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Dundee REIT Vice chair and CEO Michael Cooper. (Simon Willms)
Dundee REIT Vice chair and CEO Michael Cooper. (Simon Willms)

ROB MAGAZINE

Inside Michael Cooper’s $1.3-billion bet on Scotia Plaza Add to ...

If anyone in the real estate world doubted the Michael Cooper Factor, the Scotia Plaza deal provided definitive proof of its power.

After shelling out billions to expand in countries like Colombia and Chile, the top brass at Bank of Nova Scotia figured they would raise a bundle of cash this year by putting their 68-storey Toronto headquarters up for auction in a scorching real estate market.

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The news set off a feeding frenzy in property circles. Scotia Plaza isn’t just any tower. It’s connected to the bank’s heritage headquarters at 44 King Street West, and it hovers over the heart of Toronto’s financial district at King and Bay Streets. The cherry on top for the buyer was that the bank wanted to lease back 60 per cent of the tower once the deal was done.

A prestigious property, a prime location and a gold-plated tenant: the real estate trifecta. All the deep pockets in the commercial real estate business showed up for the auction—Brookfield Asset Management, Oxford Properties, Canada Pension Plan Investment Board.

Then there was Dundee Real Estate Investment Trust, Michael Cooper’s baby. With a market cap of just over $3-billion, it surely is no runt as a REIT—but it looked pretty much out of its league next to CPPIB, which has assets of $170-billion. Most Dundee investors are of the retail variety, REITs being an investment refuge of choice for people like retirees. When the federal government cracked down on income trusts in 2006, the real estate sector got off scot-free, and a safe haven for investors who depend on distributions for income was born.

For some CEOs, a mom-and-pop base would preclude reaching for Scotia Plaza. But Cooper plunged ahead. His final, winning bid was a heart-stopping $1.3-billion, the highest price ever paid for a Canadian office building. H&R REIT picked up one-third of the tab—but it was still Cooper’s deal.

Just a decade ago, the prospect of a REIT winning such a bidding war “was implausible,” says Ira Gluskin, the money manager who co-founded Gluskin Sheff. Cooper surprised even himself. “Honestly, I thought we wouldn’t be in the running.” Yet in one deal, he both redefined the role of REITs and, in Gluskin’s view, “bulletproofed” his portfolio with a gold-plated asset.

The deal capped off a long ascent for Cooper at Dundee. When he started there in 1994, he was just another young striver. Less than two decades later, at age 51, he has well over $10-billion in properties under his control. Even Edward Sonshine, chief executive officer of RioCan, Canada’s biggest REIT, sings Cooper’s praises, admitting that he’s “made some of the most brilliant decisions over the last seven or eight years.”

But getting there took some audacity, a bit of pushing the envelope—it’s a key ingredient of the Cooper Factor.

* * *

After abandoning corporate law, Cooper worked for a Toronto real estate developer during the recession of the early ‘90s. In late 1993, he got a call out of the blue from Ned Goodman, the patriarch of the Dundee group of companies. Goodman explained that the decimated real estate market was due to turn for the better, and he needed someone to run Dundee’s new real estate arm.

Within a few months they were striking deals. Cooper got a whiff of a distressed company that owned reams of land in Saskatchewan but had defaulted on a loan. With two partners, he scooped up half of the company for just $6-million in debt and $1-million in equity. He remained fixated on these types of assets for the next two years, doubling down on land and housing developments in Regina, Calgary and Edmonton.

By 1996, Cooper was sick of the limitations of playing with private money. If he took Dundee public, he reasoned, he could tap into a much wider investor base and grow. That year, Cooper acquired a shell company, Clydesdale Capital Corp., for peanuts and changed the name to Dundee Realty Corp. Suddenly he was the CEO of a public company.

Not bad for a neophyte. “I had zero public-market experience,” Cooper says. “I owned one stock once, for 30 days.”

One of Cooper’s first calls as CEO was to U.S. real estate emperor Sam Zell. Cooper wanted big-name backers to boost his company’s profile, and Zell agreed to a breakfast in New York City. Zell said he didn’t know the Canadian market, and gave Cooper two weeks to come up with a strategy.

Cooper’s concoction: “A Plan for Mr. Zell in Canada.” “That’s how creative I am,” he says with a laugh. “The last paragraph was, ‘What I want from you.’ And it was a quick answer.” Zell invested in January, 1997, boosting Dundee Realty’s equity value to $33-million.

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