As Connect Canada CRE reported recently, BGO has named Simon Holmes as its new chief investment officer for Canada. Holmes started his commercial real estate career with what is now known as BGO in 2003 before moving to the Canada Pension Plan Investment Board and returning to the company in 2016.

In his new role, he will lead the investment team responsible for execution of the firm’s Canadian real estate transaction activity. He will also retain his role as leader and portfolio manager for BGO’s flagship Canadian core strategy.

As part of his expanded position, he will contribute to BGO Canada’s strategic platform growth initiatives and remain active in the firm’s investor relations and capital raising functions. In addition, he will chair BGO Canada’s management investment committee.

He has assumed the CIO position from Christina Iacoucci, who remains BGO’s head of Canada. In this interview, Holmes provides insights on his new duties and goals, and BGO’s market outlook heading into 2025.

How do you feel about getting this new opportunity?

First of all, certainly very humbled by the opportunity. I started my career at BGO back in 2003, so it’s been a journey over the past couple decades. I’ve certainly been fortunate to have been provided with opportunities and colleagues that are provided with a broad experience necessary.

So, it’s not just deal execution, but it’s investment strategy, it’s partner structuring, it’s investor facing roles, it’s governance. All of those, I think, are key ingredients that go a successful CIO candidate. I’ve certainly been fortunate to have been provided with a lot of those opportunities.

So, that brings me to today. I’m more excited than ever to be part of BGO. I think it truly is unique in a Canadian context. We’ve got really a unique combination of a true global real estate investment management platform, $115 billion of [assets under management] with backing and support from our majority owner Sun Life. You combine that global presence with what we have in Canada, which is a vertically integrated platform with over 1,000 employees spanning all different components of that real estate management services function, and again, get to a platform that is truly unique, and I’ve got some great colleagues. The platform’s certainly seen change in growth, but we’re certainly firing on all cylinders today, and certainly [I’m] just humbled. This is a tremendous opportunity, to be part of a team responsible for realizing our potential.

What will your approach to this role be?

No. 1, day in and day out, it will be about driving outstanding risk-adjusted performance for our investors. That has to be the No. 1 priority at all times. You do that well, it’ll lead to growth of the platform in Canada, and that’s what myself and other members of our senior management team have been tasked to do. So, that’s really kind of the overlay.

I think it’s a very interesting time in the market, I think certainly one that presents a lot of great opportunities from an investment perspective. So, I don’t think it could have been timed any better, just from a personal standpoint. I’m eager to take advantage of what I think 2025 in the coming year generally, will hold. I think there’s going to continue to be opportunities. We started to see interest-rate declines, but I think we’re not yet out of the woods, from a real estate perspective, and so finding strategic ways to take advantage and capitalize on those opportunities will be critical.

That’ll span everything from our typical focus on single asset portfolio acquisitions, but there will be a lot, I’d say, more unique situations that we’re hoping to take advantage. Part of that will really be continuing to position BGO as a manager of choice for our investors, as a counter party of choice for those in the transaction market, and just making sure that the great machine we’ve created here continues.

Certainly, I think I’d be remiss without mentioning the fantastic team we have in place, broad and deep experience across all different functions. I’ve worked with many of them for, for many, many years, and it means we can continue to drive the business in a very efficient way.

Do you see BGO getting into any other asset classes than it already invests in?

That’s a good, good question. I guess the response would go back a few years. When COVID hit, interest rates were at all time lows, cap rates across the four major property types, were in the fours and even in the threes in some instances. So, investors were pushed to look further afield for opportunities. We completed significant research and strategy work at that time in a Canadian context, and made the conclusion to focus on some sectors on a very selective basis. So the first part of that answer is, really we are being very selective.

There were some deliberate areas in emerging sectors we chose not to focus on just because they were improving. In a Canadian context, life sciences would be a good example of that strategy, to not advance in the near term, and that segment would be an example of where it paid off to to be very selective and avoid undue risk.

We’re fortunate to have a global platform that has great experience in emerging sectors such as cold storage, such as data centres, such as self-storage. We’ve got the benefit of deep experience, and team members who are very active in those sectors, and we can apply that to a Canadian context. So, we’ve already made selective investments in Canada, in cold storage, in data centres. We’re exploring some of the others for the immediate term. I’d say we’re going to focus on those segments, but there’s, there’s a few others on our radar that we’re continuing to analyze, and in the medium term those may make sense.

Just to finish off that point, we see great opportunity within the four major property types that perhaps did not exist even a few years ago. We’d be remiss if we didn’t kind of emphasize that we see a lot of opportunity there, where we have deep experience, and so that will continue to be the priority. And, again, selectively, we will look at some emerging sectors.

How will this new role as CIO align with your other duties?

Well, I think it is truly complementary to my role as a portfolio manager for the Prime Canadian Fund. Prime is a core, income-focused $6.4-billion fund. We’ve undertaken and executed a very significant repositioning of that fund that involved $2 billion of dispositions and a very comprehensive reset from a sector and property-quality perspective. So that fund is in phenomenal shape as a result of that heavy lifting that occurred over the last few years, and the fact we were a first mover to make key moves such as selling down non-strategic office starting back in 2020. So as we pivot out of that restructuring mode, and are very much back in buy mode from an acquisition standpoint, being the person responsible for that execution, both on the investment side and as fund manager of Prime Canadian, really does have a lot of complementary attributes.

Another point I would make is the deep familiarity and history I have with our investments team. Prior to stepping into my prime Canadian portfolio manager role, I was co-head of the investments team across. Canada. So [I have] a lot of continuity, a lot of familiarity with the team there.

What is your outlook now for the office market in Canada?

A glance at the headlines would paint a picture of a sector that is facing significant challenges and headwinds, and I think that is partially true. But once you once you spend a bit of time on it, you realize there is a real divergence and bifurcation by office type and quality. As we are experiencing in our current portfolio, the very best modern buildings are actually performing, not just in a stable manner. They’re actually doing very well. We’re setting all-time highs in terms of rents at many of the buildings in the Prime Canadian Fund office portfolio, by virtue of the fact they are the leading modern office assets in their respective markets.

But that strength at the very top end of the market is really contrasted with continued weakness, and I fully think further weakness and deteriorating fundamentals, for class B and C space. I think there’s just going to continue to be a widening Gulf in performance, depending on asset quality and attributes. From a transaction and investment perspective, as I mentioned, we were first movers to sell down office. I mentioned that we are looking at all four of the major property types for buy opportunities. And, that certainly does include, on a selective basis, office property acquisitions as we head into 2025.