successful investment.”

IMCO prefers to develop partnerships with full-service real estate organizations that offer competitive advantages including market knowledge, deal accessibility, best-of-breed in-house expertise and strong reputations.

Targeted cities are characterized by supply constraints, which support higher rent growth as new developments lag demand. Market fundamentals across the U.S. remain strong and continue to outperform expectations. Development and value-add opportunities are economically attractive in the target markets, with stabilized return on cost at significant spreads over existing cap rates on core assets.
In her article, Betsy Kim of GlobeSt.com notes the following:
With IMCO’s initial commitment of $500 million and additional co-investment opportunities of $250 million, IMCO and Tishman Speyer will jointly acquire and develop property in major supply-constrained US markets. Locations will include New York, Washington, Boston, Los Angeles, San Francisco, Chicago and Seattle. The joint venture will invest in new development opportunities and well-located office and multi-residential assets in need of renovation, and convert them into modern, Class A properties.

The program bolsters IMCO’s goals of investing in high-quality assets and developing long-term and mutually beneficial strategic partnerships. For Tishman Speyer, it facilitates expansion in major US markets with value-add opportunities.
This is a great deal for IMCO with a solid real estate partner. Tishman Speyer is a leading owner, developer, operator and fund manager of first-class real estate around the world. Founded in 1978, the company is active across the United States, Europe, Latin America and Asia.

In the latest IPE Real Assets magazine, IMCO's CIO Jean Michel said they were close to finalizing its first partnership to invest in the US office market, partnering with an unnamed company that is capable of developing assets there.

He clearly explains why this joint venture with Tishman Speyer is attractive for IMCO: “This partnership allows us to access larger transactions where few bidders can compete. Tishman Speyer has a consistent track record in project delivery, which makes it an ideal partner for us.”

What makes this deal interesting is it's basically real estate development and renovation with a trusted partner that has years of experience delivering on these type of projects. IMCO is investing an initial $500 million to develop high-quality office space and multifamily housing in US gateway cities, and has earmarked another $250 million for co-investments where it will pay no fees (big money for a $64 billion pension fund).

What this deal demonstrates is IMCO is looking to develop meaningful partnerships in private markets in order to capitalize on its size, scale and long investment horizon.

Nicole Musicco, IMCO's Senior Managing Director, Private Markets, is very busy these days working on several deals but this Tishman Speyer partnership gives you a glimpse into what they are looking for when partnering up with external partners. Jean Michel told me he wants to leverage off these relationships as much as possible, and he's absolutely right.

In other related news, IMCO recently appointed Patrick De Roy to the newly created role of Senior Managing Director, Total Portfolio & Capital Markets.

In his new role, Patrick will lead a group responsible for active asset allocation, foreign exchange management, liquidity, leverage, and management of the public market alternatives and fixed income asset classes.

Patrick has over 20 years of experience as a portfolio manager and investment advisor. He was most recently Head of Global Research at the CDPQ, where he also led Portfolio Construction, Economics and Currency teams. Prior to that, he was a Partner and Investment Practice Leader at Eckler where he consulted major pension plans, like Air Canada's Pension where he met Jean Michel.

Anyway, when I saw Jean Michel in late March, he told me he was looking to fill this role, and I didn't put two and two together but it makes perfect sense he asked Patrick to join him.

One little note to Jean and Patrick, however. Most of Canada's large pensions lose a lot of money in currencies because they typically hire the wrong people who look good on paper but can't consistently make money in currencies.

I've relayed the perfect candidate I'd hire if I were IMCO. He might not be a polished CFA or have a PhD in stochastic processes, but when it comes to currencies, he has over 25 years of trading experience at a global bank and his track record speaks for itself. More importantly, he's a super nice guy who will add incredible value and experience to IMCO's team.

That's my little plug for my buddy out in Toronto who should be planning his trip to Greece with his wife and daughters, not worrying about where the CAD, euro and greenback are headed.

Below, Rob Speyer, president and chief executive officer of Tishman Speyer, shares an international developer’s view on what is driving the resurgence in global cities (June 2016). I enjoyed watching this clip and think IMCO found a great long-term partner in real estate.

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