The EG Interview: Why AIMCo is playing the long game

When you are investing the money of a highway worker in Red Deer, Alberta, so they can live out their retirement in relative comfort after a lifetime of toil, it really matters where and how you use that capital. Or at least it does for Paul Mouchakkaa (pictured), head of real estate at Alberta Investment Management Corporation, the C$160bn (£93bn) investment manager and custodian of more than 30 pension, endowment and government funds in Alberta, Canada. More than C$20bn of those assets under management are in real estate investments, primarily focused on North America, but with a growing percentage in the UK – and more to come. “Pensioners worry about inflation and they worry about the security of capital, and that’s at the front of our mind,” says Ottawa-born Mouchakkaa, talking to EG from the London office that the firm is doubling in size to feed its growing appetite in the UK.  “The name of the game for us is to find investments and invest in sectors that we believe will do as well as GDP – or better – over a long period of time. That’s our mission and that’s what drives us.” Just over a year into his role as head of real estate across AIMCo, Mouchakkaa, who joined from BentallGreenOak in May 2022, is ready to start executing the strategic plan he has spent the past six months formulating. Central to that plan is really focusing on its portfolio – “The markets are moving and shifting in a different way to how they were three, five and 10 years ago, so portfolio management is going to be very important” – finding expert partners to help grow that portfolio and using data and technology to make better decisions around it. All, of course, with that purpose to protect the pensions of the clients the business ultimately serves. Power in partnerships In the UK, AIMCo has already built some strong partnerships to progress its portfolio. In industrial, it has a £250m-plus partnership with Canmoor on multi-let, last-mile logistics; and in residential, it is working with Ridgeback Group to become one of the largest build-to-rent landlords in the UK. Following a deal to buy a £283m portfolio from Angelo Gordon last summer, the jv now has more than 3,100 flats in 10 city centres around the UK. “We want to align ourselves with more groups like that in the UK – and in the US, Canada and globally, for that matter – in the areas we want to lean into,” says Mouchakkaa. “We want to invest in places that we believe will have better growth dynamics for our portfolio over the long term. Our job is to look for the sustainable investments that will perform, not just over a year or two, but over a cycle.” And it is that long-term view that means AIMCo isn’t shying away from real estate investment. Yes, the market in the UK and globally may be going through some turmoil, but the business isn’t playing the get-rich-quick game in real estate, it’s going long. Fundamental strengths “The UK has been and will be a key part of our portfolio,” says Mouchakkaa. “There are a lot of fundamental strengths to the UK. London is one of the most important cities to have exposure to globally, so we want to have consistent exposure to the UK market, independent of whatever might be happening over a period of time.” AIMCo is keen to increase its headcount in London from 30 to 80 in the next few years, enabling it to invest billions into the UK. For now, those investment plans are focused on growing its residential holdings even further in the UK and over into continental Europe; expanding its industrial and life sciences holdings in the UK; building a data centre presence outside of Canada; and pushing further east into Asia, where AIMCo currently has just one investment in its real estate portfolio. “Asia is a huge part of the global economy,” says Mouchakkaa. “It represents a significantly larger portion of GDP than it did 20 years ago, so for us to increase our allocation there is, we believe, the right thing to do.” Doing the right thing is clearly a guiding principle for Mouchakkaa. And the right thing at AIMCo is thinking about the long-term value of investments and how they will enable the comfortable retirement of that highway worker in Red Deer that he always has front and centre of his mind. Investing for growth “The broader themes that are really driving our decision-making include the proliferation of technology and how we use it,” says Mouchakkaa. “What you can do with your phone today is amazing, even compared with 10 or 15 years ago. And not only does that spur something like e-commerce, and therefore industrial warehousing, but it also spurs our reliance on power and data transmission, which means data centres are a much more prevailing part of the market today and will continue to grow.” In residential, the driver Mouchakkaa sees to keep investing for those long, patient returns is the perennial problem of demand outstripping supply. “There wasn’t the level of housing that was built post-GFC that really kept up with demand for housing,” he says. “It’s a necessity so there is still a pretty large supply/demand imbalance that exists and it’s proliferating not just out of North America, but you’re seeing it in the UK, you’re seeing it now even in Europe. That’s another important thing that’s driving our investment decisions.” Manageable pain For Rupert Wingfield, head of real estate, Europe, at AIMCo, the investment decisions the firm has made so far have paid off, with any pain felt managed by its long-term view. “It’s certainly been a challenging nine to 12 months,” says Wingfield. “Industrial yields in particular moved out very quickly, which has been painful. But on the occupational side, our portfolio is still firing on all cylinders – vacancy is 1% and rents are rising. Every time we get a rent review or renewal, we’re clocking 5, 6, 7% above the previous rent. Occupationally it is performing very strongly, and as a long-term investor we can ride it out as the yields rise and fall.” And those rises and falls will create opportunities. That’s the beauty of long-term, cross-sector investing in real estate. For Wingfield, rising interest rates are pushing more people into rental housing, a great move for the business focused on growing its UK BTR offering. He cites one of AIMCo and Ridgeback’s schemes in Birmingham which let at twice the pace it underwrote and beat its ERV expectations by 7%. Purpose matters Where both Wingfield and Mouchakkaa get a little uncomfortable in their seats is around offices. Mouchakkaa sees the UK and Europe as a much more investible place than North America, while Wingfield sees London as healthier than the regions. Both, however, see ESG as the winning or losing bet when it comes to office investment – and real estate in general. “If you’re not responsible about how you manage your asset from an environmental and community perspective, you will not do well,” says Mouchakkaa bluntly. “We have a responsibility – a fiduciary responsibility – to our clients and our people in Alberta, and having good ESG practices is instrumental in delivering on our promises.” And in a place such as Alberta, where environmental impacts can be clearly seen and felt through snow melt and wildfires, and a company such as AIMCo, where photos of policewomen and firefighters line the walls of every office in a constant reminder of whose money they are playing with, that responsibility to make the right bet in the right way cascades from the top down. “What drives me more than anything is that our job has purpose,” says Mouchakkaa, as the conversation draws to a close. “I get excited about working for that highway worker in Red Deer, Alberta. Having that mission behind what we do is much more exciting than anything else I could possibly do.” To send feedback, e-mail samantha.mcclary@eg.co.uk or tweet @samanthamcclary or @EGPropertyNews Photos: Portrait © AIMCo Data centre © Christina Morillo/Pexels Hairpin House © Aimco Leaf © Kanishka Misra/Pexels