Ontario’s real estate portfolio earns C$1bn in 09

The Ontario Teachers’ Pension’s real estate portfolio beat its benchmark return of 6% in 2009, yielding a 7% return in the past 12 months. The Canadian pension's real estate portfolio is now valued at C$17.2bn.

The Ontario Teachers’ Pension’s real estate portfolio has increased by $1 billion from one year ago, totaling C$17.2 billion (€12.8 billion and $17.1 billion) at of the end of 2009.

The C$96 billion Canadian pension had a benchmark for real estate of 6.0 percent in 2009. The pension fund’s property management arm – Cadillac Fairview – beat that figure by yielding a 7 percent return, or C$200 million above the benchmark.

The C$1.0 billion came primarily from lease arrangements for the pension’s retail and office investments. At 31 December, 2009, the pension’s occupancy rate for retail space was 93 percent, while the office occupancy rate was 89 percent.

Unveiling its 2009 year-end results, Ontario Teachers’ said it experienced an overall return of 13 percent for all asset classes, beating its target by 4.2 percent. The real estate portfolio represents 38 percent of the pension fund’s inflation-sensitive assets, which yielded only a 4 percent return, missing its 5.4 percent benchmark. Inflation-sensitive assets also includes infrastructure and real-return bonds.

On a four-year basis, the pension’s real estate assets generated an 8.3 percent annual return, outperforming its four-year benchmark by 1.6 percent.

Rising equity markets increased the value of the pension’s publicly listed real estate holdings in 2009, which contributed significantly to the above-benchmark performance for real estate. This was partially offset, however, by valuation losses in the fund’s North American property portfolio as a result of the recession.

As of December 31, 2009, 53 percent of the pension fund’s real estate portfolio was held in Canadian retail properties; 26 percent in Canadian office properties; 7 percent in US retail and office properties and the remaining 14 percent in investments and other properties.

Among Ontario’s top 10 real estate holdings are the Toronto-Dominion Centre Office Complex; Toronto Eaton Centre; the Chinook Centre in Calgary and the Pacific Centre in Vancouver.