Real estate wound up being the top performer for the Ontario Teachers’ Pension Plan during the past year, according to its latest annual report. During 2012, the C$129.5 billion (€99.51 billion; $127.64 billion) pension plan achieved a 19.4 percent return on its real estate portfolio, exceeding not only its benchmark of 15.5 percent but also the performance of any other asset class.
The net value of the Ontario Teachers’ real estate portfolio totaled C$16.9 billion at year-end 2012, compared to C$15 billion on December 31, 2011. This growth reflected increased valuation among North American properties.
“Real estate fits our plan because it provides strong, predictable income,” the annual report stated. The report added that Cadillac Fairview, the subsidiary of Ontario Teachers that manages the real estate portfolio, “maintains a well-balanced portfolio of retail and office properties designed to provide dependable cash flows.”
The portfolio earned operating income of C$1 billion in 2012, primarily from retail and office properties. At year end, the retail occupancy rate was 94 percent, unchanged from last year, while the office occupancy rate was 95 percent, up from the 92 percent in 2011, with improvement occurring in Toronto properties.
Real estate portfolio highlights in 2012 included the buyout of three Sears stores and the related commitment to Nordstrom department stores in four Canadian retail properties. There also were a number of dispositions, including the Georgian Mall in Barrie, Ontario, and a 50 percent interest in the RBC Centre in Toronto.
New developments initiated in the past year included office towers in Calgary and Montreal, as well as a major expansion at Sherway Gardens in Toronto. Ontario Teachers also saw a significant increase in the value of its investment in Multiplan, a Brazil-based publicly traded real estate firm.
Private equity was Ontario Teachers’ next best performing asset class, returning 18.6 percent. That return also was well above its benchmark return of 13.3 percent. Private equity investments totaled C$12 billion at year end, compared to C$12.2 billion on December 31, 2011.
In 2012, Teachers’ Private Capital (TPC), the subsidiary that manages the pension plan’s private equity investments, saw C$5 billion in gross realizations and reinvestment of C$3 billion in new and existing investments. TPC invested in 13 new direct investments in 2012, eight new and existing buyout funds and four venture capital and growth equity funds.