Mixed real estate fortunes for Canadian pension giants

Two of Canada’s biggest pension funds have revealed different outlooks for their real estate holdings, as they report half-year figures. Ontario Teachers’ Pension Plan saw the value of its real estate assets grow by 6.4% in the six months ended 30 June, while CDPQ said its real estate investments had proved “challenging”. Ontario Teachers’ held just over C$30bn (£17bn) of real estate assets under management at the half-year point, up from C$28bn at the end of 2023. Real estate makes up 12% of Teachers’ total C$253.8bn investment portfolio. During the period under review, the group revealed the majority of its real estate investment had been in logistic investment across Europe. It highlighted five deals through its Boreal IM joint venture, including the acquisition of a 400,000 sq ft shed in Germany and five other investments totalling more than 2m sq ft in Germany and France. The pension fund reported a total return of 4.2% over the period. President and chief executive Jo Taylor said: “Our results for the first half of 2024 reflect an ability to generate positive returns in a range market conditions across our investment teams and maintain a well-funded status for our members.” At CDPQ, its real estate holdings posted a -3.6% return over the six months to 30 June. The group said the poor performance was caused by the continuation of challenging condition in the offices market. “The real estate industry’s challenges in recent years persisted in the first half of the year, in particular due to the difficulties in the office sector and the high interest rate environment that weighs on financing costs,” said the pension fund. “The logistics sector contributed positively to the return, but could not fully mitigate the fall in value in the office sector, especially in the United States.” CDPQ said its change in strategy to invest more heavily in logistics and residential since 2020 had meant its five-year annualised return was down by just 0.6%. The fund’s total investment across real assets, which includes infrastructure, stood at C$110.2bn During the period under review, CDPQ merged its real estate subsidiaries, Ivanhoe Cambridge and Otera Capital. The merger is expected to be complete by the beginning of 2026 and is expected to deliver savings of C$100m.