Canadian Pensions Selling Billions Worth of Vancouver Real Estate

Pacific Center - Pensions Betting Against Vancouver Real Estate

You know about the residential real estate bubble in Vancouver. Banks are preparing for it, US hedge funds have been piling into short positions, and even the Chinese government is starting to warn the Chinese about it. Yet there’s been little discussion about how commercial real estate in Vancouver– that’s about to change big time.

Canadian pension funds have quietly begun liquidating BC commercial realty. While some of have been unloading since last year, the coming weeks are likely going to see a storm of activity. Here’s our roundup of the three largest pension funds, what they’re selling, and how much they’re asking.

The Ontario Teachers’ Pension Plan (OTPP)

The OTPP is looking to sell a “minority stake” in its subsidiary Cadillac Fairview’s $4 billion portfolio of BC properties. Bloomberg reported that Cadillac Fairview is looking to raise $2 billion dollars from the sale. The portfolio includes some of Vancouver’s best known properties, including Granville Square and CF Pacific Centre (the second most profitable shopping mall in Canada according to Avison Young).

Healthcare of Ontario Pension Plan (HOOPP)

HOOPP is looking for ~$400 million for the nine office tower business park in Burnaby. That’s a ~17% reduction in their estimated $2.28 billion BC real estate portfolio. The fund’s annual report estimates that 22% of their real estate portfolio was located in BC.

Caisse de dépôt et placement du Québec (CDPQ)

The CDPQ manages its “inflation sensitive investments” in real estate through its subsidiary Ivanhoe. Ivanhoe is currently looking to sell their remaining stake in the Metrotower complex for ~$400M. This comes after having sold Metrotower III to the Metro Vancouver government for $205 million late last year.

Ivanhoe has been a fairly active with commercial sales recently. Two significant sales of of note are the Fairmont Hotel Vancouver and the Bentall Centre. The Fairmont Hotel Vancouver was sold to Larco Investments for $180 million. Their 66% stake in the Bentall Centre was sold to China’s Anbang Insurance Group for $660 million earlier this year.

According to their 2015 report, BC represented approximately $4.5 billion dollars of their portfolio. The sale of all three assets could indicate a 28% reduction in BC holdings.

What’s Next?

It’s important to note that institutional investors aren’t looking to make a quick buck on a flip. They have more than enough capital to withstand short-term losses. Typically they liquidate positions when maximum value has been achieved, so this may indicate a top in commercial real estate. If both residential and commercial Vancouver real estate has peaked, 2017 is going to be one heck of a year for BC. Good luck to the next government, they’ll need it.

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Photo of Pacific Centre via Colin Knowles.



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