“Still waters run deep” is the saying that comes to mind at the 12th-floor offices of QuadReal Property Group, which appear calm and unruffled as the staff of 30 people prepare for a year of explosive growth.
With its establishment in June 2016, the property management wing of B.C. Investment Management Corp. (bcIMC) assumed oversight of $2.5 billion in international assets. Its biggest move lies ahead: the addition of 500 properties across Canada worth more than $15 billion and the addition of 250 staff to its local payroll by February 2018.
“Think back to the last time that an entity was established that was going to manage $18 billion and growing in real estate,” said Remco Daal, president of Canadian real estate for QuadReal. “To have a Vancouver head office taking 50,000 square feet in a building like this is pretty phenomenal.”
Daal is to the point as he discusses the rationale for the massive transition he’s overseeing (Jonathan Dubois-Phillips manages QuadReal’s $2.5 billion worth of international properties).
Other pension funds have long had property managers handling their real estate portfolios. OMERS (Ontario Municipal Employees Retirement System) manages its real estate through Oxford Properties Group; Cadillac Fairview represents the Ontario Teachers’ Pension Fund; and Ivanhoe Cambridge is the public face of the Caisse de dépôt et placement du Québec.
However, bcIMC has contracted out property management to a trio of firms since it began acquiring real estate for its shareholders, the province’s civil servants, in 1991.
Bringing management in-house promises significant cost savings, boosting margins in a market where yields on properties have steadily compressed under a tsunami of capital from Asia and elsewhere.
While many of QuadReal’s staff will join from the existing property managers, everything else about QuadReal is new – from the brand to the business systems required to manage the portfolio.
The portfolio has generated an average annual return of 10% since inception, Daal said, but a focused approach will underpin bcIMC’s efforts to increase its real estate holdings from 14% of its $130 billion asset base to something closer to 20%.
“That’s a challenge,” Daal said. “That’s a tall order, but an incredibly exciting and motivating one. This allows them to have a singular focus, direct drive, in terms of investment decisions, and dedicated governance.”
Daal’s collected manner evinces the personal drive and focus he brings to the transition, qualities which have made him a respected figure in the industry. A businessman who finds respite from professional responsibilities in hiking and family activities, Daal’s manner is rational but not cold.
Born in the Hague in 1966, he emigrated to Burlington, Ontario, before his first birthday. Business administration studies at Wilfrid Laurier University in Waterloo beckoned in 1985, with work placements that exposed him to human resources and Procter & Gamble, where he sold well-known brands such as Head & Shoulders shampoo and Crest toothpaste.
His final work term was with Inducon Development Corp., the real estate venture of Andrew Zsolt, an engineer from Hungary who picked strawberries on local farms before introducing the industrial mall concept to southern Ontario and making a fortune.
Zsolt gave Daal a year to pursue his MBA at the European University in Antwerp, Belgium. The fall of the Berlin Wall and optimism about Europe’s integration made it a memorable experience. Daal returned to Canada and Inducon just as the recession of the early 1990s hit.
Over-leveraged in an era of double-digit interest rates, Inducon collapsed in 1992 under $140 million in debt. The experience was formative for Daal.
“People would say that we had a downturn in ’08-’09, but it paled in comparison to the early ’90s,” he said. “I saw a very smart family basically get wiped out. It changes you. You think about risk in a different way.”
The experience taught Daal the value of having capital and the cost of not having enough on hand. Shortly after he joined the company, half the leasing team was laid off and he was given a portfolio burdened with liens and other challenges.
Shifting in 1992 to CIBC Development Corp., property manager for the Canadian Imperial Bank of Commerce, Daal found himself in an environment where capital was not an issue.
Portfolio research led to work with distressed debt portfolios – those with either debt issues or the acquisition of debt-laden properties – and hands-on work in facilities management, where he saw the tenant’s side of the business.
CIBC’s decision to sell its portfolio of 45 office, industrial and retail properties to bcIMC in 2000 led to Daal joining Penreal Capital Management Inc. in Vancouver (now Bentall Kennedy). Daal had oversight of the properties and eventually became lead manager for bcIMC’s domestic portfolio within Bentall Kennedy, where he ascended to become president and chief operating officer for Canada.
Now, as bcIMC brings management in-house, Daal brings an intimate understanding of its properties and their importance to B.C. pensioners.
“Real estate delivered very steady income returns for 25 years in this country, and what a perfect asset class for pension funds,” he said. “The institutionalization of our real estate in Canada, the strong ownership by pension funds of the best assets in the country, creates an inherent stability in our markets which we all benefit from.”
Such a portfolio means significant opportunities for QuadReal’s staff, as well as a new generation.
“It’s a great career choice for young people,” he said. “Portfolio management is a real mixture of skills: you have to understand what delivers income … where can you move the needle, what are the investments that are going to provide you with that opportunity but also the investments that are going to have bullet-proof, stable income.”