CanFirst Capital Management has made its first closing on its eighth industrial value-add growth fund after raising $219.6 million.
The Toronto-based specialized commercial real estate private equity company first started seeking investment for the CanFirst Industrial Realty Fund VIII (CIRF VIII) in the spring of 2023.
Money from CIRF VIII will be invested across Canada, with a focus on Toronto, Montreal, Vancouver, Calgary, Edmonton, the Kitchener-Waterloo-Cambridge area and Ottawa.
“It will have a similar type of investment strategy where we’re looking to create value at any stage of the industrial pipeline,” CanFirst executive vice-president of investments and business development Mark Braun told RENX.
“We’re looking to acquire properties that have below-average market rents, where there’s vacancy or vacancy risk, or leasing risk, or expansion potential. It could be poorly managed or under-managed or we could be buying well in a market that we like that maybe is not seen as in demand right now.”
Challenging time to raise funds
The fundraising was completed in October and CIRF VIII is open to subsequent closings until this coming October.
No target value has been set for the final closing but Braun is hopeful some additional investment groups that were interested, but couldn’t commit earlier, will come on board this year.
“We’re pretty thankful that we were able to raise a fund in this environment,” Braun said.
“It’s been a little bit challenging to raise funds due to many institutional investors being limited in how much they can invest in real estate — in particular where they’re offside with their real estate allocations since their bond and equity holdings have decreased in value so much.”
About 75 to 80 per cent of investors are institutional and the balance are high-net-worth individuals and families, according to Braun.
Nothing in acquisition pipeline now
While there’s nothing in the acquisition pipeline for CIRF VIII at the moment, CanFirst is actively seeking opportunities.
“I’m still pretty bullish that there’s a market for industrial and the demand for industrial is going to remain there, notwithstanding some potential headwinds through the rest of 2024,” Braun said.
The smallest potential acquisition price would be about $20 million, while CanFirst could go up to approximately $250 million for a purchase.
Braun said the company is targeting just over $400 million in acquisitions over the next three years.
CanFirst was founded in 2002 and CIRF I was launched in September 2002 with $45 million in equity. There are now three active funds.
The $123-million CIRF VI is in disposition mode, the fully invested $250.5-million CIRF VII is in hold and value creation mode, and CIRF VIII is in acquisition mode.
The average internal rate of return for CanFirst’s value-add funds to date has been 15.5 per cent.
Other CanFirst acquisitions and dispositions
The open-ended CanFirst Income Plus Real Estate Fund acquired 16104 and 16231 121A Ave. NW in Edmonton’s Harwin Park Estate Industrial Park from Loblaw Companies Ltd. on Nov. 30.
It’s comprised of a 364,912-square-foot industrial building and a neighbouring 2.35-acre site paved for trailer parking that’s fully leased to Loblaw for 10 years.
CanFirst put eight Ontario logistics and industrial assets totalling 1.05 million square feet on the market last September.
Braun said he couldn’t talk about what was happening with the properties in Scarborough, Markham, Etobicoke, Mississauga, Burlington and Cambridge because the sales process is still ongoing.
“That was from a 2017-vintage fund,” Braun explained. “We’d already disposed of several assets, but we deemed it was the right time to complete the program.”