Oxford confers a degree of expertise on co-investments

Canadian pension plan’s property arm takes on co-developments in London, reports Jane Roberts

“We bring expertise as well as capital,” says Paul Brundage, European senior managing director of Oxford Properties, talking about its UK joint ventures.

The real estate investment arm of Canadian pension plan Ontario Municipal Employees Retirement System (OMERS) has made a string of high-profile investments here in the past two years. Most were co- investments, but it also bought Reading’s 190-acre Green Park business park without a partner, for around £400m from PruPIM.

“We’re looking for extra yield and we have an active asset management approach to investing,” Brundage says. “It would be hard for us to get our head around some of the long-term, single-let buildings that appeal to sovereign wealth funds and others.”

Instead, Oxford Properties targets large-scale income and development opportunities, and in central London is partnering on two developments of more than 500,000 sq ft: with British Land on the Leadenhall Building, EC3, and Brookfield Office Properties at London Wall Place, EC2.

Oxford also bought a 50% stake in multi-let MidCity Place, EC1, from Beacon Capital last year, and owns Watermark Place, EC4, which it developed and leased to Nomura, originally in a joint venture with UBS. “You’ve seen us do a core deal, at MidCity Place, a value-added one at Green Park and development at Watermark Place, which is now a core asset.

More than just a funding partner

“For Leadenhall, British Land didn’t want just a funding partner and didn’t get one; it’s a co-development. Our international development and occupier engagement ex-pertise complements British Land’s strong London platform.”

Oxford bid on the Hammerson portfolio sold earlier this year that originally included London Wall Place. Brookfield acquired the portfolio and the London Wall development soon afterwards: “We didn’t find as much religion as Brookfield did,” Brundage says.

The property company seeks an undisclosed absolute return on its investments and invests OMERS’ capital in property along with the pension fund’s other private asset classes, including infrastructure and private equity. The Canadian pension plan has a target of having 50% of its C$55bn of assets in these types of investments.

Brundage’s job in Europe is to help change the C$20bn property portfolio’s geographic split from 80% Canada, 20% international, to nearer 60:40, while also expanding it. Oxford invests in developed international property markets, but not Asia, and is targeting France and Germany.

The team looked at Sheffield’s Meadow-hall shopping centre when it was for sale this year but didn’t bid. “It was a big acquisition and a low return, and figuring out how to be an active partner was difficult,” Brundage says.

Love of shopping centres is unrequited

He adds: “We love shopping centres; they have been a tremendous investment for us in Canada and the US, but there are relatively few of them and it’s figuring out how to access them. If you can only make a forward purchase with a shopping centre specialist who wants to be the active manager I’m not sure it makes sense for us. Buying a third mall in a two-mall town isn’t good either. Retail parks we’ve stayed away from, so it’s been hard to figure out how to do it.”

His 15-strong London team includes Chris Carter-Keall, head of asset management and running Green Park, while Mike Rayner will join from British Land in the new year to work on the London schemes, reporting to Richard Pilkington, European managing director of asset management and development. On the Continent, Michel Vauclair, director of asset management, Europe, is working on the European growth strategy.

At Green Park, Cisco has finally surrendered buildings it never occupied – 10 years after signing the leases. It will continue to occupy 100,000 sq ft out of 600,000 sq ft. Chinese telecoms company Huawei is taking 139,000 sq ft of Cisco’s former space and the team has completed other lettings.

Brundage says Green Park “is an extension of our central London strategy as opposed to a UK business parks strategy. It has technology, media and telecoms tenants and rents at high £20/sq ft, which is a good complement to the insurance, legal and financial occupiers in the City.”