Dennis Lopez:

In the last three years on a gross basis, we've invested about 29 billion in both debt and equity, and we were able to do that without a lot of new capital because we were just able to manage the capital we had very, very well. And that was frankly due to the technology we put in place early on.

So it's really managing your business better and being able to manage growth and do that without dramatically increasing your workforce.

Nancy Lashine:

Hello and thanks for tuning in to Real Estate Capital. I'm your host, Nancy Lashine of Park Madison Partners. Capital is a lifeblood of the real estate industry, but the decisions on where and how it's allocated are driven by people and personalities. Who are they? What motivates them? What can we learn from their experiences? On this show, we introduce you to some of the real estate industry's most influential thought leaders and decision makers, and we talk about what is important to them, how they make critical decisions, who has influenced them, and a lot more.

Our guest on today's episode is Dennis Lopez, the CEO of QuadReal Property Group. Created in 2016, QuadReal is wholly owned by the British Columbia Investment Management Corporation and acts as its real estate investment arm. Dennis joined QuadReal in 2017 and since joining has more than quadrupled its assets under management to over 85 billion. The firm has 1900 employees globally and investments across Canada, the US, Europe, and Asia. Dennis has over 30 years of global experience with prior leadership roles at AXA investment managers, Sun Real Estate Group and JP Morgan. He has lived in California, New York, London, and now Vancouver and is invested globally in developed and emerging markets, including China and India.

Under Dennis innovative leadership, QuadReal has leaned heavily into real estate platform investing and now owns interest in nine real estate operating platforms, including US multifamily, industrial data centers, and student housing. We discuss Dennis' background, QuadReal's investment strategy, platform investing, sustainability, and so much more.

Dennis, it's great to have you on the podcast. Thanks so much for joining us.

Dennis Lopez:

No. Thanks for having me, Nancy. Really appreciate it. And it's nice to see you too. It's been a while.

Nancy Lashine:

It's been a while. Well, I guess it's amazing. I feel like I've known you my whole career just about. I think you were a young whipper-snapper at JP Morgan when we first met. I think I was at the O'Connor Group, and you've gone on to great things. Maybe just share with the audience a little bit about your career path and how you got from JP Morgan to QuadReal where you are today.

Dennis Lopez:

Sure. Well, I got to JP Morgan back in the early 80s after getting out of the business school program at UCLA, and definitely wanted to go live on the East coast, and it was great to be in New York and get a chance to work with companies like yours. At that time, it was O'Connor and many other ones. And then an opportunity came up after a few years to go over to Europe. The concept of real estate investment banking was just kicking off and had been successful in the US. And JP Morgan wanted to build a team in Europe, so I got sent over to do that, which was great.

Did that for about eight years. It was really, it was great too to get a sense of how real estate operates, not just in different markets but in different countries and how different people think about it. After that then decided that I'd been on the sell side or the advisory side long enough, so wanted to get on the buy side, had an opportunity to join a hedge fund that had been started by a couple of guys out of Goldman Sachs called Cambridge Place, and they wanted someone to build a real estate equity business for them. They were debt guys and they were doing CMBS and RMBS. So did that for a few years. And then the BRICS got really popular. Brazil, Russia, India, China, and investing in emerging markets became a tremendous opportunity. So got a chance to go work for a high net worth Indian family running their real estate businesses in Russia and India and did that for a few years.

Nancy Lashine:

Wow. Did you stay in London or did you move to India?

Dennis Lopez:

I stayed in London, but I would commute to India. I'd be there at least two times, sometimes three times a month. In Russia, usually once every month or two.

Nancy Lashine:

Wow.

Dennis Lopez:

So a lot of traveling.

Nancy Lashine:

That's interesting, yeah.

Dennis Lopez:

Yeah, I was really different. I mean, we'll save it for another podcast. Some of the stories of operating in Russia post collapse of the USSR, and it was really pretty wild and crazy.

Nancy Lashine:

We can talk on that podcast about the Russia fund that we raised here at Park Madison, which we generally don't talk about very much.

Dennis Lopez:

Yes, we don't want to talk about investments in Russia, but anyway, it was all these things-

Nancy Lashine:

You know, you have to learn somewhere, right?

Dennis Lopez:

That's exactly right. That was a definite learning experience. And it was also a good experience too for just understanding how investing in emerging markets really works and what it takes to make it work. So after that, that was about a good seven plus to eight years of very entrepreneurial activity. Then got an opportunity to go become CIO of AXA's real asset business. So that was not just real estate equity and real estate debt, but morphed into also infrastructure as well too.

So the opportunity there was to take what was a very large European business and grow it into a global business. So that was a great opportunity and did that for about eight years too.

Nancy Lashine:

And did you live in Paris when you did that?

Dennis Lopez:

No, I was commuting once again from, I had an office in London, and office in New York, and I spent time in both, but I spent a ton of time in Paris. I mean, I probably been to Paris over a hundred times or something like that.

And that was great too because at least, especially when they first hired me, I was the only American working in the firm. It was a huge firm they had at the time I joined probably around 60 billion of euros of assets. It grew up to over a 100-105, something like that. So it was really interesting working in a 100% non-American, non-English speaking culture. And then after doing that-

Nancy Lashine:

I didn't ask you how your French is, but.

Dennis Lopez:

It is not good. It felt very embarrassing actually, to be sitting-

Nancy Lashine:

It's so hard, isn't it? So hard.

Dennis Lopez:

Well, even if you learn a little bit, you're never going to be good enough. And it's pretty hard to do that, especially when you got a job.

Nancy Lashine:

And you're the boss.

Dennis Lopez:

Well, I was the CIO, so I wasn't quite the boss, but close. But anyway, it was always a bit, you sit in a meeting, you're in Paris in La Défense. You have 30 people around the meeting and all the documents are in English and everybody's speaking English for you. You think, "Okay, what's the problem here?" Anyway, those are great experience, learned a lot, great company. We did some really amazing things with the platform.

And then the opportunity that I'm working on now came up where the province of British Columbia wanted to create its own real estate asset management company to invest their capital and also to, as we built the platform, invest other people's capital as well, other institutions. So that I joined in June of '17, and that's what I've been doing since then. And it's been a really tremendous experience and great opportunity.

Nancy Lashine:

Yeah, well, it's been an incredible growth trend that you've started there. So QuadReal was a startup essentially when you joined in 2017. What's the assets under management today?

Dennis Lopez:

Yeah, it was a startup from scratch. Basically, the assets of the pension fund of the province, BCI were managed by third parties. Those contracts were terminated and a transition was put in place where about 21 billion, and I'll talk in Canadian dollars all the time. You guys can put the exchange rate in. So we started off with about 21 billion of assets, and then we hired 1,200 people to manage those assets. 90% of the assets were in Canada, and the mandate was to not only do the asset management ourselves, but also too to expand the portfolio, be global. Fast-forward to the end of '24, we're now up to 89 billion of assets and have operations around the world, office in Hong Kong, Tokyo, London, New York, LA, and then Toronto, Calgary, and Vancouver, which is our headquarters.

So we've merged in a debt business. So we have an active debt program. About 11 billion of that is debt. We're focused on North America and we've done some public equities, not a lot, but a little bit. And the platform has really developed around the philosophy of doing it yourself. So we have nine operating platforms now focused on markets and sectors of high conviction. And if you take those platforms into place, we have 2,900 people now working for us.

Nancy Lashine:

Wow. So much to unpack there, but big picture, when you think about all the Canadian provinces of which I guess there are seven, the big ... if you think about Ontario, had Oxford, and Quebec had Ivanhoé Cambridge. Was that the model that you were looking to pursue when you started QuadReal or is there a slightly different variation on that model?

Dennis Lopez:

Yeah, the Canadian model general, and it's not just for real estate, but it's for other asset categories too, is very much a model that is much more focused on doing it yourself or building your own platforms. They do obviously use partners, and that's an important part of the platform strategy too, but the things that they feel comfortable with doing in-house, they bring in-house. So definitely that was our strategy.

In fact, I think we've probably taken that to the extreme in that easily over 80% of our assets now are in platforms that we own or have a significant ownership interest in. And that was the plan. In some respects, one of the motivations were just, you're paying away lots of fees and if you set up your own company, you don't have to do that. But I think even more than that, it's control, performance, alignment of interest. There's many things that I think personally are, well, saving fees is important or probably even more important, which is performance. That's what really is the most important factor. So that was the philosophy behind it.

To give you a sense of some of the numbers, it costs just under 200 million to set up QuadReal. We dividended back in the first seven years, 500 million. And the management company which we created from scratch, which made $14 million the first year, is now worth about a billion dollars. So it's been a good investment for the province. If you do the IRR on that, it comes out to about 37% than multiple seven, and there's total-

Nancy Lashine:

That's better than most real estate deals.

Dennis Lopez:

Yeah. It's improved the portfolio of return, let me say that.

Nancy Lashine:

Sure, sure.

Dennis Lopez:

No, it's been, it's been a success from that front. And it's also been a success too from improving performance. The performance before QuadReal was good, but relative to our peers, frankly, was underperforming. And since we've been able to form QuadReal, we've been able to do very well based on our peers, benchmarks and other measurements of success. So far, so good.

Nancy Lashine:

It sounds amazing. When you buy into a platform, how do you keep the entrepreneurial spirit at that platform?

Dennis Lopez:

Well, we only buy into platforms that have a demand outlook that's very long-term. So even in the market today, there's strategies that you can make money. Let's take like office to resi development, something like that. So you convert an office building to residential. I mean you can make a lot of money out, that's a good strategy, but it's relatively short-term, maybe three or four years, something like that. We're more focused on markets and sectors where just the demand is extremely long-term that you think I can't see in the next decade or more where we're still not going to need this product.

So what are ideas of that? Well, right now it's super hot, data centers would be one of those. The growth of data is massive and will continue to be that way. One of our first investments in platforms was a data center company, so we've been building an operating data center since late '18 early '19 and it just been, that concept of very long-term growth was what got us interested in the sector.

I had done some of that before at AXA, so it wasn't actually new. Affordable housing is another one where, I don't see the solution to that problem for many, many, many years, so that's why we really love living in a lot of different aspects of that. It could be condos, multifamily, manufactured housing.

So that's the way we think about it. So the platforms we have established have a very long-term outlook. So when we make those investments, we think we can grow the platform. So we're going in to take a company to a completely different level and think that that will be a company that will have an interest in very long term.

Nancy Lashine:

You mentioned data centers, which obviously is very hot where here we are at the beginning of 2025. What did you see five years ago or more that allowed you to get into it so early?

Dennis Lopez:

Well, like I said, when I was at AXA, we bought a data center company. We're building data centers in Paris, in Milan, and in Switzerland. So had the opportunity there to get a sense of the sector. But I'd say really what it was, it was this concept of what are, were worst demand that isn't just going to be short term, but it's going to be very long term. And also too frankly, that you don't have technological factors impacting you as much. So we have been not participants in retail, and sorry, based on your earlier O'Connor days, but-

Nancy Lashine:

We have not done retail the last 18 years here at Park Madison, but not because we don't like the sector. It's just been such a challenging sector to invest in.

Dennis Lopez:

Well, so just on that, so just take retail, we thought, well, the department stores are changing dramatically. You can repurposes space but that's a lot of CapEx, so that's going to impact your return so we don't like that. And then there's this thing called eCommerce, and it's small, but we think it's got good trajectory. And so it just made us think that, okay, retail's not going away, but is this going to be the strongest demand area of real estate for the next decade? And we didn't think that was the case. Data centers are just the opposite. We think, okay, the cloud is expanding rapidly. E-commerce is coming. They're talking about things like driverless cars. Well, that's going to take a lot of data. It seems like everybody's got iPhones now and it's taking tons of photos. That takes a lot of data.

They're talking about virtual reality that takes a lot of data. So all these things, when you pile them up, and then frankly you look at, we did a lot of research on it and saw that the growth of data is going to be massive for as long as you can see. And then you really study what it takes to put the internet in place, fiber optic cables, cell towers, satellites, and you see that, well, the data centers is the heart. It's the center of the internet, so we don't think it's going anywhere. In fact, if anything is just going to get more and more important in our lives.

So that's why we like the sector. That's why we like the specific property type. And then all of a sudden AI comes up and takes all those incredibly strong growth factors and demand factors and just puts it on steroids. And that's what we've experienced in the last couple years. So a little bit of luck with AI. We didn't anticipate that, but it was absolutely the conviction that all these different uses that I just articulated are going to be important in growing for the next decade or more.

Nancy Lashine:

A question that we get a lot from investors who've just recently started to look at the data center space is are you better off going into doing development and then selling to a core buyer? Because what is the long-term residual value and what's the CapEx going to look like 15 or 20 years down the road when you're really great, tenant may be either, maybe leaving or technology changes?

How do you invest in data centers? How do you think about it from that perspective?

Dennis Lopez:

Well, along the lines of the way we like to do everything is we very much like to be involved in the development of creation of value. We think that's really important going forward. We've had a period of declining interest rates, declining cap rates for a very long time that have helped everybody out on returns. We don't believe in that scenario going forward, so therefore, how are we going to outperform? We have to do operations and we have to create value, and that's through development and running things.

So in terms of the technological obsolescence of data centers, well first off, we don't own those elements of the property that have the high technological obsolescence. In other words, we own the building, we own the cooling, we own the generators. A lot of times we'll build a substation. All of this is technology that's been in place for decades and it's not going to change. The servers inside the data halls are owned by the tenants, and those are the pieces of equipment that have a relatively short life, three to five years or whatever. And those are the pieces of equipment too that will be subject to technological change.

And also too, remember we're not selling square feet. We're selling power. So even with these changes to the technology in the building which we don't own, they're most likely still going to require power. And if you think about it now, the real constraint, and as you know as real estate investors, we're always looking for constraints to supply when you have strong demand. So the real constraint to supply now is power and solutions to power take a long time. It takes a long time not only to build power generation, but the transmission lines.

I think probably you and everybody else now have seen enough articles on this to realize that's now becoming the issue with data centers. So if we own a property that has the power, has the transmission lines, has the fiber optic cables, is in a geographic location that there's density so that there's an aggregation of data centers for the users there for talent and for operations, in 15 years, why is that not going to be attractive? I mean, the cost of the building by then will be depreciated to nothing.

So if you believe that there'll be a continued demand for data, which we absolutely do, and it's going to be significantly greater, I don't think those things aren't going to be valued, meaning the power and the location, maybe the servers in the data hall will change dramatically, but what we're providing won't.

Nancy Lashine:

Will you generally just have one operating partner for a strategy like this or one platform?

Dennis Lopez:

In this particular case, we have one platform that we have a significant ownership in, and then we have one platform that were one of a small group of people who own. So frankly, to find really good operators and really good platforms is hard.

Nancy Lashine:

Yeah.

Dennis Lopez:

And because we started early on it, we were able to get in to two platforms that we have really high conviction on that are operating very well and creating value, not just buying stabilized properties. And as you know right now to do that is pretty expensive and hard to find. But typically, yeah, I think for a sector we would only want one or two platforms because we don't want to compete against ourselves. If they're in different markets, then that's fine, but if they're in the same market, frankly, usually one's enough.

The two that we have, one is more focused on enterprise and hyperscale, and the other one's more focused on carrier hotel. So they don't really compete with each other.

Nancy Lashine:

Are the return levels the same for hyperscale and carrier hotel in your mind?

Dennis Lopez:

Well, I mean the carrier hotels are great. I mean it's a monopoly or at best or worse than oligopoly, but there's only a few of those. And the ones that are owned aren't trading. And if they do trade, they're incredibly expensive. And it's really hard to build them. So that strategy is when you have to pick somebody who's already in the game, has the sites.

Hyperscale is what's become the flavor of the day with the big six being driven by AI right now. And those opportunities, there are lots of opportunities right now, but even then it's become the flavor of the day. And there's lots of people who are promoting themselves as developers, but I don't know if they necessarily have the skills or the relationships to be successful. It's going to get more competitive shortly because so much attention [inaudible 00:23:05] capital has been drawn to it.

Nancy Lashine:

How have you found debt for, I mean, these projects are so large that the debt is not easy to find, and where have you found the debt and how does the cost of that debt compare to say debt on some other core real estate assets?

Dennis Lopez:

Yeah, actually we haven't found the debt to be a problem because the tenants are really strong. You're talking about Microsoft, Amazon, you know, Meta, people like that, Oracle, the banks are happy to lend it to it because the contracts are long that typically 10 to 15 years. And because frankly the tenant-

Nancy Lashine:

So lending against the credit of the tenant, basically?

Dennis Lopez:

Yeah, it's the credit of the tenant. And I mean the tenants too, if a data center costs a billion, they put in half of it for the servers. So every aspect you'd want in terms of the commitment of tenants there. So we haven't found raising debt capital to be a problem. We found the pricing to be the base rates we don't like, but the spreads are fine.

And then after construction then, what we're setting up for our stabilized properties is these master trusts where you issue asset-backed securities off of. And for that rated paper, there's a lot of appetite for that. So debt really hasn't been a problem. In fact, just the opposite on our lending side, we've been trying to find opportunities to lend data centers, because we're an equity operator, we figure, well, yeah, let's lend to them too.

And it's been pretty competitive in the last 15 to 24 months. So we've done a few, but not as much as we'd like. Potentially, that will change just because there's so much supply out there, so much paper to buy, so much debt that maybe you'll start to see some of the lenders get constrained. But we haven't seen that so far.

Nancy Lashine:

What other, and going forward in 2025, what else are you excited about from a property type perspective?

Dennis Lopez:

Well, we're very excited about debt. So I'd say we slowed down our equity operations in mid '22, and we've continued, but it's been more on a selective basis where we could find opportunities for sectors or markets that we liked. But boy, on the debt side, it's just been great. So we really husband our capital and went after the market in late '22. '23 and '24 have been great. We've been very focused on sectors of high conviction, basically alternatives, living logistics and the portfolio state of fairly high quality.

We don't really have any significant problems so we're not playing defense. We've been playing offense. And the returns have been outstanding. One of the things that's happened to really help the returns is, for lack of a better word, the re-leveraging market or the banks lending to us to lend money to others. That market now has gotten increasingly attractive where the spreads between what we can borrow at and what we can we re-lend at are attractive and that helps returns too. So it's-

Nancy Lashine:

They're lending to you off your balance sheet?

Dennis Lopez:

No, off the mortgages that we lend. So it's secured by the mortgages itself-

Nancy Lashine:

Okay.

Dennis Lopez:

... not our balance sheet. So that's a really attractive business. The returns have been, especially on a risk adjusted basis, the returns have been great. High single digits, low double digits, just depending upon how high you want to go up the capital stack in our loan or how much leverage we want to put on it.

Great business. Been really great in '23 and '24. Been really great, will be really great this year in '25. And it's also impacted too because the banks themselves, the regulation on the banks and the capital charges in particular have been such that they have been a big provider of capital in the past. I think they'll continue to be a big provider, but there's a real opportunity there for the debt funds of which that's what we do.

Nancy Lashine:

You mentioned living as a place where you've invested a lot of capital. So many have manufactured housing, student housing. What are your thoughts about build to rent, BTR?

Dennis Lopez:

That's one sector we haven't participated in. So we've got big platforms and student housing in the US and Australia, New Zealand. Little, we're working on it in Europe and the UK. We're the largest owner, operator, developer of manufactured housing in Canada and we're really putting additional effort into that platform to even make it even bigger. And we just finally got a smaller portfolio about sub 400 million of manufactured housing in the US to get going on that. So those are all areas of living that we have very high conviction in and have been able to execute.

In single family rental, we just, we haven't. I don't know that we ... we don't think it's a good sector to be in. I just think we haven't maybe found the right opportunity. I know one thing that's got us focus is just the CapEx. We don't like sectors that have a lot of CapEx. And if you think about it for multifamily, you've got maybe one roof or a lot less CapEx issues than if you have a large portfolio single family home.

The one constant in all the sectors that we've gone for is to have as low a CapEx requirement as possible. So that's one of the reasons why we don't do hotels. We haven't done retail and we have to do very limited office. All of those sectors have very high CapEx just to maintain cash flow, not to get a return on it.

Nancy Lashine:

Right, right. You've hired so many people or brought in-house people so quickly, what have you learned in your years at QuadReal about hiring people and then secondarily just building a culture?

Dennis Lopez:

Yeah, look, for most of my career, been a deal guy. I like to do deals. I like to make investments. First, advising people, then doing it myself. And then as I progressed through my career, I got more into management positions and this soft thing called culture, which is so fuzzy and you hear these things from culture eat strategy and all that kind of stuff. But it's actually really true.

Nancy Lashine:

Those darn people, they have a lot to do with how you perform, right?

Dennis Lopez:

Yeah. That's right. The most important thing has been to establish a culture with all these people, a culture of performance, a culture of responsibility, integrity, and how you behave, collaboration, innovation. Those are our key phrases and yeah. I mean for the success we've had, I'd attribute a very significant part of it to getting the culture right so far. But it's also one of those things too that you can, takes forever to build it and a nanosecond to lose it. So the way that we have managed that growth and managed the firm is by setting up a really strong culture. And the thing too is-

Nancy Lashine:

How do you do that? I mean, you read books about it, you bring in the right people as coaches and advisors. Do you rely on a management team? How do you do it?

Dennis Lopez:

So yeah, you hire for it, and initially it's hard until you establish the culture to get that right. But we've got it now. So now when we interview people, that's a huge part of the hiring decision is that they have the right culture, not to be-

Nancy Lashine:

Oh, say it.

Dennis Lopez:

... unfairly, that we fire for it too. So frankly, we will usually, we can figure it out pretty quick in a year. Like, okay, we missed on this one, or for whatever reason, this person doesn't, so have it. People don't fit in. We don't say you're a bad person. We just go, look, the culture isn't the right fit here, so this isn't the right place for you. Now, the reality is once you do that, and we've been around for seven years now, after probably about four or five years, you got it. So those issues within the culture are de minimis now.

So yeah, you basically, you hire people, you keep people, and then frankly at some point, age and stage of your career, you're not going to change so much. But for the younger people who are coming in, you can set the culture and they learn that and they learn at least why we think that culture's beneficial at our firm. And then you can grow it, but it is hard to change people. And we've decided that if people don't want to change, that's fine.

Nancy Lashine:

Would you say the culture's consistent from Tokyo and Hong Kong to Toronto, to London, New York?

Dennis Lopez:

Yeah, absolutely it is. I mean, probably our biggest cultural value is collaboration in that you have a little bit of verticals you need because people have to specialize in debt or multifamily or retail, or I should say residential, whatever it is. But then we really foster a climate of everybody needs to work together. And also we set up our compensation systems that way too.

Obviously, everybody gets evaluated at the end of the year, and an element of their compensation is based on their performance. But then another major element of the compensation is the performance of both the management company and the portfolio.

Nancy Lashine:

Have you incorporated technology into your culture or your day-to-day processes at this point?

Dennis Lopez:

Yeah, we're trying to. It's really hard. The element that prevents rapid uses of technology isn't the technology, it's people. And when you implement technology, you're changing the way people do business, the way they operate. And that's the hard part. So you got to get them convinced that this is a worthwhile change. You got get them convinced that the time it takes to make the change is worthwhile. And then after you get it in place, you got to get them convinced to keep using it and to really utilize the technology fully. So adapting technology is really about having the right mindset and right approach to your employees, your staff, your colleagues, adapting the culture, I mean the technology and having the culture to do that. Look, the two areas that we've really focused on in advancing that, yeah, we've got a 60 person IT group but, and they're very much involved in it, but there's two areas. One is digital buildings, and the other one is the classic data analytics.

We started digital buildings right away. So we've been utilizing sensors and technology in our buildings to create efficiencies from day one, and that activity is quite advanced. And then in terms of the data from day one, we really start, we set up a data governance group to try and organize it because it's hard to study the data if it's just completely disorganized or inaccurate.

And then about two and a half years ago now, we put together a data analytics team to start taking our information and studying it, and also too, bringing in third-party information in a way that we can utilize it in our investment decisions, as well as, the way we run our business. So it's the old walk before you run strategy. So we have been building on it and we've seen good results, but the really big results are still in the future.

Nancy Lashine:

Are you more efficient today? Do you operate with fewer people because of data analytics?

Dennis Lopez:

Yeah, it's not really fewer people, it's just that we can do more, we can grow to the extent that we've grown without growing our base that much. So the base, we've grown, I'd mentioned 2,900, but a lot of those, I'd say almost half of those 2,900 people are really in the property management side, which is very intensive in student housing and in manufactured housing in particular. So the base staff that supports it, especially in areas like finance, treasury, haven't grown that much. And we've obviously four, four and a half times are AUM in the last seven years.

And it's also too quality of how we were able to control our organization and manage organization. That really came into play in the last couple of years because it's been hard. The access to capital has been difficult. So we were able to really get on top of every dollar we spent, every dollar we raised, every dollar of cash flow, every dollar that we borrowed, and put in place, really very sophisticated detail, cash management systems for our debt and equity business that allowed us to have capital because we weren't putting cushions in because we knew exactly what we needed for our projects going forward for the next 24, 36 months.

So that's where technology's really helped us. In the last three  years, on a gross basis, we've invested about 29 billion in both debt and equity, and we were able to do that without a lot of new capital because we were just able to manage the capital we had very, very well. And that was frankly due to the technology we put in place early on.

 

Nancy Lashine:

You had mentioned wanting to raise market to invest third-party capital, which I think you currently do, but perhaps that's in your growth plans as well. How do you envision that? Or am I misspeaking in saying that?

Dennis Lopez:

No, I mean, right off the bat, in 2018, remember we got the company going in '17, I joined in '18 ... in '16, that got the company going, formed it, and I joined in the middle of '17. In '18, we started talking with RBC about creating a core fund form, and in '19, we kicked it off, but that core fund today is over $10 billion. And we just had all-

Nancy Lashine:

All Canadian assets?

Dennis Lopez:

All Canadian assets, yeah so. And the capital raising for that vehicle has been very successful. In fact, a couple days ago I was up in Toronto celebrating our fifth capital raise for that. So that's always been part of the plan. It's not like we're focused on raising third-party capital, but we've now with the platforms we have in place, are able to generate a really attractive coherent portfolios around a particular strategy or market. And those exceed BCI's capabilities to invest in.

We want to keep growing the platforms. You're able to have good people because you have platforms that you can grow and that you have opportunities that attract really strong people. So it's really more a part of that. I think there will be a point in time where we probably get big enough that instead of raising third party capital, we'll just continue to use the existing capital as working capital and constantly reposition properties or sell properties and just, that'll be big enough, but we're not there yet.

Nancy Lashine:

Right. But how does running QuadReal as a Canadian company make it different than if it was, say, a US company or a European company?

Dennis Lopez:

I think it is been very satisfying to work for a Canadian company. They have great ethics, great standards to be a country, it's run well. Their pension fund system is really amazing. Whereas in the states, a pension fund that's funded 100%, I don't think it exists. It seems to be good if there's 70 or 80% funded

Nancy Lashine:

A corporate pension fund, but not a public plan, right?

Dennis Lopez:

Public, right, yes. So in Canada, they're all over 100%. They're all extremely well funded. And the last couple of years have been rough for everybody, but generally they've been run very well for the last couple decades. So it's great working for a Canadian company.

Nancy Lashine:

Yeah. I think you're one of the very few investors who has been active in China in the last few years. Are you continuing to be active in China?

Dennis Lopez:

No, no. I mean, to be honest with you, that's not going to work out very well. So we dipped our toes into that. We put a little bit over a percent and a half into China of our portfolio, picked out some strategies and themes that should have worked really well.

I mean, China has the highest ratio of eCommerce over 40%, and the lowest ratio of modern distribution facilities in the world. So you go, "Okay, that's a good basis," but mainly due to politics, it didn't really work out.

Nancy Lashine:

You have a lot of company with that experience.

Dennis Lopez:

Yeah, no, but I mean, it doesn't matter. I think once again, based on my experience in working in India, we're not investing in India. And we generally avoided, well, we avoided all the emerging markets. The one we thought we would test out was China, just because frankly, at that time, all the discussion of China becoming the largest economy in the world and how successful they'd been for the previous decades really made us think, well, we've got to at least test out a few theses, but then the geopolitical scenarios completely reversed. So no.

So we mark down our portfolio, we sold assets where we could, and we will be exiting China as soon as we can, which is going to be a while.

Nancy Lashine:

Yeah, yeah. Well, I feel your pain. And we are not alone.

Dennis Lopez:

Yeah. Yeah.

Nancy Lashine:

I have actually been speaking with some Canadian investors where we're working on a project, say in Miami on the coastline, and they'll say, "Well, I have a map here, and these areas are redlined for me. I cannot invest along the waterline in Miami or certain other places that are viewed to be not as sustainable."

How are you thinking about that? Have you redlined certain areas and give us your views about that.

Dennis Lopez:

We've been very focused on climate change since we started the company. So we've been through our portfolio several times, identifying properties and loans in markets that are in high-risk areas, either. It was really initially, mostly all floods, mostly from the ocean, some from rivers, but mostly oceans. And then obviously now it's moved in the last probably year and a half, two years to wildfires as well too.

So we've sold over a billion more of properties, 100% just because of those factors. Nothing to do with the location or demand or rents or anything like that. Redline is not the right word. It's just that we feel we have the entire world to invest in. So why would we invest in a market that has these risks unless we're getting higher returns and we don't. So we don't. It's, probably that's simple.

Nancy Lashine:

Is it flooding from oceans and wildfires, are the two things that you feel are the greatest risks for property owners?

Dennis Lopez:

I think those are the ones that, for the property types that we're interested in and the markets are interested in, those are the greatest risks, yeah. So it's really the ocean rising, which is going to have an impact on shorelines, and then it also has an impact that the ocean's rising when you have storms and then wildfires, yeah, so those are the biggest ones.

And it's not too just the destruction of the property. It's when the insurance companies start raising the rates to a level too that it gets pretty expensive. And it's also when frankly, other people in the market are concerned about it. So the prices you can get are reflecting what they think maybe the useful life will be.

Nancy Lashine:

So we're taping this, sadly, during the terrible wildfires going on in Los Angeles. You're from Los Angeles. Do you think that just the magnitude of this event and this happening in a dense urban area, will it change investor views of the market, do you think, for the next foreseeable future?

Dennis Lopez:

Well, it's a major event, right? I've lived in big cities my whole life, grew up in LA, lived in New York, lived in London, lived in Vancouver now. Not as big as the other three, but still pretty big. Yeah, you don't think of a fire in a city that goes on for over a week. You think of a building catching fire at worse, maybe a block, but you don't think of what's happening in LA now. This fire has been raging on control for a very long time and challenging neighborhoods that you would never think would be at risk.

So yeah, I think it is definitely going to impact people's thinking. People have been talking about climate change and the impact of climate change for a very long time, but when something like this happens, then it becomes more real.

Nancy Lashine:

Yeah, yeah. What sources are you using these days on climate change? Where do you look for good guidance?

Dennis Lopez:

There's people who provide the services. We've gone through a couple of them, and it's really more just having picked those services, which we think are the best based on our experience and based on our own opinions too.

So no paid advertisements or anything like that, but basically, yeah. So it's just picking those out. Some of the ones, frankly, who are involved with insurance companies are pretty good because they've been doing it for so long.

Nancy Lashine:

Mm-hmm. Mm-hmm. Yeah. Yeah, the insurance companies have to figure this out.

Dennis Lopez:

Yes.

Nancy Lashine:

So I want to ask you a couple of rapid fire questions if I could.

Dennis Lopez:

Sure. Okay.

Nancy Lashine:

You've lived all over many places of the world.

Dennis Lopez:

Yeah.

Nancy Lashine:

Do you have a favorite city?

Dennis Lopez:

London.

Nancy Lashine:

Oh, okay. Do you have a favorite restaurant?

Dennis Lopez:

No, probably not, but I must admit, the food in India is really amazing.

Nancy Lashine:

Oh, that's interesting.

Dennis Lopez:

Yeah.

Nancy Lashine:

Okay. Who would you say has had the greatest influence on you in your life?

Dennis Lopez:

I won't disclose the individual's name, but when I was at JP Morgan, I was very interested in becoming a managing director. The first year I was up for it, I didn't get it, and I got some advice that what I needed to do was less about being even better at what I'd done in the past and changed my skill sets for what was required for the new position.

So it was kind like, don't focus on being a better deal guy. Focus on maybe having more strategic convictions that drive the direction of a company versus a particular deal, bigger picture perspective, and then add that in with what you've done before. So that was pretty important. It tells you that at certain stages of your career, what got you there isn't going to get you any further. You need to pick up some new skills. And so taking the time to figure out what it takes, what those skills are for that new position is what it takes to get you to the next level.

Nancy Lashine:

But how lucky were you that you had someone who cared about you enough to share that, right? And how many times have you probably said something to a young person working with or for you that was that instrumental, and you probably didn't even realize it at the time?

Dennis Lopez:

I don't know. I mean, one of the really great things that I've had the opportunity in my career is to work with people who are very talented and younger or at a different stage of their career and myself, and it's really nice when you can help them out and you see them be successful. And then stay in touch with them and see them grow and do really great things. So that's been really nice.

Through a couple of the firms I've worked at, particularly JP Morgan was one of them, but also to a certain extent, to a couple other firms, AXA was one, that you've had a chance to impact people's lives and allow them to do things in their career that maybe they might not have done. So that's a very good part about the job.

Nancy Lashine:

Yeah. Yeah. Last question.

Dennis Lopez:

Sure.

Nancy Lashine:

If you could have dinner with anybody dead or alive, who would it be, Dennis?

Dennis Lopez:

Winston Churchill.

Nancy Lashine:

Oh, that's a good one.

Dennis Lopez:

Yeah, I like him. I don't read a lot of books, but I read books about him, and I really just admired just some of the things I was talking about. Just his sense of what was the right thing to do and just dedicating himself to it. And it wasn't necessarily popular a lot of the time, and it wasn't even right all the time, but it was right more than it was wrong, and he had a major impact on the world we live in today.

Nancy Lashine:

Well, didn't he? Yeah. Yeah. And so much courage.

Dennis Lopez:

Right.

Dennis Lopez:

That's one of the things what I read about him, I just am overwhelmed by his courage.

Dennis Lopez:

Yeah. No, he's an amazing man.

Nancy Lashine:

Yeah. Thank you so much. This was a lot of fun.

Dennis Lopez:

Yeah, it was. It was good. Thank you so much. I appreciate you having me. It was great.

Nancy Lashine:

Yeah, come back soon.

Dennis Lopez:

Okay. Will do. Thanks, Nancy.

Nancy Lashine:

I hope you enjoyed this episode of Real Estate Capital. Before you go, I have a quick favor to ask. We put a lot of thought and effort into this show and making sure we bring you insights from real estate leaders that you don't normally find in the mainstream media.

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