For many, Doug Pearce needs no introduction. As the founding CEO and CIO of the British Columbia Investment Management Corporation (now QuadReal), Doug has built a 38-year career many can only dream of.
Taking a portfolio from zero to $18 billion in real estate assets, the icon shared with us some of his best achievements, lessons, and advice at a recent NAIOP event. Here are four tips from one of Canada’s most experienced and well respected investment professionals.
You Need a Long Term Perspective
In the 1980’s, Pearce shared how interest rates reached an all-time high of 18.5 percent. It was a period of doom and gloom, to say the least.
“I’ve learned that nothing is guaranteed. Despite sky-high rates, the markets began to change. During my career, interest rates were on the steady decline. This was a great tailwind that helped my career and certainly growing my fund.”
Pearce then shared how this same sentiment draws many parallels to today’s market.
“If you’re young and want to get into the market now, the prices are so high. You think you may not see a day when prices are much more reasonable. Back then it was hard to fathom that rates would be as low as they are today, but things will always change.”
Pearce shared that when you’re looking at a portfolio of assets, liquidity is a factor to always consider.
“What asset would I really want to own for the long term and has characteristics that meet my pension liabilities? It would be real estate. Bonds and public equity give you liquidity and it’s very tough for active managers to outperform the marketplace. That wasn’t such a great match to our liabilities. Real estate is the last asset you never get rid of.”
Raise Your Profile
“One of the largest cheques I ever wrote was when we bought the CIBC portfolio for $860 million. For an organization that had not written a ticket for more than $150 million before, this was a big step up.”
Another acquisition Pearce is proud of is the South Core Financial area in Toronto. They purchased the land from Fairmont Hotels, developing three buildings that cost over $1 billion.
“And that was a lot of fun. We were dealing with the city and every issue that came up through the development. That process was excellent.”
Know Your Limits
“I would’ve done the QuadReal model sooner, but it took an awful lot of effort. I ran out of energy to do it. BCI’s decision to form Quadreal was a great one. It really does help when departments are all under one roof and one identity. It’s your best chance to get the culture right.”
Don’t Buy In To Trends
Pearce shares that if you don't understand what you're getting in to, don't get into it.
“A great example is the subprime mortgage crisis in 2008. Everyone was doing it, but thankfully we didn’t believe the hype. Being based in Victoria, we were far enough away that we could assess what’s safe to invest in. Take your time and don’t feel pressured just because everyone else is doing something.”