“Real” assets, such as malls and office towers, produced an investment loss of $5 billon, or seven per cent.
Author of the article:
Frédéric Tomesco
“We’re very happy with our resilience” amid the pandemic, said Caisse de dépôt et placement du Québec CEO Charles Emond. “I do not wish to see crises like this, but when they happen, it really lets us see what is solid, and what needs to be improved.”Photo by Allen McInnis /Montreal Gazette file photo
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A second-half comeback allowed Quebec’s biggest institutional investor to finish the year in the black — while falling short of its own targets.
Following a negative first-half return of 2.3 per cent, the Caisse de dépôt et placement du Québec said Thursday it returned 7.7 per cent on average for all of 2020. Net investment income was $24.8 billion, lifting net assets to $365.5 billion at year end.
Equities accounted for the bulk of CDPQ’s 2020 performance, generating investment income of $20 billion — a 12.4 per cent return. Fixed income contributed $8.7 billion, for a return of nine per cent, while so-called “real” assets, such as malls and office towers, produced an investment loss of $5 billon, or seven per cent. The loss in real estate was a whopping 15.6 per cent.
The results trail the 9.2 per cent average return of Canadian defined benefit pension plans, according to a January survey released by RBC Investor & Treasury Services. Returns also trailed CDPQ’s own benchmark by 1.5 per cent — a situation that the pension-fund manager blamed on the struggles in real estate.
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COVID-19 created “an unprecedented crisis. Everything shut down at once,” CDPQ chief executive officer Charles Emond told reporters Thursday in Montreal. “We’re very happy with our resilience. I do not wish to see crises like this, but when they happen, it really lets us see what is solid, and what needs to be improved.”
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Real estate was the biggest trouble spot for the Caisse in 2020, generating a net investment loss of $6.4 billion. Property valuations crumbled across the world as COVID-19 emptied downtowns and forced malls to close for extended periods.
Though CDPQ’s Ivanhoé Cambridge property unit managed to cut its overall exposure to shopping centres, asset sales have been slow to materialize amid a dearth of liquidity in the market, CEO Nathalie Palladitcheff told reporters. Only one mall was sold, on Vancouver Island.
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Ivanhoé Cambridge said last February it wanted to cut its exposure to Canadian malls and would look to sell about eight shopping centres by 2023, now that shoppers are increasingly turning to e-commerce at the expense of brick-and-mortar stores.
Malls now account for less than 20 per cent of Ivanhoé Cambridge’s $60-billion portfolio, including debt, Palladitcheff said.
Ivanhoé Cambridge is still aiming to sell some of its 24 remaining shopping centres, though this process will likely extend until 2024, the CEO added. Two unidentified properties are in the process of being sold, Palladitcheff said.
“The strategy has not changed,” she said.
Ivanhoé Cambridge concluded more than 70 real-estate deals last year, including $2.8 billion of asset sales and $5.9 billion in purchases and modernizations. Most of the acquisitions focused on logistics and industrial buildings.
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“2021 will certainly be complicated, but we have in our portfolio sources of durable returns for the future,” Palladitcheff said, citing Ivanhoé Cambridge’s $10-billion logistics portfolio and its collection of office buildings for the life-sciences industry.
COVID-19, which brought air travel to a virtual standstill, also hurt returns in CDPQ’s $32-billion infrastructure portfolio. Though infrastructure climbed 5.1 per cent in 2020, airports trimmed the return figure by three percentage points, Emond said. CDPQ is nevertheless aiming to double the size of its infrastructure portfolio to about $60 billion over four years, he said.
While CDPQ is now a truly global investor, it remains very active in its home market. Quebec assets stood at $68.3 billion at year end, including $50 billion in the private sector.
At the start of the pandemic, CDPQ set aside $4 billion to help Quebec companies weather the storm. About half of the amount has already been invested, or is in the process of being allocated, CDPQ said Thursday.
Compared with its benchmark portfolio, CDPQ says it generated $1.7 billion in value added for depositors over five years. Over 10 years, the outperformance amounts to $9.3 billion.
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TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
