Canadian Firms on the Prowl

Land developers and oil drillers lead a move south

The Silver Triangle in downtown Denver is a 20-square-block collection of parking lots, seedy hotels and aging, rundown stores. But a few months ago, the area started blossoming with bright green and white signs reading: ACQUIRED FOR CLIENTS. KNOWLTON REALTY, LTD.

Knowlton is a Calgary, Alta., real estate firm that over the past year bought up $70 million worth of Triangle property as part of the major new influx of Canadian investment into the U.S.

Canadian firms have long done business in the U.S. The Bank of Montreal helped start the Chicago Clearing House in the 19th century, and companies like Alcan Aluminium, Seagram and Massey-Ferguson have been selling south of their border for decades. But the big push started in the 1970s. Over the past decade, Canadian entrepreneurs have bought U.S. newspapers, drugstores, cable television franchises, office towers and oil-drilling leases. Just last month Hiram Walker-Consumers Home Ltd. of Toronto paid more than $600 million for about 60% of Denver Wildcatter Marvin Davis' oil empire, including wells in Wyoming, Oklahoma, Louisiana and Texas that daily produce 4,000 bbl. of crude and 40 million cu. ft. of natural gas.

Canadian direct investment in the U.S. has risen from an estimated $3.3 billion in 1970 to more than $10 billion today. This is still only about one-quarter of America's direct investment in its northern neighbor. But Canada is now challenging Britain for second place among foreign investors in the U.S. The Netherlands remains by far the biggest overall.

The most visible Canadian investors are real estate companies. Toronto's Olympia & York Developments Ltd. owns 11 million sq. ft. of prime office space in Manhattan and recently won a competition to develop 6 million sq. ft. more in New York's Battery Park City. Another Toronto company, Cadillac Fairview, is now the largest single developer of luxury condominiums in the Miami area, having close to $300 million worth of housing under construction.

Hard on the heels of the real estate developers are Canadian oil and gas companies. These firms have been so discouraged by their government's policy of heavy taxation and price controls that they find the U.S. an attractive alternative market. This year Alberta-based oil and gas hunters will spend as much as $4 billion searching for energy in the U.S., vs. $1.5 billion to $2 billion spent at home. The International Association of Drilling Contractors in Houston estimates that by late spring there may be as many as 250 Canadian drilling rigs operating in the U.S. This would be more than a third of that country's supply of rigs. Already, about 50 Canadian energy-related firms have opened offices in the Denver area, the U.S.'s new oil and gas boomtown.

Canadian Prime Minister Pierre Elliott Trudeau has long pursued a strongly nationalist policy that tried to lower the proportion of foreign ownership of sensitive economic areas. But, so far, the American reaction to the Canadian invasion has been warm. In the mile-square beachfront community of Surfside, Fla., near affluent Bal Harbour, Canadian businessmen have almost finished two high-rise condominiums, valued at $46 million. Next month the town will hold its annual "Salute to Canada" week. qed

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