On a recent Monday evening, an elegant party took place in the City Club of Dallas, on the top floor of a 50-story office building downtown. The host was a Canadian real estate development company known as Cadillac-Fairview, and it was, in fact, something of a coming out.
Cadillac -Fairview's board had never held a meeting outside Canada, and this lavish buffet with cut flowers was an opportunity to introduce the 24 directors to the local establishment. But the establishment here is already familiar with Cadillac-Fairview and many of its Canadian brethren, for the Canadians are rapidly changing the face of Dallas -- and many other American cities as well.
Huge Canadian real estate firms, whose assets dwarf most U.S. companies, have flocked to the United States in recent years and are now involved in projects throughout the country. The Commerce Department estimates Canadian real estate investment in the United States in 1979 was about $1.8 billion, which by some measurements represents more than half of the Canadian activity in this country, and much has happened since then.
This Canadian invasion of the U.S. real estate market is big and getting bigger, and as President Reagan travels to Ottawa for talks with Canadian Prime Minister Pierre Elliott Trudeau about U.S. investment north of the border, this is one area in which the Canadians seem to hold a strong hand.
Major projects are under way in Baltimore, Boston, Minneapolis, Seattle, Denver, Los Angeles, San Diego, Albuquerque, Austin and elsewhere. Canadians also have sizable holdings in New York, Florida and Arizona, including the Arizona Biltmore Hotel in Phoenix.
Increasingly, the Canadians are focusing attention on the Sun Belt, and the center of the action is here in Dallas, where the companies are not only building buildings but also establishing regional or American headquarters. "Virtually every one of the major Canadian companies is active here," said Michael V. Prentiss, president of C-F Southern Region Inc., Cadillac-Fairview's subsidiary here.
The main reason is the business climate. "When you're dealing in the Northeast, the political situation is such that they've made it more difficult for developers to get on with the job of building the building." said Kenneth Field, president of Bramalea Ltd. of Toronto.
In contest, the Sun Belt is wide open. "Historically the main businesses here have been oil, agriculture and land, all of which involve making deals. People here know how to make deals," said Michael Young, a Canadian now living in Dallas who has helped assemble parcels of land for Canadian investors. "It's a lot different here than in Chicago or Buffalo, where there aren't enough food deals to go around. You can make a deal here with anyone from Clint Murchison to Bunker Hunt. They're all approachable."
Young helped cut the deal with the Murchison family for four city blocks surrounding the City Club's building that will be developed by Bramalea. The company plans to build two 70-story office towers (the tallest in Dallas), a hotel and a major parking structure, at a cost of about $400 million.
What is especially interesting about the projects in the Sun Belt is that the Canadians are attempting to create urban centers in what have typically been sprawling, unfocused cities. The Canadian companies are putting up office towers, retail shops, condominiums and hotels and within easy access of other downtown facilities, and they are potentially changing the way the people of these cities will live.
In Houston, Cadillac-Fairview, in partnership with Texas Eastern Co., is developing roughly 30 square blocks on the edge of the downtown. It is the largest development project in any American city and will include 3 million square feet of office space, inlcuding Gulf Oil's southern headquarters. Other giant projects are under way in Denver.
In Dallas, Olympia and York is building a new office tower for Arco and another for itself, while Campeau Texas Corp, has acquired 22 acres just north of downtown for condominiums, offices and retail shopping. Canadian companies also have acquired other tracts downtown, and along the freeway that runs from the city to the Dallas-Ft. Worth regional airport. Cadillac-Fairview, for example, owns hundreds of acres along the freeway, including six major corners, Young said. Another firm, Wycliffe International, owns more than 1,000 acres in the same general area.
One Canadian banker in Dallas estimated that most of the big commercial projects in Dallas are now Canadian.
"I don't think that's true," said Cadillac-Fairview's Prentiss. "But the Canadians are involved in a lot of the gutsier projects that get a lot of publicity."
But what is risky for many U.S. companies is second nature to Canadian ones because of their size and experience. "Local people have had trouble understanding the scale on which these companies want to operate," Young said.
Cadillac-Fairview's assets are roughly $2.5 billion, making it the largest publicly held real estate development firm in North Amerca. Olympia and York, a privately held Canadian firm that has developments in New York, Dallas and other cities, rivals Cadillac-Fairview. Nu-West Group Ltd. of Calgary, an energy and real estate firm, has assets of about $2 billion; Campeau's are about $1 billion and Bramalea's about $700 million. $2
"They've got a jillion dollars in cash," said one Dallas banker.
Prentiss estimated that Cadillac-Fairview's cash flow this year will be about $75 million-$80. Bramalea's will be about $24 million.
As a result, projects of a million square feet or more are the norm to the Canadians. By way of contrast, the average new office building in Washington is roughly 250,000 square feet.
"They've very, very careful, very conservative, very well-managed companies," said a Houston banker familiar with the Canadians' activities.
Canadian real estate firms followed Canadian tourists south, first to Florida, later to California, and now increasingly throughout the United States. The impetus was a combination of the political and economic climates in Canada. Socialism, separatism and the increasing threat of political disruption frightened some of the Canadian companies and prompted them to look outside Canada for investment. In addition, inflation enlarged their Canadian assets while the Canadian economy stagnated. The firms simply outgrew Canada. "When Cadillac-Fairview's put up a 50- or 60-story office building in every city in Canada, they have to come to the United States," said a Canadian banker now working in Texas.
The first wave came in the early 1970s, with the latest push coming in the last two to three years. Campeau opened its Dallas office in November, after moving into Houston about 18 months ago. Cadillac-Fairview came to the United States in 1978 and opened its Southern Region office in late 1979. Bramalea soon will open a U.S. headquarters in Dallas.
The companies employ many Americans, but their activity in Dallas is leaving its imprint. Pop and country singer Anne Murray was in Las Vegas recently and asked her audience how many were from Canada. A man near the front held up his hand and she asked what part he was from. "Dallas," he replied.