Sun Life Financial acquires Bentall Kennedy Group

August 4, 2015

Plan sponsors may wish to consider whether this investment news has any implications for the investment options available within their plans.

On June 15, 2015, Sun Life Financial Inc. (SLF) and Bentall Kennedy Group (BK) announced an agreement whereby SLF will acquire BK for a purchase price of $560 million. The transaction is expected to close in the third quarter of 2015, subject to customary closing conditions, including regulatory approvals. BK will become a unit of Sun Life Investment Management (SLIM), but will continue to operate under the BK brand name. The two firms will combine their real estate investment teams to become Sun Life’s exclusive real estate investment management platform. Following completion of the transaction, BK will continue to be managed by its current team, led by Group Chief Executive Officer, Gary Whitelaw, who will report to Steve Peacher, President, Sun Life Investment Management, and Chief Investment Officer, Sun Life Financial.  Gary will also join the SLIM leadership team.

BK manages the Bentall Kennedy Prime Canadian Property Fund Limited Partnership (BK Prime), which is the principal investment of the Bentall Kennedy Canadian Real Estate Plus Segregated Fund (BK Plus) which is available on SLF's Core investment platform. No changes to BK Plus’ investment strategy are expected as a result of the pending transaction.  In addition, BK has confirmed that no changes are expected to the existing real estate portfolio management team for BK Prime as a result of the pending transaction. These individuals include:

  • Michel Cormier, Vice President; Assistant Portfolio Manager, BK Prime and lead for BK Plus,
  • Malcolm Leitch, Chief Operating Officer; Co‐Portfolio Manager, BK Prime
  • Chris Lawrence, Executive Vice President; Co‐Portfolio Manager,  BK Prime
  • Paul Zemla, Chief Investment Officer
  • John McFadden, Executive Vice President

In addition to an ownership stake held by its employees, BK is currently owned by two institutional owners, the British Columbia Investment Management Corporation (bcIMC) and the California Public Employees’ Retirement System (CalPERS). Both bcIMC and CalPERS have expressed their confidence in BK and noted that they will continue to be clients of BK under SLF's ownership. In addition, both bcIMC and CalPERS have approved the purchase transaction.

The combined organizations will have $47 billion in assets under management, serving over 550 institutional clients and investors. As at March 31, 2015, BK had assets under management of $27 billion and provided real estate services across 91 million square feet of properties, operating in Canada and the United States.

Upon transaction close, BK’s current employee owners and institutional owners will be paid in full on their equity in BK. SLF is focused on maintaining management continuity at BK following the closing of the transaction. BK shares this focus, and their commitment to management continuity is reflected in a number of ways. BK’s investment professionals have a multi-year deferred component to their existing compensation structure which will be maintained on a go-forward basis; any existing deferred compensation will not crystallize as a result of SLF’s purchase.  In addition, following the transaction close, BK’s key investment professionals will receive phantom SLF shares, which will have a three-year vesting schedule.   

We will monitor both organizations between now and the close of the transaction and the subsequent integration. We believe BK is one of the deepest and most respected real estate managers in the industry and will only be strengthened by combining with SLIM’s real estate professionals. SLIM has a deep history managing direct real estate for Sun Life’s general account.

Background
BK Plus allows plan sponsors to provide their plan members with access to an asset class normally only accessible to large institutional investors. BK Plus’ target investment allocation includes 70-80% exposure to direct real estate investments with the remaining 20-30% cash and Real Estate Investment Trusts (REITs) in order to provide normal course daily liquidity for CAP investors.  Direct property investments are accessed through units of the BK Prime, which follows a strategy available only to institutional investors for over 30 years. BK Prime is well diversified across major Canadian cities and by income-producing property type, including office, retail, industrial, multi-family residential and land held for future development. BK Prime is managed by Bentall Kennedy (Canada) Limited Partnership and BK Plus is managed by BKC Capital Inc.

What does this mean for Plan Sponsors?
No action is required at this time. We continue to closely monitor developments related to the transaction and will provide necessary updates as new information becomes available.

Questions?
Please contact your Sun Life Financial Group Retirement Services representative.