Ontario Teachers’ Posts 1.9% Return as Property Losses Widen

2024/03/13 by Christopher Caillavet Leave a Comment

Ontario Teachers’ head office at 5650 Yonge Street in Toronto (Image: Manulife IM)

The Ontario Teachers’ Pension Plan reported a net return of 1.9 percent for 2023, as a 20 percent gain in public equities was offset by losses in infrastructure and real estate.

The Canadian fund’s net assets grew to C$247.5 billion ($183.4 billion), reflecting incremental progress towards a strategic goal of reaching C$300 billion by 2030, Ontario Teachers’ said Tuesday in a release.

Despite the nominal return, the results underperformed the fund’s benchmark return of 8.7 percent, representing C$15.8 billion in negative value-add, according to the Toronto-based organisation.

Real estate performed the worst among asset classes with a 5.9 percent loss — widening from a 3.5 percent loss in 2022 — while infrastructure posted a 2.8 percent loss after a year-earlier return of 18.7 percent.

“While we advanced key strategic areas of focus in 2023, we did not generate investment results to desired levels,” said president and CEO Jo Taylor. “This was largely due to positioning the portfolio for a more challenging economic environment than ultimately transpired, our relatively lower exposure to public equities, and valuation adjustments in certain real estate and infrastructure assets.”

Real Estate Restructuring

The annual report is the first since Ontario Teachers’ last June announced a restructuring of its Cadillac Fairview property investment arm, bringing the latter’s 37-strong global real estate team directly under the umbrella of the parent organisation.

Jo Taylor, president and CEO of the Ontario Teachers’ Pension Plan

The transition saw longtime executive John Sullivan retire as Cadillac Fairview’s president and CEO in November, with executive vice president for operations Salvatore Iacono succeeding Sullivan in both roles.

In January of this year, Pierre Cherki assumed the newly created role of executive managing director for real estate at Ontario Teachers’ after serving on the board of Cadillac Fairview since June 2022.

The fund’s real estate investments in 2023 included the acquisition of European logistics assets through an existing joint venture with Boreal IM, as well as the purchase of a controlling stake in Compass Datacenters alongside JV partner Brookfield Infrastructure.

Compass has designed and built data centres for hyperscalers and cloud providers at campuses in North America, Europe and the Middle East. Ontario Teachers’ and Brookfield will provide operational and financial support for the Dallas-based company’s projects, the partners said.

China Investment on Hold

In Asia Pacific, Ontario Teachers’ last year announced its intention to suspend investments in mainland China. Fund management head Stephen McLennan told a Canadian parliamentary committee in May that the group had paused direct investments in Asia’s biggest economy amid rising tensions between Beijing and Ottawa.

Through Cadillac Fairview, the pension fund in mid-2021 committed $400 million to Hines Asia Property Partners, with US developer Hines citing China as one of the top-tier markets targeted by its flagship Asia investment vehicle.

In 2022, Ontario Teachers’ was among a group of investors joining a $505 million fundraising round for APAC data centre platform Princeton Digital Group, with that firm listing China as among its target markets, alongside India and Singapore.

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