Ontario Teachers’ Pension Plan is in talks to sell its stake in Canadian oil and gas producer Aspenleaf Energy Ltd., according to people familiar with the matter.
The pension fund’s stake is worth around $200 million, with the entire company valued at about $800 million, said the people, who asked to not be identified because the details are private. A sale might close as early as May, they said.Aspenleaf is backed by Ontario Teachers’ and ARC Financial Corp., a Calgary-based private equity manager that focuses on energy. The original private equity investment vehicle, formed more than a decade ago, is at the end of its life and other Aspenleaf shareholders are rolling their stakes into a continuation fund. But the Ontario pension fund has decided it would rather exit now, the people said.
The C$247.5 billion ($181 billion) Ontario Teachers’ fund, like many other pension managers, is under pressure to reduce the carbon footprint of its holdings — though it hasn’t made the decision to exit the fossil fuels sector entirely. A representative for Ontario Teachers’ declined to comment. Representatives for Calgary-based Aspenleaf didn’t immediately respond to a request for comment.
Aspenleaf is focused on drilling and acquiring light oil and liquids-rich gas assets in western Canada, with projects in the Swan Hills, Leduc, and Twining fields in Alberta. The company’s acquisition strategy focuses on buying financially stressed energy companies, injecting capital if necessary and using its operating experience to turn them around.
ARC was founded in 1989, initially with a focus on corporate advisory services and research before it evolved into private equity. Since then, ARC has raised 11 energy-focused private equity funds totaling over C$6.3 billion of committed capital from global institutional investors, according to its website.
So Teachers' is selling its stake in Aspenleaf, a stake it acquired via a private equity investment in ARC Financial Corp, the largest energy focused private equity manager in Canada.
Now, the sale isn't finalized but when news like this leaks out, it's typically from the inside to get the word out and a sale is imminent.
And it's not just Aspenleaf.
Two weeks ago, Paula Sambo of Bloomberg (notice the link) reported that Teachers’ reportedly weighing $5 billion sale of luxury senior residences chain:
The Ontario Teachers’ Pension Plan is exploring a sale of luxury senior-living residences Amica Senior Lifestyles, which could be valued at about $5 billion, according to people familiar with the matter.
Teachers’ is working with advisers on a potential sale of the Toronto-based company, which has drawn interest from multiple parties, said the people, who asked to not be identified because the details are private. No final decision has been made and Teachers’ could opt to to hold onto the business, the people added.
A representative for the pension fund declined to comment. A representative for Amica didn’t immediately respond to a request for comment.
Teachers’ took Amica private in 2015 via a takeover by its subsidiary BayBridge Seniors Housing Inc., according to a statement at the time. Today, the company has more than 30 senior-living locations in British Columbia and Ontario, according to its website.
The pension fund is mulling the sale soon after starting to move its real estate investing team in-house from subsidiary Cadillac Fairview Corp. Ontario Teachers’ gained 1.9 per cent last year, underperforming its benchmark by a wide margin, as it lowered valuations on real estate and infrastructure investments hit by higher interest rates. The real estate portfolio declined 5.9 per cent, compared with a two per cent gain for its benchmark.
Amica Senior Lifestyles is actually a great investment Teachers' did back in 2015 in premium seniors housing for an aging population:
The investment: In 2015, we acquired a publicly traded Canadian provider of premium seniors housing and merged it with our seniors-housing subsidiary to create Amica Senior Lifestyles.
Many seniors stay in their homes as long as they can. But isolation, age-related frailties or even the desire to be free of burdensome household chores sometimes lead seniors to choose another option. That’s where Amica Senior Lifestyles comes in. The company, which operates mainly in Ontario and British Columbia, provides private-pay, premium housing in three categories: independent living, assisted living and memory care. Through its focus on premium amenities and personalized care, Amica has established itself as the leading provider of seniors housing in Canada.
As a long-term partner to Ontario Teachers’, Amica has a proven track record of generating stable returns. We also invested in the company because of its long-term growth potential. Canada is aging, and the cohort of Canadians aged 75 and up is expected to almost double by 2040, to 14% of the overall population. The rising number of older seniors is expected to drive demand for seniors housing in the years to come, positioning Amica for growth. Currently, the company operates 33 properties, with another dozen under development.
Amica’s appeal includes prime locations, great food and its activity and entertainment options. But its strength lies in personalizing services to suit the desires and needs of its residents. Indeed, many newcomers report better health and less of a need for prescription medications after they move in, benefiting from the full meals and sense of community that Amica provides. The company also provides a continuum of care, catering to the changing needs of residents as they age.
Like other companies operating congregate living facilities, the pandemic brought some challenges for Amica. We’re proud of the way it was able to respond with its residents’ wellbeing in mind. Company management quickly went into crisis mode to protect and reassure its residents, and adopted staffing and other policies that helped minimize the spread of the coronavirus in its facilities. Due to its proactive approach, Amica managed through the pandemic well and is now moving forward with its growth plans.
“Having Ontario Teachers’ as our partner and long-term owner has provided Amica with the ability to make solid long-term value creating decisions not subject to the investment and operational swings that comes from a quarterly public reporting environment. During the pandemic, it also allowed Amica the freedom to make the right choices to protect its residents, team members and company brand.”
--Doug MacLatchy, CEO, Amica Senior Lifestyles
Now, let me be clear, I do not think Teachers' is looking to sell Amica because of the pandemic which is now largely behind us.
Instead, I think this is a real estate diversification move as last year, OTPP bifurcated Cadillac Fairview, its real estate subsidiary and internalized global real estate investments.
Remember, OTPP is still very overweight Canadian real estate and it has explicitly stated they are looking to diversify outside Canada but are not willing to sell prized assets at a deep discount (nor should they).
CEO Jo Taylor made that very clear to me.
Anyway, whenever you read a pension fund is thinking of selling an asset, it's typically because someone internally leaked it out to get the word out.
Why is OTPP selling assets? It's a portfolio allocation move (in real estate) or it could be shoring up liquidity to pounce on other investments as opportunities arise.
And in the case of Aspenleaf, I'm sure their ambitious goal to reduce portfolio carbon emissions intensity by 45% by 2025 and two-thirds (67%) by 2030, compared to its 2019 baseline factored into that decision.
In any case, pension funds buy assets, they typically hold them for a much longer period than private equity funds and sell them when the conditions are right.
Keep that in mind, Canada's large pensions funds are not in the buy and hold forever business, they will sell if the price is right.
Below, a month ago, Young Canadians for Resources members had the pleasure of interviewing Aspenleaf CEO Bryan Gould. Great interview, well worth listening to his insights.
And Chef Gary McBlain, Amica’s National Director of Culinary Services, discusses how they prepare fresh meals for their members.
Ok, I posted that last clip because it's past my dinner time and I am famished and want to eat something fresh and delicious but in all seriousness, this is as good as it gets for seniors residences!