Canadian Pension Fund Reduces Real Estate Exposure, Staff

Canada Pension Plan Investment Board recorded a 5% loss on its real estate holdings and plans to pare back its exposure to property to about 8% of its total assets, the company said in its annual report.

CPPIB, Canada's largest pension manager, reduced its property exposure to 9% last year, down from 12% five years ago, Bloomberg reports. The company's office sector exposure dropped from 9% to 6% of its total real-asset holdings, which also include infrastructure, clean energy, power and utilities.

The company recently sold its stakes in two Vancouver towers, a Southern California business park and a Manhattan redevelopment project. The fund sold the New York property for only $1 so it could get out of its future obligations on the project, according to Bloomberg.

CPPIB earned an 8% return in the fiscal year that ended in March, but its performance was dragged down by the poor performance of its real estate assets. The overall rise in interest rates across many markets continued to adversely impact the company's real estate, it said in the report.

“Most of the losses were in the office sector, given the additional impact of changes in workplace trends,” it stated in the report.

The company's real estate investments generated a five-year net return of 0.7%. Its investments in the logistics sector performed better than its other commercial real estate assets, thanks to increased tenant and investor demand for most of the period, CPPIB said in the report.

However, CPPIB said its retail and office investments were negatively affected by the transition to e-commerce and the impact of evolving hybrid workplace trends.

CPPIB also announced it had cut staff in real assets and private equity by 7% and 13%, respectively. It expanded its credit investments team by 5%, Bloomberg reported.

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