CDPQ beats real estate benchmark

The Canadian pension fell short of the asset class index in the previous year.

The real estate portfolio of la Caisse de dépôt et placement du Québec exceeded its benchmark last year, according to CDPQ’s annual results for 2016 released Friday.

The asset class returned 10.4 percent in 2016, beating its benchmark of 7.2 percent. By contrast, CDPQ’s real estate portfolio returned 13.1 percent in 2015, but fell short of its 15.4 percent benchmark.

CDPQ’s real estate portfolio, managed by Ivanhoé Cambridge, had C$31.7 billion ($24.1 billion; €22.8 billion) in assets as of December 31. The pension system oversaw C$270.7 billion in total assets and returned 7.6 percent overall in 2016.

CDPQ said its 2016 real estate performance was driven by increasing values in the residential sector in the US and by good current yields in the office and retail sectors, particularly in North America.

Meanwhile, the pension has posted a return of 12.1 percent since 2012, having benefited from the strong appreciation of asset values in the retail, office and residential sectors, primarily in North America. The pension plan also noted that Ivanhoé Cambridge has benefited from repositioning its real estate portfolio in recent years to focus on quality assets and to make numerous international acquisitions in targeted cities.

Over the last five years, the pension system has decreased its allocation to retail from 40.4 percent to 31.1 percent, and increased its exposure to residential from 5.4 percent to 16.5 percent. Office has remained relatively unchanged, comprising about 30 percent of the real estate portfolio.

Ivanhoé Cambridge was equally active as a buyer and seller in 2016, with C$5.8 billion in acquisitions and the same volume of dispositions, according to the investment report. Its major investments included the acquisitions of remaining interests in two New York office buildings for more than $1.2 billion and a co-investment with CBRE Global Investment Partners in a $400 million venture through LOGOS Property Group to invest in Chinese logistics. Last year, the firm executed Europe’s largest property transaction of the year with partner TPG Real Estate, in the sale of the duo’s Point Park Properties to GIC Private. The logistics platform deal was valued at €2.4 billion, PERE previously reported.

The pension system’s investment activity was much lower than in 2015, when transaction volume hit C$18.2 billion, including C$12.4 billion in acquisitions and C$5.8 billion in dispositions.