The leader of one of Canada’s largest real estate organizations shares his perspectives and insights on the industry.
GWL REALTY ADVISORS INC. provides comprehensive asset management, property management, development, portfolio management and specialized real estate advice and services to pension funds as well as institutional and retail clients. Paul Finkbeiner is responsible for the overall management and growth of the Toronto-based company’s real estate portfolio. Under his leadership, the company has achieved significant growth of more than $16 billion in assets under management, making it one of Canada’s largest real estate organizations. Finkbeiner, who joined GWL in 1995, has more than 24 years’ experience in the real estate industry. He holds bachelor’s and master’s degrees in engineering from Queen’s University and an MBA from McGill University.
Development: How did you become interested in real estate?
Finkbeiner: I tried engineering for a couple of years, but found it repetitive. I completed an MBA and went to work for a bank. The bank and I did not get along. I stepped back and asked myself how I could combine an MBA and a civil engineering degree. I chose real estate, and I have never looked back.
Development: What are your core areas of focus today?
Finkbeiner: I focus on delivering strong returns. If I can deliver strong returns, I will get growth. I spend 60 to 70 percent of my time thinking about the future and allowing the rest of the organization to operate the business. The main job of a leader is to figure out where the business will be in three to five years. Some examples: Should infrastructure be part of our mandate? Currently, it is not. Is student housing going to become a desirable asset class for pension funds or investors? Is there going to be enough of it?
Development: How important is it to your work to focus on industry trends and fundamentals?
Finkbeiner: We are always trying to look at our portfolio differently. We are always questioning our strategy and weightings in asset classes to see if they still apply. We continually look at trends and assumptions. For example, people say that millennials don’t want to have to use cars to get to work; therefore, when you design and build apartment buildings downtown, don’t include parking. We ask ourselves: Is this trend forever, or will millennials want cars when they are 35 and have children?
These are the things we debate and try to figure out. We try to evaluate and research the market and trends. Back in the 1990s, people said that downtowns were dying because everyone would work from home. Right now, downtowns are probably stronger than ever, and there are probably more people working from home than ever. You have to look at all of these trends and then take them with a grain of salt.
Development: What areas of your real estate experience have been most valuable to you as CEO?
Finkbeiner: I came into the industry in the late 1980s to early 1990s, when a lot of real estate had gone bad. I worked for a company that had a building in St. Paul [Minnesota] that was valued at over $100 million. When I reviewed the building as an analyst, I calculated that it was worth $25 million. When you have seen that type of shift, it makes you humble and disciplined.
Development: Tell us about your company culture, strategies and leadership style.
Finkbeiner: We want to buy good real estate to pay pensions and to pay for liabilities. My view when we invest is that I am placing my parents’ money, my friend’s money, my grandmother’s money. I want that investment to deliver good, stable returns. I want people who like real estate; that’s the culture I am looking for. It is not about someone’s educational attainments; it is whether they like real estate. There are young men and women who are spending their time renovating houses and then flipping them. That’s showing an interest in real estate. I want a can-do culture and motivated people.
Development: Do you invest exclusively in Canada? If so, why? Will you continue to do so in the future?
Finkbeiner: We currently invest largely in Canada, but we have two investments in Houston. We invest in Canada for the most part because most of our clients are Canadian pension funds that are looking to match assets and liabilities, to manage their investing, purchasing and selling activities to ensure that cash is available to meet their obligations as needed. We are exploring the possibilities of expanding into the U.S. We also have sister companies in both London and Dublin. We are looking at ways to work with those companies to invest money. The goal is to deliver good returns for our clients. We are always looking at ways to grow the business.
Development: What yields are you currently targeting?
Finkbeiner: We are looking to deliver combined yields of between 6 and 8 percent; that is a combination of both income and capital.
Development: For what types of clients do you invest?
Finkbeiner: We have a small number of large clients. Of the $16 billion that we invest, approximate $1 billion is for the Great-West Life Assurance Co. (of which we are a wholly owned subsidiary); the rest is made up of third-party pension funds. We have three or four direct clients for whom we invest. We also have real estate funds that have both institutional clients and retail clients.
Development: Do you ever look at value add or opportunistic investments?
Finkbeiner: We will look at opportunistic returns, but going back to what I said about investing my parent’s money, if there is too much risk, we will not do it. We say that we take risks, but we do not take chances. If we have researched it and are comfortable that we can do well, we will invest. An example might be buying a building that is empty, but we are certain that we have a large tenant that will take it. Overall, we are a core adviser and a core investor.
Development: How is your portfolio balanced, in terms of property types?
Finkbeiner: We try to structure portfolios with a certain amount of office, industrial, retail and apartments; then we design them so that they are geographically diverse. In our portfolios, office and retail tend to behave more like equities and industrial and apartments tend to behave more like bonds; therefore, we tend to have a mix of those four asset classes.
Development: Where do you believe Canada is in the current real estate cycle?
Finkbeiner: According to the experts — and I don’t consider myself an expert — using the baseball analogy, we are in the later innings, the seventh to ninth inning. There is still a lot of appetite for Canadian real estate, but a lot of my competitors are looking to the U.S., the U.K. and Europe. They are looking for better returns than they can get in Canada. There are still good returns to be had in Canada, but we are in the later innings.
Development: How has the real estate industry changed during your career?
Finkbeiner: It has become more disciplined and a lot bigger. It continues to perform well, other than from 2008 to 2010, which was more of a financial crisis than a real estate crisis. A fellow I once worked for used to say, “it wasn’t real estate that got us into trouble, it was the debt on the real estate that got us into trouble.” Therefore, some of the structures I am looking at now have a maximum debt level of 50 to 60 percent, which means that it is highly unlikely that you will get into trouble.
Development: What are the most valuable lessons you’ve learned over the course of your real estate career?
Finkbeiner: No. 1: Learn from your mistakes and be humble. No. 2: Real estate is mostly about the tenants, solid property management and leasing, because management and leasing are where you can add value to an asset. No. 3: Listen! Listen to clients, listen to tenants and listen to employees. No. 4: Enjoy yourself, because you only go around once. Laugh at the office and be passionate about real estate.