Real estate investors: Secrets of my success

In tumultuous times, it's often prudent to turn to those who know how to make money no matter the situation. That's why we combed the Canadian Business Rich 100 to find some of this country's most successful (and wealthy) real estate players. David Azrieli, Tom (son of Bob) Gaglardi and Peter Gilgan share their strategies, and their thoughts about where the sector is heading and what pitfalls to avoid.

DAVID AZRIELI

Founder and president, Canpro Investments Ltd.

What is your most recent acquisition?

We bought a parcel of properties from General Electric at the Toronto airport. It's approximately $100 million.

What was the strategy behind going for that acquisition?

I believe it's a quality property. And we have the cash. Some people need the cash, and they want to sell. We have also made an acquisition in Israel. We bought a major shopping centre at the end of March, for about US$200 million.

Is that the Givatayim Mall?

Yeah. And, of course, we have quite a number of projects on the drawing board that we are proceeding with.

What is your strategy in this market?

We have the cash, and we want to take advantage of opportunities. As a matter of fact, in the over 50 years I have been in business, we have always taken advantage of slumps in the market, and we were buying. I can say that we've increased our portfolio nearly every time there was a recession.

So in a way, it's a good thing for you?

No. We are part of the general economy, so it's not very good. But, yeah, we are looking at opportunities, and if we find them we have the ability to proceed.

You have holdings in Canada, the United States and Israel. Which country currently has the best opportunities for the commercial real estate market?

All three. The market in the U.S. will definitely improve, but it might take a bit longer. The prospects in Canada are fantastic, because commodities will be needed in the future, and the banking system in Canada is strong. And I also believe that the ripple effect of the depression touched Israel only slightly.

When do you think the market is going to come back?

Ha ha. I don't know if I ever told you, but that's an unfair question to ask me because I'm the eternal optimist. I think in the second half of the year we will see a very positive change.

Which of the countries that you hold assets in has the best outlook?

We have very nice, very good, very selective properties. And we suffered virtually nothing at all in terms of loss of tenants or rent. Surely there are some places here and there. But I wouldn't say that any of them is different.

You have holdings in various sectors within the commercial real estate market. Office space, malls, hotels. Which of those specific sectors has the best outlook?

Shopping centres. Hotels will undergo a bit of a slowdown this year.

Why?

People may not travel as much. People may not spend as much money on vacations. But people are still buying, they're still going to the grocery store, they're still buying shoes.

What advice would you give someone interested in getting into the commercial real estate market now?

The big problem in commercial revenue-producing real estate at this moment is the ability to finance. And if someone's credit is good enough to get 60% to 65% to 70% of a loan, or to identify a project that comes with a loan he would be worthy of assuming, then I would say that a capital return of 7%, 7.5% or 8% would be a very good investment. But that's, of course, limited, because so far the banks are not lending yet sufficiently. Some properties come with existing mortgages, but, even there, there's a question whether the buyer can assume them.