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5Q: Blake Hutcheson, CEO of Oxford Properties

5Q: Blake Hutcheson, CEO of Oxford Properties

If you ask Blake Hutcheson if real estate played a big role in his life growing up, he'd tell you he practically grew up hanging off front-end loaders, backhoes and bulldozers at construction sites, tagging along with his dad who built a career on fixing roads, homes, cottages and buildings in Huntsville, Ontario.

It's no wonder Hutcheson, chief executive of Oxford Properties Group, quickly discovered he, too, loved to build things.

These days he's especially focused on assembling the right mix when it comes to shopping malls and office towers, which make up a big chunk of Oxford's $27 billion -- and growing -- global real estate assets. In Canada, retail real estate has garnered a lot of attention lately with news that Saks, bought by Hudson's Bay Co for $2.9 billion last year, and Nordstrom will soon be housed under one roof at Toronto's Eaton Centre, owned by rival Cadillac Fairview Corp.

But Oxford, the real estate arm of Ontario Municipal Employees Retirement System (OMERS), has its own arsenal. That includes the high-end Yorkdale mall, which will also house a Nordstrom store, Scarborough Town Shopping Centre and Square One, where chic Quebec-based La Maison Simons will open its first Ontario store. All this has ramped up competition not only among retailers, traditional and online, but also among the mall owners who are battling it out to be the best go-to shopping destination.

What do people want from malls these days?

The best malls are those with the best tenant mixes. They are organic assets — meaning you can constantly change them to adapt to the times and the tastes of the times. If you have a single box it can become functionally obsolete. If you have a single piece of real estate on a main street it can become functionally obsolete.

How have tastes changed?

It’s much more of an experience today than it was when we were growing up in the industry. It’s much more a combination of aesthetics and offerings, and things to do, than just a store. You’re not only going there to buy a product, you’re going for the experience so if you don’t get the food courts right or the parking facility right; if you don’t get a mix of sensational products and household products then people will either shop online because why not.

Tell me about the mix

For example, we were selling electric cars at Yorkdale the other day. There’s Apple. You can walk into Holts and literally get hundreds of the highest end offerings in the world. And you can buy food and groceries and drug store items all in the same corridor. It gets people out of their homes, it becomes part of their social life, their entertainment. When you get the mix right you know the difference. When you get a certain nucleus of tenants that are a draw, then everyone else lines up.

How does Simons fit into that

We’ve watched their family build this great retail offering from scratch. We think the calibre of the people at the top is world class. Peter Simons is a classic example of nice guys finishing first. You can do a deal with him on a handshake. They seem to understand service, they seem to understand their customers.

Is there any new thinking out there in retail real estate?

Of course. I’m not going to reveal them in the public. We’ve got our smartest teams focused on the future of retail innovation. You’ll see us roll out some pretty exciting stuff in the future.

Saks and Nordstrom will be under your rival's roof. How concerned are you?

I think, for the most part, there is room for great retailers on the Canadian platform to raise the standard and keep everyone honest, and create some healthy competition. I don’t see an oversupply at this point. Some of those names are going to Cadillac. Some are going to us.

How do malls compete with e-commerce?

There was a gross overreaction to the potency of dotcom products. The reality is people are creatures of habit. People need socialization. What you really want is a combination of both.

What about the urban versus suburban dynamic?

So much of a success of a mall is demographics. Sometimes in life something gets built at precisely the right place, at precisely the right time in history. Yorkdale is a very good example of that. It seemed north at the time. It became centre ice.

What should we expect then?

The shift is much more urbanization at the expense of suburbanization. We’re seeing the infrastructure in city cores as a real draw for people. It’s overwhelming. It’s happening in the United States, that migration to cities. In Canada. It’s certainly been happening to Europe for a long time.

And your malls are central enough?

Square One is downtown Mississauga. Yorkdale is centre ice for the GTA. Scarborough Town Centre is downtown Scarborough. We've got a city centre mall in Calgary, a city centre mall in Edmonton, Upper Canada mall is right in the middle of the one of the fastest growing regions in North America.

Turning to real estate generally, what was your first defining real estate lesson?

The first thing I'd ever built of size was this courthouse in Huntsville. I realized you could get debt against an asset on the basis of value, as opposed to on the basis of construction costs. My first early lesson on that courthouse was, hey, I can finance out more money than we have in this thing. Before that, my dad used to explain to us the most important thing in business is cash flow—not net profit, but cash flow.

What's the trick to making money in real estate?

The trick is understanding you can make money through multiple cycles. You can take something that is a 'B' and turn it into an A-plus. There's time to develop and times not to develop. There's times to buy, there's time to sell. There's time to hold. If you don't have too much debt you're not liable to get into too much trouble.

Your European portfolio has grown roughly $3 billion over five years. I take it you took your own advice

You can go into the market and say hold on a second, the euro zone is melting down, the leadership of the country is in country so maybe we ought to get in the way of that trend and there have got to be opportunities here.  When everything melted down we got into the market early and everything we've bought over there has appreciated dramatically.

Is your life all real estate, all the time?

We're an active ski family. We have a place in Collingwood. I still play lacrosse for my hometown of Hunstville. I played all my life. I had a hiatus as I built my career, but since I've been 35—so that's 17 years—I’ve still played for Hunstville. Many of my lifetime friends, we still play together. It keeps me grounded, keeps me remembering where my roots are.

Was it fate you got into real estate?

My father, my grandfather, my brother, who is my best friend, we're all in and around the business and have been really lucky. My brother is a very successful developer in Alberta. The difference between him and me is he owns his company. I don't.

*Interview has been edited and condensed