Fresh Profile: Breakwater Investments likes emerging credit managers, partnering with other FOs

Breakwater Investments is the family office for Canada’s McKeil family, created after they sold their 60-year-old marine-transportation business to TorQuest Partners in 2016.

Much of Breakwater’s work reflects the family’s nautical background — it helps run a shipyard business the family still owns, with five locations in Ontario and eastern Canada.

“We’re involved in ensuring that business is operating efficiently, helping out with different growth opportunities, and providing oversight and stewardship,” said Chief Investment Officer Michael Barry. “We would also assist the family with some administrative personal matters. … We’re full service.”

But Breakwater also has an investment side. Barry told Buyouts that while the firm is open to further investments in the marine sector, it has not bitten yet, preferring opportunities in private debt and real estate with low competition.

In the private-debt space, Breakwater looks to commit as an LP into smaller third-party providers.

“The market for transactions above $20 million up into the hundreds of millions is becoming very competitive, so we see the yields and the risk-adjusted returns being lower,” he told Buyouts.

“We’re seeking out opportunities where there’s just a lot less competition.”

Barry said Breakwater tends to invest in more emerging managers than most family offices, looking for transaction sizes of less than $20 million.

“If we can find an asset manager managing about $200 million who knows what they’re doing, we like that,” he added.

For now, Barry said, Breakwater is not interested in going any more direct with credit investments.

“At this time, we don’t have the experience in-house to lead private-debt deals to operating companies effectively,” he told Buyouts.

In real estate, seeking lower competition has meant developing vacant land as opposed to stabilized cash-flowing assets like apartment buildings or industrial buildings.

“That’s an area where we feel there’s a nice barrier to entry and good potential for returns,” he said.

Breakwater has also invested in the U.S., mostly in office buildings in what Barry called “less-loved markets” like Minneapolis and Chicago.

Breakwater Investments is part of a growing family-office scene in Canada, but one Barry said is small and concentrated mostly in Toronto and Montreal.

“We’re all probably a bit behind the United States, but it’s definitely a growing space,” he said.

Barry joined Breakwater in January 2017 after a few years with Deloitte as a vice president and senior associate working in the accounting giant’s capital advisory practice.

Barry said he liked working with other family offices because the model provided a transparent and unbiased point of view.

“We’re always happy to review other opportunities,” he said. “We like to speak with other families, hear what they’re up to and share ideas.”

Action item: Contact Michael Barry at m.barry@breakwaterinvestments.ca.