This article is part of our Beyond the Family Business series.
Hosted by Luke-Hansen MacDonald, a second-generation family business leader, “Beyond the Family Business” is one of the most thoughtful and engaging podcasts about family enterprise in Canada. In the podcast, which Canadian Family Offices is sharing with readers every two weeks, Luke interviews leaders in the family enterprise space to explore lessons they have learned and their successes and challenges behind the headlines.
In this episode of “Beyond the Family Business,” Luke sat down with KC Daya, founder and CEO of Clifton Blake. The son of entrepreneurial immigrants, Daya has built Clifton Blake from the ground up into one of Canada’s leading integrated real estate builders and operators.
In his conversation with Luke, Daya shares:
- How his upbringing set him on his entrepreneurial course.
- How he navigated early career challenges to create and grow his company.
- How he managed the strategic transformation of his company from mortgage brokerage to asset manager.
- How Clifton Blake is achieving scale through mergers.
- How he and his wife balance supporting their children while ensuring they have the life skills to succeed.
To watch the full video of this podcast, click here.
Previous episodes of “Beyond the Family Business” on Canadian Family Offices feature Jeffrey McCain and Ian Wilson.
Transcript
Luke: Hi, welcome to Beyond the Family Business, a podcast in partnership with Canadian Family Offices, where we dive into the lessons, challenges, and opportunities that come with operating a family enterprise. This episode is brought to you by BMO Private Wealth. As longtime clients, I’m proud to have them as a sponsor of this podcast.
Today’s guest is Toronto native KC Daya. He is the CEO and founder of Clifton Blake. They are an integrated builder, lender, and operator of multifamily assets with over 1 billion in assets under management. Today we discuss his struggle of finding balance between the hard lessons he learned from his immigrant entrepreneurial parents, and his desire to spoil his kids with experiences that he never got to have as a young boy. KC shares how his first real estate fund actually failed to raise money, and the invaluable lessons this taught him, which have underpinned his success up till today. KC also shares why many Canadian real estate funds have recently gated, and the risk that this may present going forward. KC also describes the reasoning behind two of the recent mergers that have transformed Clifton Blake into a vertically integrated business, and how these are unlocking huge value for his investors.
Alright, this is Beyond the Family Business podcast. Let’s jump into it.
Luke: So, I always start off with the same three questions. Who are you, where are you from, and what do you do?
KC: Well, thanks for having me. My name is KC Daya. I’m the co-founder and CEO of Clifton Blake Asset Management, and I’ve been an entrepreneur since I was a teenager.
Luke: And what is your business today?
KC: That’s a loaded question because we do quite a few different things, but it’s all centred around private equity and real estate. We have a development program where we actively build and manage purpose-built multifamily mixed-use buildings in core Toronto. Alongside that, we have a private lending business, fully integrated platform. We recently tucked in a construction management company as well as a commercial real estate brokerage.
Luke: Wow. Yeah. So, you’re a busy man.
KC: I like to be.
Luke: Yeah. So how did you get into the world of real estate?
KC: That’s really tough. I was quite naive when I thought about being a real estate entrepreneur. This goes back to when I was a kid. You know, I used to play Monopoly when I was a child, and I consider what we do today, professional Monopoly. So it’s fun. But I started this company with a partner right out of school. Actually, we didn’t even graduate yet, and we were buying our first building. I did an MBA in real estate finance, so I was full of confidence, wanted to have a career in commercial real estate. So, we went about starting this thing up, one investor at the time, and it was really difficult. It was extremely difficult. We had our bumps along the way and eventually had to get a job and get back on my feet. Nobody ever prepared me for that roller coaster ride. But those were very formative years, and some of those hard lessons really prepared me for what was to come later in life.
Luke: Right. Yeah. I read in one interview you’d worked in tech and then pivoted to real estate. What was the motivation to switch from tech to real estate?
KC: I was always tech forward. When I was a kid, I was always tinkering with computers. The first company that I tried to start was in the late nineties. It was a dot-com e-commerce website when nobody had ever heard of anything like that. Most people didn’t even have an email address. So, it was early days, but I had this idea and tried to run with it. From there, I tried different things in tech, startups here and there. I went into computer science at McGill. That was when I went to university, that’s what I started with. And then I realized, it actually wasn’t what I wanted to do. What I really wanted to do was be in business. My parents historically had really discouraged that. Coming from an Indian immigrant family, they wanted me to be a doctor. That was a one-track mind. And I don’t blame them for that. In their mind, that was the right thing to do. But it just wasn’t my passion. And it took a while for me to just build a confidence to say, ‘Sorry, Mom. Sorry, Dad. I’m going to do this.’
Luke: And what did your parents do? How did they come to Canada?
KC: My parents came in the early seventies. There was a huge wave of migration from East Africa to Canada. They were very hardworking people. They got into small business. They owned a few restaurants. They would open and close the store, work seven days a week. And there’s a family story in there too. I think every one of my mom’s siblings and her parents worked in the business. My sister and I worked in the business since we were really young. It was just a thing that you did, you just gravitate towards that. My dad was able to support a lot of people. But I watched them work really, really hard. And I watched them go through cycles, which was a bit painful. There were a couple moments where he was struggling. There were a couple moments where he was doing really well and put us through private school, and we all had our own car and all that jazz. It was quite a roller coaster ride, but it was for sure an entrepreneurial household.
Luke: Yeah. And so they had a business in Canada as well, or was it based in East Africa?
KC: Yeah. No, it was in Canada. He came here as a chartered accountant. And he thought to himself one day, he walked into a Harvey’s restaurant, and he said, I’m going to own one of these one day. And sure enough, he did. I think he’s been through about 10 stores in his career. At the peak of it, we had five at the same time. My uncle was running one, my grandfather was running one. His family business.
Luke: Yeah, absolutely.
KC: But they always told me and my sister, they said, don’t think we’re going to give these stores to you. This is not your career.
Luke: Why do you think they said that?
KC: They didn’t want that life for us. You know, my first job, I was flipping hamburgers, and I worked there all the way till eighteen. And then they pushed us out. They said, go get a career. Go get an education. Focus on school.
Luke: And what were some of the lessons? I mean, they battled through it, sounds like some ups and downs, and really lived that small entrepreneur business role. What were some of the lessons that you’ve taken to heart that have benefited you in your career now?
KC: That’s a long conversation. So, my dad used to drive me to school in the morning, and he would talk about what he’s doing in business. He’d talk about how he’s financing the next acquisition or how he’s levering up the house to do whatever. So, I actually learned a lot just through stories from my parents. Those are very formative lessons. But they worked really hard. I don’t think they wanted that life for us. Ironically, I think I work just as hard today, and so does my sister. We chose a different path, but we still have that same work ethic. We still have those peak stress moments, and we still have that roller coaster lifestyle. So it’s just the way life evolved, and I don’t dislike it. I actually really find it very thrilling.
Luke: I always find it interesting. I’ve interviewed many people on this channel that are the next generation of an immigrant. And the almost-echo of that immigrant struggle and the work ethic that their parents had, sort of lives on through them, and they then take it to a whole other level as a result of that. Do you find that is something that you can then pass on to your kids? Or is that something that you think because you lived with those ups and downs and that, you know, the fear that your dad was dealing with, at times that it’s hard to reproduce going forward?
KC: That is a magic question. Right. I find with my own kids, of course, we want great things for them. They emulate us really well. And it’s as simple as, you know, when I hear my 15-year-old shouting in the house, I can hear my own voice. Like he’s saying those phrases that I would say. And you’re like, ‘Oh, s**t. He learned that from me.’ So they are watching. Sometimes it feels like they’re not listening, or they want to defy you, but they are absorbing a lot of information just by watching you.
And so, I think they will work hard. I see that in their schoolwork. You know, they’re self-motivated, they do their thing. They’re all excellent in what they apply themselves to do. So, I’m not worried about them. I think they’ll be just fine. And we’ve given them the tools to be successful. But we do have a tendency to spoil them a bit. So, certain things I wanted when I was young that we couldn’t afford, I’m very quick to just enable them. And that may be good or bad. I mean, I don’t think there’s any right or wrong answer. It makes me feel good that I get to provide these things to them, but am I turning them into these entitled children? It’s an age-old question.
Luke: Yeah, you know. No, it is. My dad grew up with nothing. He was the first-generation entrepreneur. My mom was an immigrant from South Africa who had nothing. And they literally were below the poverty line, started a business in the seventies, and then, you know, we’ve been very fortunate that business took off and did very well. And my dad has the exact same situation as you, where on one hand he understands the importance of hard work and struggle and everything like that. And I absolutely have emulated what I’ve seen, but I’ve grown up in a very privileged lifestyle because I was born in the mid to late eighties. And by then the business was relatively successful. We still had some big ups and downs and, you know, almost lost everything a couple times, but generally was pretty stable.
And my dad’s sort of philosophy on it was he was robbed of his own childhood so much that he can’t help but, you know, he wanted to spoil us as kids. Because that was almost his entire purpose. And so, it is a very complex decision or, you know, philosophy to sort of craft. Where do you think you find that balance of like, you know, the spoiling or the, you know, you showing your love to your kids and teaching them those difficult lessons that maybe you learned firsthand out of necessity, but you may have to almost create for them to some degree?
KC: I’m in two minds about it really. And I’ve gone through my own evolution about this. My first job, I was working minimum wage. I started from the bottom. I worked my way up. It took a long, long time to get to where we are today. And I thought, you know, I learned some hard lessons. Since 19 years old, I’ve been on my own financially. So, I had to borrow money, I had to pay it back. I had to do all kinds of crazy things. But these are life lessons. Then you learn how to manage your personal finances. You learn how to be creative. You learn how to navigate through life.
And I thought, my kids really need to learn all of this stuff. I need to harden them up. And so, I told them from a very young age, I said, when you go to university, you’re on your own. Okay. You better start saving because you’re going to go on student loans and you’re going to pay your way through. And I did this, and it built character and blah, blah, blah.
Then I go and do this executive education course at Harvard one day, and I come back home, I tell the kids, I’m like, ‘Oh, this is the most amazing thing I ever did. And you guys should really think about leaving Canada for school. You can go to Harvard, you know?’ And my kid looks at me, he’s like, ‘What do you mean you can go to Harvard? I can’t afford that.’ I said, ‘Whoa, wait a second. If you get into Harvard, I will pay for it.’ Right? And it just triggered a whole new thought process where I was maybe shortchanging them by setting certain boundaries and restrictions around them.
And instead, you know, maybe I can give them a launch pad, and they can be even greater than I could have ever imagined. And their bar of success is going to be so much higher than if they start from the bottom. So I really started rethinking that philosophy and, okay, now how do we provide for them without spoiling them so that they still appreciate it, but I want to give them a launch that’s more elevated than where we had to start from.
Luke: Yeah. No, that’s a wonderful philosophy. My uncle once said to me, you know, you shouldn’t try to reproduce the exact life your dad lived. He took it from here to here. You need to be focused on how do you take it from here to here.
KC: Or not. Yeah. I mean, if that’s not their interest.
Luke: For sure. That’s fair.
KC: The other thing I firmly believe in, regardless of money and success, you have to do what you’re passionate about.
Luke: Yeah.
KC: If they choose a career path that doesn’t make them want to jump out of bed every morning, it’s not the right path. Because most days I get up, it doesn’t feel like work. I really enjoy what I do. My wife looks at me like, how do you do this? Like, you haven’t barely slept, and you just jump out of bed, and you go to work with a smile on your face.
Luke: Hmm.
KC: Because it’s not work.
Luke: So to that point, back to the founding of Clifton Blake. How did you find that purpose? You know, I agree with you wholeheartedly. But I think some people are, I don’t want to say lucky but are lucky with the fact that they find that passion early on. And some people spend decades looking for it. How did you find your passion?
KC: So, like I said, I always really enjoyed business. I always enjoyed the concept of real estate. I didn’t know anything about commercial real estate when I was younger. I really learned, I got a huge exposé when I went to the MBA school at Schulich, and they had a specific commercial real estate program. So that was really eye-opening for me. But I already had a general interest in the field. So, I’m lucky in the sense that I had the confidence to stand up to my parents and say, I know we were talking about medicine, but I gave it a legitimate try, and it’s not my interest. I’m going to switch gears here. And for a lot of people in early twenties, that’s not an easy thing to do. So, there’s a bit of luck in there.
Luke: But it clicked immediately. Like once you tried it, you were pretty much—
KC: It was horrible. I made no money for years. I went straight into entrepreneurship. I had no salary. I got married very young. We bought a house. I had to pay the bills. She wasn’t really making that much money. And every month was a struggle. In 2007, I remember coming home one day, I was like, ‘S**t, I don’t know how I’m gonna pay the mortgage next month.’ And I go to my wife, ‘I think I have to get a job. Like, I don’t really want to, but I think I have to.’ And so, I started applying for jobs, and I got a call from [real estate firm] Morguard one day. They said, ‘We saw your application. I’d like you to come in for an interview.’ I was like, great, thank God.
And they gave me the job, then they pulled it away a week later. It’s just like toying with your emotions, right? And I’m like ‘Sh*t, sh*t, sh*t. What am I going to do?’ And just continued to grind. And then a month later, they called me back. They said, ‘OK, we’re ready now. You still want the job?’ Yes. Yes. I still want the job.
And I skipped a part of this story where before this, we were acquiring those properties. I ended up getting my real estate licence and my mortgage broker licence really as a tool to internalize those commissions that we were paying outside. And so that’s how I was surviving in those early years. And after I accepted the job at Morguard, I had four deals I was working on that closed, and I got all this commission money, and at the end of the year, it was a bit of a surprise. I worked hard for it. It wasn’t like it was a lottery ticket.
Luke: And that was 2007, so just before …
KC: That was December 2007. I had the biggest commission year of my life at that point. After all that struggle that I described. So, I just took all that, I paid off my debts, and I worked at that job really hard. And it was a great experience, although I wasn’t excited about it because I was chained to a desk and, you know, income wasn’t great, but I got a lot of experience.
So, I got to see every asset class across the country, some stuff in the US. I worked on their IPO. I worked on so many things, development income. I worked for the valuations group. I built crazy models that they used for a decade later. I worked on my CFA at my desk. I advanced a lot of other education at my desk. So, it was really cool. I went to every networking event that I could get into in commercial real estate. So, I really built my network there. And then late 2009, my wife was pregnant with our first child, and the thought process was, I need a bigger paycheque. So, I started looking for a new job, and I got offered a position at Brookfield, which was really nice, really prestigious company. And the pay was great. And Morguard wasn’t willing to match it, so I had to move on. So, I go over to Brookfield. Great company. Super boring job.
Luke: What were you doing at Brookfield?
KC: Similar position, senior analyst. I worked closely with their development group. I was in Brookfield Properties in the asset management group for downtown Toronto and Ottawa office portfolio. And I wasn’t happy. A friend of mine, he kind of knew my situation and what was going on, and they had just raised a private debt fund. So, he tapped my shoulder that summer and he said, ‘Hey, why don’t you come join us? We’re doing this thing in solar right now. Nobody’s really paying attention to the mortgage book, and you can just run that.’ And I said, ‘Sure, let’s go.’
So, I quit my job with little due diligence on the opportunity, jumped over there, and within three months, there was nothing left. And they let me go.
Luke: Wow.
KC: Yeah, it was like, ‘Whoa, I wasn’t expecting that.’ It was the first time in my life I’d been let go. I never anticipated it. I was really disgruntled, and you go through this whole mix of emotions and anger and what happened and how did I go off track. But it was one of the best things that happened. Because what happened a couple months later was, I dusted off Clifton Blake and got back at it. And that would’ve never happened if I stayed there.
Luke: And what was the new vision for Clifton Blake at that time?
KC: There was no vision. Do deals, make money.
Luke: And was that on, you know, the mortgage side? Was that buying and selling or what?
KC: Just because of the circumstance, I had spent three months there originating opportunities for private mortgage in commercial real estate. So, I had some prospects in my pipeline that were just not dealt with. At the time, I had presented 48 opportunities to those guys. We closed on one. So, I had quite a bit of pipeline in my back pocket.
And the easy thing to do immediately with a low barrier to entry was just to start brokering this stuff out. I had my licence, so I just got to work and started brokering the loans that I had originated to other lenders, taking a commission. So, this was early 2011. By November 2011, I hired my first agent, and he subsequently stayed with me for about a decade.
Luke: Wow.
KC: Yeah. He was a specialist in hotel finance, really niche stuff, and he was so successful. It was great. And then by 2012, we ramped it up to about, I want to say, 15 to 18 agents in the business.
Luke: As mortgage brokers?
KC: Yep. I still wasn’t really enjoying this business. Like, I was doing it, I was scaling it, but it wasn’t fun. And what I really thought would be a better position in the marketplace was to be a lender. So, in 2012, I made a business plan to become an asset manager, a fund manager, and start raising capital.
And in that same moment, I crossed paths with Wes Miles. He was trying to raise a private equity fund to reposition commercial real estate, and we quickly decided to do this together. It was an amazing partnership that came together in lightning speed.
Luke: Wow.
KC: Right. And then we came up with this genius idea: we’ll do a hybrid fund. We’ll do debt and equity in one fund. Investors will get a coupon; they’ll get a high yield. Nobody’s doing this. We’re geniuses. So, we go to market with this concept—and we fall flat on our ass. We raised zero capital.
Luke: Just nobody was interested?
KC: Nobody’s interested. It’s a blind pool. You guys are unproven. ‘I don’t like this weird concept of yours, never seen it before.’ So, we took that feedback and we recalibrated, and then we ended up having two pure-play funds—an equity fund that was repositioning real estate, and a debt fund that was doing bridge financing on other assets. And that was early 2013. That would’ve been our first launch.
Luke: So, was that your first major success then, those two pure play funds?
KC: We still didn’t make much money in 2013. So, it depends how you define success.
Luke: But you at least got investors.
KC: We got investors. Our first fund, we posted a 19.5 per cent IRR.
Luke: Great. Wow.
KC: So, it was really good.
Luke: And was that on the equity?
KC: That was on the equity fund, yeah.
Luke: Wow.
KC: So, a couple of Tim Hortons stores, a Bell store.
Luke: Like private equity returns, basically.
KC: It was private equity. It was really good. The investors, although the IRR was high, we actually sent them a cheque back in six months. Like a partial distribution. And one guy got mad at us, and that really perplexed us. ‘What do you mean? We’re giving you a return.’ He’s like, ‘Yeah, but I gave you money to keep it invested. I don’t want it back.’ That was unheard of to Wes and I, right? Like, who doesn’t want cash? Well, this is a new demographic we’ve never dealt with before.
Luke: Sure.
KC: And it put us on the map. The first fund was six investors, five million bucks. The second fund was 48 investors and 20 million. So, then they called their friends, they said, ‘Guys, you should look at this,’ and it started to scale.
Luke: Cool.
KC: So those were really exciting years. High risk. As an organization, we were still paycheque to paycheque. Anything could have gone wrong, and we could have gone bust. I don’t think a lot of people from the outside looking in really have an appreciation for that, unless you’re in that hot seat and you’ve got to make payroll and rent and all that stuff. You don’t really have a recurring revenue stream. You’re still pretty transactional and margins are thin.
The partners are doing a lot of work themselves. We just couldn’t afford a lot of staff. So those were, I mean, still long days, but that was different. That was a different era.
Luke: So, when did you start to really enjoy it?
KC: I didn’t say I didn’t enjoy it.
Luke: You said the first part, you didn’t enjoy it.
KC: I said it was tough.
Luke: Okay, yeah. But you said when you were doing the mortgage brokering business, you said you still weren’t loving that.
KC: No, I didn’t.
Luke: When you started to do the pure play funds, was that sort of when you …
KC: Managing agents is really difficult. Out of 18 agents, I may have had 12 of them doing exclusively single-family residential mortgages, because they’re easy. It’s cookie-cutter. It can pay the bills fast. So, I got them to a point where I was netting like a hundred grand a year, and that was enough to give me a little bit of stability. But managing agents is not easy.
And so as soon as we saw a little bit of success in asset management, I actually folded the entire brokerage business. And that was a tough decision at the time, to just sacrifice an income stream for the greater good. But there was reputational risk there, and it was a big distraction as a manager. We really needed to focus on the asset management business a hundred percent.
Luke: Sure. Very cool.
KC: But it was fun times in the sense that it’s entrepreneurial, you know? It’s an exciting way to live life. Every day is different. You’re always meeting new people. You’re kind of flying under the radar. Like, nowadays, a lot of people know who we are. We’ve got TV ads and all this stuff, so we’re very visible. And so, you’ve got to be a little bit careful about your public presence.
But when you’re three or five guys in an office, it’s quite a different lifestyle.
Luke: Right. Sure. And so, what is your offering now? Like, what are your key focuses as a business today?
KC: So that private equity fund that we started with in 2013, we started with repositioning existing assets. By the third fund, we started our first ground-up development. That’s on College Street. It’s a mixed-use building, seven stories, about 110 suites, and there’s a Loblaws on grade. It’s a beautiful project. We worked on it for years. We built an entire strategy around that type of product. So, it’s urban, it’s infill, it’s very livable neighbourhood. You can live, work, and play there. You’re an easy commute to the core. We really like the mixed-use concept. If you look at all of our projects today, there’s retail on the ground floor, and these are AAA tenants. There are banks, grocery stores, pharmacies, long-term leases with escalations. That gives you a lot of staying power.
In COVID, for example, we had 98 per cent rent collection; they all stayed open. That was really a stress test on that thesis. And then that’s supported by brand new multi-family above. So, purpose-built rental apartments. They’re not rent-controlled when they’re new builds. It’s a high-quality product. It’s not luxury, but it’s good quality. We really focus on building the right community.
And then the way we operate this business is those assets get built inside a development fund, like a limited partnership. And then when they’re stabilized and income-producing, we roll it into a private REIT where investors have the option; they can stay. If they choose to stay, it’s a really tax-efficient process, and then they can get monthly coupons thereafter.
Our flagship fund really is that Clifton Blake Private REIT, where we’re scaling asset by asset.
Luke: And how does a person get their capital returned out of a private REIT, comparatively to like a GP/LP structure? What’s the difference?
KC: In terms of an exit?
Luke: Yeah. So, you get a coupon, but is there a fixed term like there would be with a closed-end fund?
KC: No. It’s open-ended.
Luke: Open-ended?
KC: Yep. There’s a redemption feature, and you can send your written notice and ask for your capital back.
Luke: Oh, very cool.
KC: It doesn’t happen very often, but I think I know where you’re going with this.
Luke: Yeah. Well, we talked briefly before, and so there was a lot of gating going on in the Canadian real estate open-ended fund market today.
KC: Yeah.
Luke: First of all, for people that are maybe not familiar—what does that mean when there’s gating?
KC: So, first of all, it is a very necessary feature for an open-ended fund to protect the interests of the investors that wish to stay in the fund long term. Real estate, I firmly believe, should be a long-term investment. Real estate ownership—you’re really going to realize appreciation in your value over time. Buildings are not something to be traded on a short-term basis. But stocks are very easily tradable on a short-term basis.
And then you get into a private environment where people feel there are certain advantages to investing in a private fund versus public. So, you get into a private vehicle, ‘Well, I’m enjoying it for a period of time, and now I’ve changed my mind. I don’t want this anymore. I want to call my capital back.’
How does that capital get replaced? Where does it come from? The asset manager can find new equity, raise you out. They could increase leverage on the portfolio, take some debt. Or they have to sell an asset. So, if you can’t raise equity and you can’t raise debt, and an asset doesn’t sell overnight, where do you generate the cash to pay that investor who wants to exit? You can’t.
And so that’s when you have to, there’s a feature in most fund documents called the ‘gating,’ where the fund manager will say, ‘We cannot fulfill any redemptions right now until we generate new cash,’ using one of those mechanisms.
Luke: Hmm. And so there has now been a ripple effect of gating that seems to have happened in the market, where it’s at least in three or four big notable funds. What do you think the reason is for that? I mean, you explained semantically why it happens, but why has there been this big rippling of gating in the industry?
KC: So, ultimately, it’s investor sentiment, but I would look further into the category of investor that’s causing this type of behaviour. If you look at some of these large funds that are experiencing these gatings, they raised a lot of money in wealth management, which we’ll call retail money. The retail money is fickle. When you see bad headlines, it’s very reactionary.
This capital is managed by an advisor, a wealth manager. That person is hired as a fiduciary to protect their interests. That person is naturally going to err on the side of caution. They never want to be the one that puts you into a fund that caused you to have a loss. So they’re going to react and say, ‘You should pull your money out. It’s the prudent thing to do.’
In comparison to the significantly wealthy families that have invested in our product that are going long on real estate. They’re talking not just about two or five years; they’re talking about 10, 15 years. Or they’re talking about, ‘I’m going to give these investments to my kids. It’s going into our portfolio for generational wealth.’
So, it’s really sticky money with the families that we work with. We don’t see a lot of redemptions. It’s very rare. But in the retail market, especially where the asset manager doesn’t have direct access to the investor. So, if the investor is having some concerns, there’s no opportunity for a direct dialogue: ‘Let me explain to you what’s actually happening here and how we’re different than our competitors, or whatever the like.’
Luke: Sure. Thanks for the explanation. So that’s your real estate REIT investment sleeve. What are your other sleeves within your business?
KC: In parallel to that, we built a private lending business. So, as I described, in 2012–13, we had this business plan to become a lender. We started originally with mortgage syndications.
So, just for the audience, let’s say someone requires a $2 million loan. We don’t have a fund to provide that $2 million loan, but what I could do is pass the hat around several high-net-worth individuals and assemble a hundred thousand, two hundred thousand, five hundred thousand from multiple parties and package it together as one loan. That’s a loan syndication.
That has been a business that’s gone on for a long time. A lot of people enjoy that business. It gives you a nice high yield. But there were some funny things going on at that time. If you remember the fortresses of raising money from mom-and-pop investors, and as an insider in the industry, we could see that something odd was happening there. Something just didn’t add up, and I couldn’t reconcile what was going on.
For years I thought, this is a disaster waiting to happen. There’s going to be a big headline one day that just trash talks syndicated mortgages, and then we’re going to be out of business. The better version of that is to have a fund. So, let’s pivot from syndications to a fund, which we launched in 2015. I think we started at $10 million, today we’re about $300 [million], and that’s just been pure organic growth.
So, raising capital from individual high-net-worth investors, put them in the fund, and don’t lose people any money. Stay really disciplined on the investment philosophy. The underwriting is very tight. When we’re looking at new loan applications, we’re looking at borrowers with a track experience, they’ve got financial wherewithal to execute their project, the loan-to-values are appropriate, the assets themselves that are in a liquid market, so if they do end up in a default scenario, I can turn around in short order and liquidate that asset and recover our principal and interest. We’ve been able to maintain a pretty solid 10-year track record on that business, and I’m very proud about that. Now it’s really about looking at ways to scale that.
Luke: Very cool. You also, in the past year, combined both Wilkinson Construction and Metropolitan Commercial Realty into Clifton Blake. Can you speak a bit about how that came together and what that means for your business?
KC: Yeah. So, both of those organizations, they gave us huge advantage in our execution capability. On the construction side, my partner Wes, who’s closer to the action, I’ll tell you, every single project since 2016, at some point, he ends up just getting on site and taking control.
We hire these third-party construction managers. These are big brand names. They come with a good reputation, but they just have a different way of doing business. They’re not so motivated on speed of execution, which is extremely important to us. There’s a bit of complacency that goes on. They really act as brokers for trades these days, rather than true project managers, and it’s been really frustrating for us. These buildings are not cheap to put up, and we put our heart and soul into these things, and it can get eroded so quickly.
I’ve been asking him for years, ‘Why can’t we internalize construction management? This is the right thing to do.’ And he’ll tell me how difficult that is and whatnot.
Our current project that’s under construction is going to deliver in Q1 2026. It’s an eight-story building in the Junction. It was being built by a company called Wilkinson Construction, a 50-year-old company, second-generation, and we have a mutual friend who sat us in a room one day last year, or I guess it’s about a year and a half now, and he says, ‘You guys should really consider a merger.’
There was a succession taking place within Wilkinson itself. We were trying to scale up. There were some headwinds in the industry. There were a lot of reasons why it made sense on both sides. So, we made that union, and I’m really happy for it, because now we have direct visibility into the construction management. We’re retooling the entire culture of that business on speed of execution and acting like you’re the owner of the business. We share the same P&L now. So, every dollar you save on construction is going right to the bottom line, and you’re going to get bonused on that, versus passing it through as a change order or whatever the case you would normally do as a CM.
And time matters. Right? If we can crush schedule, even if the hard cost is going to be the same, but if we can do it faster, that project is going to save on interest, it’s going to accelerate its IRR, and we all do better together. So now they’re extremely motivated. You can see it’s a shift in the way they used to think, but they appreciate it. It’s much better.
Luke: Yeah, it makes sense. It’s a natural progression to get that extra transparency and control, so I completely get it.
KC: And there’s very few of our competitors that have this feature in-house. So, it makes us more competitive from that perspective.
The Metropolitan opportunity is slightly different, and a lot of people scratch their heads and say, ‘How does this make sense? Why did you bring a brokerage in-house? Aren’t you pissing off the big boys?’
We have a bit of benefit of some retrospect here. In the last 13 years, we have our relationships in the brokerage industry, but it hasn’t translated into a ton of loyalty. I’m not trying to be negative to the brokerage community out there, but the fact of the matter is we’re still bidding, just like everybody else, on a listed property. So, there’s no advantage to staying out of the game.
Metropolitan was a company where we actually did a lot of business with, and we acquired a lot of sites together. There’s been this ongoing relationship for about a decade. Then, you know, we got into a room together as well and started talking about maybe combining into one company.
I started to think, wow, this can be a really interesting feature for the business and accelerate our sales and marketing engine. And then, at the scale we are today, we’re over a billion in assets now. The REIT by itself will be about a billion and a half in the next three years with our pipeline.
Luke: Wow. Congratulations.
KC: Thank you. I still got a lot of work to do. We started thinking about how do we continue to scale this business, and at what point do we break out of Toronto? Because right now, we’re a very Toronto-centric business. But it’s not an easy proposition to say, ‘Let’s go develop in a different city.’ We don’t have all this capability in another local market.
But the brokerage is something that we can weaponize in that way. Where I can expand Metropolitan into Vancouver, and Calgary, or Dallas, or pick a city that we want to be in, with a lot less risk. There’s no capital investment into hard assets, but I can staff up an office and get boots on the ground. Now I’ve got market intelligence. Now I’ve got deal flow. Now we can learn that area and then we can decide, do I want to be a lender, do I want to be an owner, do I want to develop?
Luke: Very interesting. So really, for both businesses, first of all it’s very interesting that you worked with them previously. So it gave you almost that familiarity of their capabilities and whatnot, which is a great way, I mean we work in private equity, being able to work with a business before you acquire them or merge with them, is a huge advantage, to sort of understand them and their ethos and how successful they can be.
But also, it’s very interesting that these are two aspects of vertical integration. One is obviously giving you transparency on the construction side. The other one, is you just said, it’s giving you that outward-facing new business development lens, which maybe you wouldn’t have had otherwise. So, when you put it that way, very, very strategic on both of them.
KC: Yeah.
Luke: We’re running short on time here, and there’s a couple things I wanted to get to before we’re done. Your parents must be very proud of you.
KC: I hope so. I’ve tried really hard to impress them.
Luke: Yeah. No, I mean, going from not following through on medical school that they wanted to, and now having one and a half billion in a pipeline, I mean, that’s just insane. My hat’s off to you.
But you now work with your father and your mother. How do you find that dynamic? What’s some advice you could give other people, as far as what it’s like to work with family?
KC: We really need more time.
Luke: Fair. Is there a single lesson you would stress that’s made that possible and successful?
KC: Family is really important. My dad’s been in the office now for 12 years, maybe 13. And the way that happened was, he was in a moment in his career—after the Harvey’s business, he went back to accounting and was consulting for a while, and there was a period where he wasn’t really doing much.
I was just getting started and things were crazy. I couldn’t really afford staff and was trying to do a lot myself. I was falling behind on tax returns. CRA’s calling me like, ‘Where’s your HST return?’ I’m like, ‘Dad, I’ve got an empty office here. Why don’t you just come plug in your laptop and help me get caught up on this accounting stuff?’
And that was it. It was just a help, and he never left. But not in a bad way. What happened was we raised that first fund, and then I had four small properties that needed accounting work, and he was there, and he wasn’t doing anything. So, he said, ‘Don’t worry, I’ll take care of it.’
Then six months later, we buy four more properties, and he’s like, ‘Don’t worry, I got this. I’ll take care of it.’ You know, and we’re managing like 50 investor accounts now and all this stuff, and he’s working full-time. And he can’t leave, now he’s critical.
So, the interesting story about family, right? I’d say we were pretty tight growing up. There was a moment through my twenties where we didn’t see eye-to-eye on career, then we didn’t see eye-to-eye on other family matters. We ended up not talking for a while.
And to go from not talking for a while to seeing each other every day for over a decade is quite remarkable. So, there’s a lot to unpack there. We need another session.
Luke: Yeah. Absolutely. But now obviously you’re very close. I mean, if you’re seeing each other every day.
KC: Yeah.
Luke: That’s incredible. Last question, and again, this is a very expansive topic, but if you wanted to highlight one key thing that’s on the horizon for you and your team, what is next for Clifton Blake?
KC: So, I’m the guy who’s always trying to grow the business. We did not talk about our advisory board, but they’ve been pretty critical in putting some guardrails on and making sure that we don’t make mistakes, making sure that we don’t get out of hand in our ambitions.
That was actually one of our key success factors, was recruiting that advisory board early on. We were very successful in getting the former CEO of Cadillac Fairview as our chairman of the board, Peter Sharpe. The other three gentlemen, Patrick Brigham, Byron Messier, and Sid Zucker, they’ve been with us since that first fund that we raised.
There were moments early in this journey where I wanted to scale. I tied up a big building one day, and they completely gave me the lashes in the boardroom. ‘You gotta drop that now.’ I’m like, ‘But it’s a great opportunity, and we can raise the money.’ And they’re like, ‘I know we can raise it. I know it’s good. You’re not ready. Cancel the deal.’
Nowadays, we have a good handle on the business. There’s really very little need for them to give us those sort of lessons, because it’s in our DNA now as an organization. The conservative underwriting comes from a lot of coaching they gave us early on. That guidance was really critical.
So, I still want to scale the business, my partners equally so, but we have to do it responsibly.
Luke: But growth is on the horizon?
KC: Growth is definitely on the horizon. We’re on a public forum here, but we are looking at an acquisition of another company now as a way to grow. They have some interesting assets. They have an interesting investor pool.
So, in a market like this, where new investors are a bit shy about jumping in with an asset manager that they don’t know, it’s a different way to grow. Our families, the families that support us, are still all in. They’re not pulling out. In fact, we’re going to do another raise shortly for the next round of development assets.
But as we talked about, the retail money is completely on ice. And that’s where our competitors, they really scaled in that arena. The guys that are gated right now, they raised billions of dollars in that channel. So, the capital that’s required to do the things that we want to do, it’s really two sides of the business there.
Luke: Yeah. But that represents an opportunity.
KC: Luke, there’s huge opportunity in the market right now. A lot of people have their blinders on. If you just think back to GFC 2008, when you thought the sky was falling, you could have bought almost anything, and you would’ve made a great investment decision just by buying at the bottom.
There’s a lot of land sites right now in the market. There’s a ton of receivership out there, you see it in the headlines. And for a well-located piece of real estate in the city of Toronto, it’s not going out of style.
You have to be a bit bold and say, ‘I’m going to acquire this,’ and yeah, maybe it’ll go down a little bit more. But I assure you, in five or 10 years from now, it’s going to be extremely valuable real estate. So, if you’re in the business, you have to do it with a conviction. We really believe in what we’re doing, and we just try to do it responsibly.
Luke: Awesome. Sounds like some very exciting stuff. I can’t wait to see what’s next.
KC: I’m very excited.
Luke: Thank you so much for your time, KC. Really appreciate it.
KC: Thank you for having me, Luke. I really appreciate this.
Luke: Absolutely.
Thank you so much for watching. Please like and subscribe. Alright, take care.
Disclaimer: This podcast is sponsored by BMO Private Wealth. The information provided in this podcast is for informational purposes only and does not constitute financial, investment, or professional advice. The views expressed by the host and guests are their own and do not necessarily reflect the opinions of any organization or company. Always consult with a qualified financial advisor or professional before making any investment decisions.
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