Dalfen grows massive U.S. industrial portfolio

Paul Brent | Commercial | Property Biz Canada | 2015-08-20


Perhaps it’s because the parent company is headquartered in Montreal, or the fact its deal-making is spread across a dozen different states and it is focused on industrial properties. Or maybe it’s because the U.S. head office is in Dallas.


Whatever the reasons, Dalfen America Corp. (DAC) has not received the attention it deserves in the real estate community.


DAC may share some of the blame, as its website is unable to keep up with the pace of its acquisitions, listing deals well after the fact, if at all.


“We closed over a million feet of deals over the past month,” said Sean Dalfen, DAC’s president and chief investment officer. That activity includes portfolios in Charlotte, South Texas and Houston.


Dalfen, representing the company’s third generation (father Murray is CEO), has a simple explanation for why the company is so busy.


“We focus exclusively on industrial. Although we have had other holdings in the past, we strongly believe that industrial is the product type that we gravitate to and has yielded the best results for us. We feel that we are experts, we have a full-service shop you might say.”


DAC does everything from asset management in a number of U.S. locations, in-house construction, accounting, legal and property management, as well as a six-person investment team.


The portfolio


Dalfen owns “millions” of square feet in the U.S. and Canada, a constantly changing number that is generally rising as it bulks up while selling off properties whose value the company believes has peaked.


In Texas, DAC has 3.5 million square feet it either owns or is developing It also likes states such as the Carolinas, Honda and more surpns1ng locales such as M1ch1gan and Indiana.


DAC expects to reach $1 billion worth of assets in the U.S. in three to four years from about $400 million today. “The number could be much larger; it is simply because we sold a lot of assets.”


Many of those properties purchased during the last U.S. recession were improved and sold when the company thought they had reached peak valuations.


Dalfen also owns a portfolio north of the U.S border, although it is not its main focus today. “We don’t hate Canada, although we won’t invest in Quebec,” said Dalfen. He says the Montreal-based outfit is shunning its home province is a result of its anti-business policies. “We will invest in other parts of Canada, including Ontario.”


Besides the growth and dynamism of the U.S., Dalfen is attracted to the quantum jump in liquidity the world’s largest economy has to offer.


DAC runs a number of investment funds targeting institutional and ultra-high net worth investors and Dalfen is justifiably proud of the returns it has provided investors. “I’m proud to say, and you could publish this, because they are audited returns, our average annual returns net of fees over the past 1 O years has been 19 6%.”


Wind at their backs


It doesn’t hurt the U.S. unit, set up by father Murray in 1992, is currently enjoying strong demand for industrial space in the markets it operates in.


“The supply has not been able to keep up with demand,” said the younger Dalfen.


The company’s current strategy is to acquire what it identifies as undervalued properties in its key markets and to build in some places where the demand-supply balance is most out of whack. (For example, it is building 1. 7 million sq. ft. of space in Dallas currently).


Dalfen sums up the company’s U.S. strategy: “It is to aggregate a very strong portfolio of class-A or -B-plus product in these growth markets, key logistics corridors and population centers in the U.S.


“There are very few groups like us who focus exclusively on this – especially based out of Canada.”


Nuts and bolts approach


Dalfen is quick to add the company’s value-based approach is not about “financial engineering” but rather the “fundamentals” of real estate. “We are property guys. We are bricks and mortar guys.


“Is the property located in the right place that submarket, on the right street? Does it have the right attributes, meaning the right ceiling heights, the right column spacing, is the accessibility from a truck port standpoint good?


“Can you multi-tenant this property, is it properly geared towards what the demands of the market are?”


Part 2 next week: Dalfen America’s view of U.S. industrial trends