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 December 31, 2018

$2.8B

in real estate assets

$3.1B

in total assets

91

properties

Source of Return

2009201020112012201320142015201620172018
Income 6.1%5.8%5.8%5.1%4.3%4.3%4.0%4.5%4.4%4.2%
Capital (4.6)%(1.4)%12.5%14.1%4.3%1.7%0.4%0.8%0.9%2.1%
Total 1.5%4.4%18.2%19.2%8.6%6.0%4.5%5.3%5.3%6.3%

Compound rates of return

(gross of investment management fees)
Three Month – Q4 0.56%
Year-to-date 6.32%
One Year 6.32%
Three Year 5.63%
Five Year 5.46%
Ten Year 7.77%

Diversification by property type

By property type (millions)

Retail 15.3% $ 431
Office 44.2% $ 1,241
Industrial 17.5% $ 492
Residential 19.0% $ 533
Other 4.1% $ 115

Diversification by region

By region (millions)

British Columbia 24.6% $ 691
Alberta 15.2% $ 426
Prairies 1.0% $ 23
Ontario 46.9% $ 1,319
Quebec 9.2% $ 259
Atlantic 2.9% $ 82
U.S. 0.4% $ 12

Quarterly Highlights

Q4 2018 LLREF Bulletin

The London Life Real Estate Fund

The London Life Real Estate Fund finished the year on a high note, delivering investors a total gross return of 6.3%. In the face of ongoing headwinds linked to Calgary’s challenged office market, the Fund’s capital return (2.1%) closed at its highest level since 2013. Performance for the year was further highlighted by a 140 bps decrease in overall portfolio vacancy, concluding 2018 at 4.5%, which represents the lowest figure since 2004. With limited correlation and substantially less volatility when compared to equity markets (the S&P TSX index was down approximately 11% in 2018) and bond-like consistency, the results of 2018 will remind investors as to the merits of having exposure to a diversified mix of core institutional quality real estate within their broader investment portfolios. Fourth quarter activity is summarized below.

Transaction Updates

In October, the Fund acquired its second multi-residential apartment building site in Montreal for $108 million. 1770 Joseph Manseau Street, known as “The Shaughn,” is a recently completed 294-unit Class ‘A’ residential property in downtown Montreal. The 21-storey building includes a gym, pool, spa, rooftop patio, games room and a 25,000 square foot outdoor courtyard. The property also features modern suite design and specifications and a well-distributed mix of units. The building’s prime location south of René-Lévesque Boulevard places the property near the Central Business District, Concordia and McGill universities, and the Montreal General Hospital. The acquisition ideally embodies targeted characteristics: urban, new generation, amenity rich and well located.

For the year, new gross investment into real estate totalled approximately $188 million across three acquisitions, while a non-core holding was sold for $3.3 million.

Financing Activity

Two new financing initiatives were completed in the fourth quarter for total proceeds of $68 million, carrying an average coupon of 3.4%. Total activity for the year reduced the overall portfolio weighted average interest rate by 25 bps to 3.6%. With a conservative 17.2% loan to value across the portfolio, Fund management will continue to look for opportunities to take advantage of an attractive debt market by selectively applying new leverage in 2019.

Forward Outlook

With limited vacancy, a balanced expiry profile and strong market fundamentals across most of the country, the Fund is very well positioned as we turn the page on 2018 and look ahead to 2019. The tone coming from the Bank of Canada would suggest a level of conservatism with respect to the pace and frequency of future rate increases, a result of economic growth targets missing the mark. At least in the near term, debt should remain inexpensive. South of the border, the Fed appears to be on a slightly more aggressive path, and the diversion will likely continue to put pressure on the Canadian dollar, increasing the appeal of Canadian exports. Should this be the case, it could add fuel to the fire with respect to what is already a very healthy industrial market. Technology is certain to continue to play a vital role in reshaping the commercial real estate sector which historically has been reluctant to adapt. Embracing new ideas will be key to keeping pace.

Downloads

Latest bulletin

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Past Performance Reports

Quarterly Bulletins

Q4 2018 Bulletin PDF (994 KB)
Q3 2018 Bulletin PDF (2 MB)
Q2 2018 Bulletin PDF (2 MB)
Q1 2018 Bulletin PDF (1 MB)

Want to Invest?

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