From Leon’s Furniture to Pension Fund Management

A client of Gill Planning since 1996, Kevin Leon’s story and rise to business success exemplifies the power of how pursuing your passion with a clearly laid out plan can redefine your destiny.

Kevin, a member of the Leon’s Furniture family, started working for the family business as a teenager. Today he is the founder and President of Crestpoint Real Estate Investment Ltd., a business dedicated to providing individual and smaller institutional investors exposure to direct ownership in commercial real estate.

Kevin was exposed to business his whole life. From age 15 to 22, he dedicated himself to Leon’s Furniture. “If I wasn’t in school, I was at Leon’s. There was never a break.” During this time at Leon’s, his Father instilled within him a very powerful message. “Make it on your own, it gives you more options. Go to business school and get your education.”

Kevin heeded that advice. “I wanted alternatives and was always intrigued by real estate which is more closely aligned with retailing than one would think.”

With that, Kevin left Leon’s to execute his vision and enrolled in Western’s prestigious Ivey Business School, subsequently earning a Business Administration degree and graduating with Honours in 1989. During his time at Western he discovered two areas of real estate he had a passion for, pure real estate and investment banking / corporate finance. Kevin ended up going into both.

In 1989, Kevin started his professional real estate career at CB Richard Ellis Limited, a firm that would afford him the exposure to many facets of commercial real estate. “I started with CB Richard Ellis just after the go-go days of real estate in the late 80‘s. The whole crash happened right after. In retrospect it was a great time to get in because I was young and it allowed me to learn in very difficult times.”

From 1989 to 1998, Kevin ascended from an investment sales specialist to a Vice President of the firm. During his tenure he led an investment sales team and in 1997 and 1998 he was the top salesperson in the country for his firm. Kevin also started investing into commercial real estate on his own in the mid 90’s.

Kevin’s tenacity and success didn’t go unnoticed in the industry. Kevin received a call from CIBC to join their real estate investment banking group. “It was my opportunity to bring pure real estate and corporate banking together and I made the move in 1999.”

Kevin recalls that, at the time, CIBC had a multi-billion dollar portfolio of commercial real estate. “My job was to manage out of that because they were going to sell most of it” Kevin says. “I got experience in a whole different side of the business working ventures with Goldman Sachs, Smart Centres and other international deals. I also was involved in raising money for REITs, pension funds and put together several opportunity funds too. It was a great experience but I knew all along I wanted to do something for myself on the principle side of the business.”

In 2010, his plan was complete. With a formal business education, a decade of experience in each of his two passions, pure real estate and investment banking, he left CIBC to set up his own real estate investment company.

“My main goal was to offer individuals and institutions direct exposure to real estate.” Kevin put up some individual and personal equity and began to acquire office buildings, shopping centres and industrial buildings.

Kevin’s value proposition is a powerful one and seems to fill a void in the market place that is crowded with a plethora of investment vehicles, namely direct exposure to real estate, as a way to diversify one’s personal investment portfolio.

Kevin suggests that the prudent investor should seek diversification and that individuals should allocate 10-20% of their investments in real estate with the balance invested in the more traditional vehicles such as equity and bonds.

“When people say they have exposure to real estate from their home or cottage, it’s not the same. Residential versus commercial real estate is a different class of assets; it’s driven by what business tenants can afford to pay and what income can be driven by the asset.”

Although alternatives for individuals who want exposure to real estate are REITs, Kevin states “REITs are a tradable security and much more aligned to equity than direct real estate exposure. REITs are bought as an income producing product primarily and long term appreciation is secondary. A better balancing alternative is to hold direct real estate than REITs and equities for this reason.”

Kevin also points out that investments are protected on both sides of the interest rates equation. Typically Crestpoint finances only 50-55% of a property’s value to ensure positive cash-flow from rental income. In addition, mortgages are generally long term in nature to protect the positive cash-flow from interest rate volatility. “If inflation happens, replacement costs increase and the value of the underlying asset should increases too” Kevin says. “Moreover, the leases that provide income will also increase and the typical leases have provisions ensuring protection from increases in taxes, utility and common services, as such, a bit of inflation isn’t a bad thing. Conversely, if interest rates fall, there is an opportunity to refinance at lower rates and enhance positive cash-flow.”

Kevin’s clients are usually older because they have more disposable income, but that is starting to change as it’s becoming attractive to clients in their 40’s who see real estate is a long term asset. It gives individuals the opportunity to have exposure to Downtown Toronto and Vancouver prime commercial real estate that would usually require a net worth in the stratosphere to do on their own.

Kevin designed his funds to make entry into owning this class of asset affordable and offer the kind of liquidity and income that isn’t traditionally available in real estate investments. “We purchase hard assets that are income producing from day one. Every quarter, our clients are returned a tax preferred dividend that has historically had an effective yield currently much higher than a fixed income product.”

As for liquidity, “At the end of each quarter, units can be sold or liquidated at the underlying portfolio’s present value, a feature that is not usually found in this class of asset.”

Kevin’s message is resonating. No sooner than he set up Crestpoint did he receive a call from Conner, Clarke & Lunn (CCL) a pension fund manager with over $38 billion in assets under administration. “CCL manages funds for many of Canada’s large institutions and high net-worth clients. They didn’t have an investment vehicle that allowed direct exposure to commercial real estate for their clients.” In 2011, the joint venture was formed.

With over 20 years of experience and being involved in over $10 billion of real estate transactions, Kevin is adding value directly and indirectly to thousands of Canadians through his company and fulfilling his passion at the same time.

Based on his father’s influential message to Kevin that inspired him to pursue his dreams, we asked Kevin if he had any advice to other entrepreneurs. “Take the time to make sure that what you’re doing is what you want to do. Think about it, lay out a plan, and if you have passion and you thought through a plan, then the chances are you are going to be very successful.” Kevin pondered and again emphasized “Make sure you are passionate about what you want to do and you truly believe you’re delivering a value proposition because it can be long hours.”

In his personal time Kevin is involved with community activities including coaching his four children’s hockey and soccer teams.

Kevin Leon can be reached at (416) 304-6632 or by email at .