Mall redevelopments often mean a little spiffing up, a few thousand more square feet of retail space, better branding.
But the plan for Vancouver's Oakridge Centre mall – a classic 1950s development parked in the middle of Vancouver's single-family swathe in the south half of the city – is light-years beyond that.
Instead, owner Ivanhoé Cambridge is investing $1-billion to transform the mall into its own small city, with almost 3,000 residential units in 13 towers that will cluster around a shopping centre that's twice its current size.
Included in that massive 28-acre project – double the area of the city's Olympic Village and triple the housing – will be public gardens, 400 units of rental housing, 150 units aimed at seniors, a community centre, a daycare and a library.
If it gets approval from the city as is, it will become the biggest investment Ivanhoé is making in any of its real-estate holdings in the world.
"Nothing else comes close to the size of this," says Roman Drohomirecki, the company's vice-president for operations in western North America.
The Oakridge redevelopment (which includes a partnership on the residential side with local developer Ian Gillespie) is not just a result of the attractive Vancouver market. It's just one play – albeit a big one – in the global strategy of Quebec's pension-fund manager Caisse de dépôt et placement du Québec, where Ivanhoé Cambridge functions as the real-estate division.
That strategy is to put more money into real estate in Canada and around the world, as real estate has edged out the bond market recently for returns on investment.
The Caisse announced in January this year that it planned to shift $10-billion more of its assets into real estate for a new total of $40-billion. That will boost Ivanhoe's standing even higher among the 10 largest property investors in the world where it already lives, among others from Dubai, Kuwait, China, Norway and the United States.
That move into real estate is similar to what other Canadian pension funds are doing, although on a much larger scale. As a result, between Ivanhoé and others, Canadian companies have been on a buying spree around the world recently.
But Ivanhoé is not just going to throw its money around randomly. As the company's investments president explained in a recent Globe and Mail interview, the company has learned through some difficult lessons that it does better when it does less.
"We have been extremely successful where we have a concentration of assets and people," says Bill Tresham, in an exuberant rundown of the company's strategy worldwide.
Mr. Tresham said the company has done well in its mall holdings in Brazil, "where we've been able to export our abilities gained in Canada."
It's looking to move into more mall development and acquisitions in Europe, where, again, the company can operate to "the rule of doing better what you do well already." Europe, he said, is a particularly attractive target because it's "probably four decades behind in the mall business."
He has said earlier that the company has struggled with its investments in Russia and China.
Now, the idea is to stick with its proven strengths: Office buildings in Paris and London and some key American cities. And malls, in the markets where they can be successful: Brazil, where the company has 22 malls; Europe, a mall-deficient part of the globe; the United States; and, of course, Canada.
Ivanhoé has done spectacularly well with malls in Canada, where its high-level shopping centres far outperform most American ones. So it makes sense to invest more in those malls. But there isn't a lot of empty land available in Canadian cities for giant new developments.
That's why $1-billion is going into Oakridge, and an additional $280-million into the Guildford Mall in Surrey. Along with that in the past year: A $200-million redevelopment at the Bayshore Mall in Ottawa; an $87-million makeover at Vaughan Mills north of Toronto.
"Where we look is 'Can we profitably invest in what we own already?'" Mr. Tresham said. He's a fan of malls as a real-estate investment.
"When you own hotels, you rent one day at a time. With apartments, it's one year at a time. With office tenants, maybe five years. But when you rent space in a mall, you rent it forever. And we happen to own the best class of real estate in what has turned out to be the best-performing economy in the world."
Canadian mall owners are benefitting in two ways. They didn't suffer nearly as much during the recession as their American or European counterparts, so they have their profits from those years intact and available to invest. And both U.S. and European retailers are now panting to get into Canadian malls, which are seen as above-average performers.
"There's a tidal wave coming to Canada," Mr. Tresham said.
Oakridge has already made room for the U.S. retailer Crate & Barrel even before the mall's expansion. Others are waiting to come in.
Ivanhoé's profitability during the recession, along with the Caisse's extra $10-billion commitment, have also made it possible to move aggressively into non-Canadian markets.
The company is also investing in office development or acquisitions in the markets where it believes it can be successful. Ivanhoé is building a third tower at Burnaby's Metrotown on spec. It announced recently it is partnering on a 45-storey tower in Chicago's West Loop. And it has made big buys of offices in both Paris and London, one the Peugeot headquarters for $350-million, the other the Woolgate Exchange building for $400-million. In both cases, the company negotiated tricky deals that others shied away from.
Mr. Tresham said the value of real estate is that its profits never vanish, no matter how bad things get. "If I properly invest, my return might vary but it won't go away."
And at least the pension fund can manage what it has as the economy varies. Which is what pension funds want more than anything these days.
"A lot of pension funds used to invest in other funds and they had no control," Mr. Tresham said. "Pension funds have become far more activist. We want direct control."