London Life Real Estate Fund

The London Life Real Estate Fund was launched in 1998 to create a vehicle for direct real estate investment. The Fund invests in high-quality, income-producing properties diversified by type and location. The objective is to provide investors with strong income returns and the opportunity for long-term capital appreciation.

Fund Performance

as of March 31, 2019

$3.0B

in real estate assets

$3.3B

in total assets

92

properties

Source of Return

2010201120122013201420152016201720182019
Income 5.8%5.8%5.1%4.3%4.3%4%4.5%4.4%4.2%1.1%
Capital (1.4)%12.5%14.1%4.3%1.7%0.4%0.8%0.9%2.1%0.8%
Total 4.4%18.2%19.2%8.6%6%4.5%5.3%5.3%6.3%1.9%

Compound rates of return

(gross of investment management fees)
Three Month – Q1 1.86%
Year-to-date 1.86%
One Year 7.16%
Three Year 5.97%
Five Year 5.52%
Ten Year 7.86%

Diversification by property type

By property type (millions)

Retail 14.5% $ 431
Office 44.9% $ 1,333
Industrial 17.1% $ 509
Residential 19.6% $ 581
Other 4.0% $ 118

Diversification by region

By region (millions)

British Columbia 23.7% $ 706
Alberta 14.2% $ 423
Prairies 0.8% $ 23
Ontario 49.4% $ 1,467
Quebec 8.7% $ 260
Atlantic 2.8% $ 82
U.S. 0.4% $ 12

Quarterly Highlights

Q1 2019 LLREF Bulletin

The London Life Real Estate Fund began 2019 in strong fashion, delivering a total gross return of 1.9% over the first quarter.  Notably, this represents the best opening period for the Fund since 2013 and contributes toward a trailing twelve-month total return of 7.2%. The well leased portfolio of 92 institutional quality assets continues to provide steady income performance while material gains in the Toronto industrial and Vancouver office sectors paced the capital component of return.  Highlights from the Fund’s first quarter of the year follow:

1 Adelaide Street East, Toronto, ON
20 Victoria Street, Toronto, ON
4250 Canada Way, Burnaby, BC

Investment Activity

In February, the Fund acquired a 15% interest in a 650,000 square foot office and retail complex in downtown Toronto for approximately $73M.  The asset, better known as the Dynamic Funds Tower Complex, is located at the southeast corner of Yonge and Adelaide. It includes 1 Adelaide Street East, a 30-storey LEED® Gold certified office tower, 20 Victoria Street, a nine-storey boutique office building, and 85 Yonge Street, a three-storey retail building.  The asset is currently 99 per cent leased, with major tenants including Scotia Capital Inc. and OPTrust.  The Class ‘A’, PATH connected complex marks a significant acquisition for the Fund of a high-profile core property that is rarely available.

Financing Activity

Further to the acquisition noted above, financing representing 50% of the purchase price was placed on the asset.  The 10-year loan facility was funded on an interest-only basis for the entire term at a coupon rate of 3.4%. 

4250 Canada Way in Burnaby, BC, is a modern single-tenant six storey Class ‘A’ office building that is fully occupied by Pacific Blue Cross.  In March, management arranged for new financing at the property.  Details of the mortgage include a three-year interest only period over a ten-year term, and an interest rate of 3.4%.

Collectively, the two deals will reduce the overall weighted average cost of debt in the portfolio, improve performance, and move the Fund closer to its long-term leverage target. 

Forward Outlook

Now a full decade into the current bull market cycle, major markets across the country continue to exhibit strong fundamentals with vacancy rates at historic lows and rental rate growth outpacing the greater economy.  A development pipeline that will see the delivery of significant new office product in downtown Toronto and Vancouver by 2023 may cause growth to pause, though a substantial portion of the space is already spoken for.  Investment into the asset class in 2018 reset the benchmark as record levels of capital were deployed for the third consecutive year*.  Though yields for investment grade product have contracted, demand remains considerable.  None of this is to say that risks are not present at this stage in the cycle as broader economic signals have recently flashed the potential for economic slowdown which could certainly alter the landscape of our industry.  Notwithstanding, the Fund’s diversification and income focus position it well to build on a promising start to the year. Looking ahead, management remains committed to identifying opportunities to improve the quality of real estate within the portfolio while enhancing returns for investors.

*Source: CBRE

Downloads

Latest bulletin

Download PDF

Past Performance Reports

Quarterly Bulletins

Q1 2019 Bulletin PDF (2 MB)
Q4 2018 Bulletin PDF (994 KB)
Q3 2018 Bulletin PDF (2 MB)
Q2 2018 Bulletin PDF (2 MB)

Want to Invest?

Contact a London Life advisor to invest in the London Life Real Estate Fund.