After sitting on the sidelines since its formation in 2024, Desjardins’ DGAM Canadian Private Real Estate Fund is ready to deploy its equity and to start making acquisitions.

“We have a total of $382 million to deploy which, with leverage, translates to almost $600 million worth of dry gunpowder to invest,” Richard Dansereau, vice-president and head of real estate investments at Desjardins Global Asset Management (DGAM) told RENX in an exclusive interview.

The open-ended core-plus fund was created in June 2024 with an equity commitment of $250 million, from which it acquired a seed portfolio of about 15 properties. Dansereau says since the fund’s launch it has received subscriptions primarily from its network of mostly Quebec-based depositors.

However, aside from the seed portfolio, the fund “was inactive in the real estate market because our principal asset providers have, for all intents and purposes, been over-allocated to real estate.”

The situation has since changed and Dansereau says the fund will close on a transaction in the coming weeks. “It’s a bit of a contrarian play,” he says. “It’s going to be a huge calling card for us to open up more doors to try and do more deals.”

Another deal is set to close in the New Year, he said. In addition, the fund has more than 30 potential transactions at various stages of due diligence in the pipeline. 

A focus on off-market transactions

The transactions that are closing and 80 per cent of the pipeline consists of off-market deals, which, Dansereau says, are a result of the relationships Desjardins has in the marketplace.

“We have an abundance of capital. We’re actively looking for opportunities, open for business and we’re ready to structure ourselves in an efficient way so that we can be responsive to any opportunity,” Dansereau says.

The fund will deploy its equity in Canada’s six major metropolitan markets – Vancouver, Calgary, Edmonton, Toronto, Ottawa and Montreal.

Dansereau says the first objective is to expand the fund’s geographic diversity outside its Quebec stronghold where it currently has 72 per cent of its assets. The fund is aiming to expand to BC and Alberta and to increase its presence in Ontario, where it has 28 per cent of its assets. 

The fund will continue to focus on purpose-built rental apartments, industrial and food-anchored strip retail, the asset classes that currently comprise its seed portfolio. However, Dansereau says the fund is now eyeing office as well. 

Since last spring, the trend has been positive for some office properties in certain markets. The trend has been fuelled by decisions by the Ontario government and major banks to have employees return to the office on a four-day basis after Labour Day, he says. 

“That really was a milestone moment in the recovery phase of the office sector from our perspective,” Dansereau says. “We now believe that is an asset class that we should seriously consider that should generate good returns and not be subject to downward evaluations as it has been for the past several years since COVID. We are actively looking for that asset class.”

However, given the disparities between occupancy rates for class-A and class-B office space in places like downtown Toronto, “you’ve really got to pick your spots.” 

Desjardins promotes, adds senior execs

Dansereau, who was previously the senior vice-president at Woodbourne Capital Management in Toronto, joined Desjardins last May. He replaced Tony Roy, Desjardins’ former head of real estate investments, who has retired.

“I loved what I was doing at Woodbourne,” Dansereau says. However, “my entire family is in Montreal and the mandate to lead a team that I knew was going to be well-capitalized for future acquisitions was extremely compelling. In addition, the opportunity to come home and be closer to my family made it a no-brainer.”

Since the fund is becoming “an active buyer, we needed to reorganize our group,” he adds.

Vincent Morin, who was one of the portfolio’s asset managers, was recently promoted to senior director, real estate asset management, and is now responsible for asset management nationally. Three people in Toronto and four in Montreal report to him.

About a month ago, the fund recruited Alexandre Ménard, as senior director, real estate Investments. Ménard, who is responsible for acquisitions, has previously worked for Colliers, Brookfield and Cadillac Fairview. 

The Canadian Private Real Estate Fund

The fund’s seed portfolio was acquired on a 50 per cent basis from Desjardins Financial Security Life Assurance Co., which Dansereau says was over-allocated in real estate and sold half its stake in the properties to reduce its exposure. 

The deals were done on a 50 per cent basis because “we didn’t want anyone to argue cherry-picking. No one on either side of that transaction could say ‘You took the best’ or ‘We got the worst end of the stick.’ It was an equal and fair transaction for both sides and ultimately allowed us to create and seed this fund.”

The seed portfolio focuses on purpose-built rentals, industrial and food-anchored strip retail.

Multifamily holdings include the high-end Equinoxe in Laval and Le Carlyle in Town of Mount Royal, Que., industrial assets include 20-30 Ironside Drive in Brampton, Ont., and retail includes the Fifty South Shopping Centre in Caledon, Ont. 

The retail and industrial assets are “stable and generate steady recurring, reliable income” with lease maturities of at least five years. The multifamily portfolio “is relatively new and performing extremely well” and has occupancy around 95 per cent, he says.