growth fund next step in the evolution of The Pearl Group | RENX

Jordan Pearl, Chairman of Pearl Group. (Courtesy of Pearl Group)

The Pearl Group is a family-owned investment management firm that has been part of the Toronto real estate scene for nearly 50 years. Under the leadership of its third-generation chairman, Jordan Pearl, the company has launched and is rolling out funds from its first equity fund.

Pearl’s grandfather, Martin, immigrated to Canada in the 1950s and founded The Pearl Group in Toronto in 1973. His father Mel started with the business, but branched out and co-founded Lifetime Developments with Sam Herzog in the 1980s.

“When I got out of school, I went to work with my grandfather for four years until he passed away,” Pearl told RENX. “I have been running this office for 10 years.

“We have continued to grow, buying new properties and attracting outside investors. Our equity fund is the culmination of all this work.

The Pearl Group now has a team of 12 people and more than $450 million of commercial, industrial, office and mixed-use street-front assets under management.

“We don’t do development from scratch,” Pearl said. “We put a few projects through the zoning process and then sold them to someone to build.

“We make acquisitions, we do due diligence, we find our own financing, we do property management, we renovate our buildings and we do our own leasing and asset management. We basically manage the full range of the investment lifecycle. »

Launch of the Pearl Group growth fund

The Pearl Group Growth Fund is a private, closed-end fund that invests in mid-market, value-added commercial real estate in the Greater Toronto Area and has a targeted annual total net return of 12-15% through distributions and capital appreciation.

The growth fund was launched in November to acquire $150 million in real estate and has used about two-thirds of its equity to buy five properties valued at $91.1 million.

“We had gotten to a point where we wanted to have a bigger pool of capital to invest in,” Pearl said. “It gives us the ability to act with agility.

“It’s very competitive there and, for a private group like ours, we have to find every possible advantage. Speed ​​is one of those things that maybe we can bring to the table.

“Having this bigger pool of capital helps us go out and do the kinds of things that we’ve always done, but it also allows us to buy maybe bigger properties outside of what we normally would have done and it also gives us exposure to different investors and people who can give us strategic insights.

Pearl Group Growth Fund Acquisitions

The growth fund acquired three commercial and retail properties totaling 22,300 square feet at 449 King St. E. in Toronto. They sit on a nearly one-acre site where The Pearl Group and a partner are looking to increase retail density and re-let the buildings at market rates.

“We’re trying to create more of a community on this property and make it a bit more of a destination,” Pearl said.

The fund acquired a four-story, 9,200 square foot building with retail and office space at 50 St. Clair Ave. E. which, according to The Pearl Group, has some rental potential.

The Pearl Group also sold three properties it already owned to the fund:

– a 50,000 square foot three-storey brick and beam building with retail and office space at 20 Leslie Street in Toronto, where a renovation has just been completed and leasing has begun;

– a two-storey, 160,000 square foot industrial building at 6515 Kitimat Rd. in Mississauga;

— and a two-story, 7,800-square-foot building with retail and office space at 96 Carlaw Ave. in Toronto that The Pearl Group is looking to reposition in order to lease or sell.

Pearl said the fund is no closer to deploying the roughly $60 million it has left at this point.

“There is a lot of uncertainty now with interest rates. We still have 18 months to invest it, so we try to be very careful about what we invest in. I take the responsibility of investing people’s money very seriously, so I’d like to see some dust cleared of this interest rate increase.

“We are always actively looking at things. We guarantee things every day, visit buildings and look for new opportunities.

The cluster strategy offers advantages

The fundamental strategies behind acquiring properties with the growth fund are similar to those the company employs with properties in its core portfolio, according to Pearl.

“We are a value-added group. We are always looking to buy something that we can add value to, whether that’s through our rental expertise or by renovating the building and repositioning it in some way.

Many properties in The Pearl Group’s core portfolio are close together, clustered along Queen Street West, King Street West and Yonge Street in Toronto.

“My grandfather was really focused on the Queen Street West, Yonge and Eglinton, and Yonge and Lawrence areas,” Pearl said. “When I started taking over, we started to expand a bit geographically.

“We are very location-oriented. Must be a great place. We also have a lot of knowledge about those streets we shop on, so it makes sense to keep going back to the well instead of exploring areas we don’t know much about. »

This cluster strategy facilitates property management and allows The Pearl Group to work with and find opportunities for existing tenants who wish to expand or contract their space while remaining in the same area.

“When you own a lot of stuff on Queen Street West, you get a sense of what tenants want to be there and the nuances of the different buildings, unit sizes and that sort of thing,” Pearl said.

The Pearl Group also owns a property outside the GTA, a 26,600 square foot three-story building with retail on the ground floor and offices and apartments above at 1015-1021 West Lake Rd. in Chicago.