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Great-West Life Real Estate Fund
Established in 1981, the Great-West Life Real Estate Fund is one of Canada’s largest real estate segregated funds. The Great-West Life Real Estate Fund (also known as the Canadian Real Estate Investment Fund No. 1 (or CREIF)) invests in a portfolio of 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.
65 Lillian (vivere), Toronto, ON
Watermark Tower, Calgary, AB
Laval Industrial, Laval, Quebec
Creekside Crossing, Airdrie, AB
as of December 31, 2019
in real estate assets
in total assets
Source of Return
Compound rates of return
(gross of investment management fees)
Three Month - Q4
Diversification by property type
By property type (millions)
Diversification by region
By region (millions)
Q4 2019 CREIF Bulletin
The Great-West Life Real Estate Fund closed the book on the decade by rewarding investors with its strongest annual performance since 2013. The fourth quarter marked the best period of the year, delivering 270 bps of return, contributing to the 9.1% twelve-month total. Overall performance was derived from a balance between income and capital, as portfolio fundamentals strengthened across the board.
Halton Hills Village, Halton Hills, ON
Goreway Business Park, Brampton, ON
Jasper 111, Edmonton, AB
Income returns are reliant on a well-leased portfolio of assets that are managed with a focus on net operating income (NOI) growth. This component of return has been the cornerstone of Fund performance since inception, with 2019 proving to be no different in that regard. Portfolio occupancy concluded the year at a robust 94.3%, representing a 60 bps improvement from the end of 2018, and led to a 6% increase in Fund NOI. The Fund’s income return for 2019 was 4.2%.
Capital performance is the result of positive changes in asset values that stem from prudent capital investment, combined with overall market sentiment. Although investment into Canadian commercial real estate was down in 2019 relative to a 2018 high, pricing for institutional quality assets continued to set new benchmarks. We view the downstroke in deployment as a reluctance of owners to divest, rather than a lack of appetite to add product. The industrial asset class paced capital performance for the year, helping to grow the value of the Fund by over 10% and to cross the $6B threshold for the first time. The Fund’s capital return for 2019 was 4.9%.
Total Fund returns combine income and capital performance from the underlying portfolio of real estate, with various structural impacts, such as cash and leverage. Strategic management of each of these components is crucial in optimizing performance. Over the course of the year, Management trimmed the cash position in the Fund by over 100 bps, while increasing it’s leverage position by the same magnitude. This reduced the overall portfolio weighted interest rate by 23bps, to 3.4%.
Jasper One-Eleven is a 237-unit apartment building located in the heart of Edmonton on Jasper Avenue. In October, Management placed a new, 10-year, $31.5 million CMHC insured mortgage on the asset. The facility carries an attractive interest rate of 2.3%.
In December, the Fund acquired a 100% freehold interest in Halton Hills Village, a 111,728 square foot new generation, grocery-anchored centre located in Halton Hills, ON, for $42.3M. The property is 98% leased and will provide the portfolio with a secure income stream based on a weighted average lease term of approximately 6 years.
Development will form a large part of the narrative as the calendar rolls over. Projects at Grenadier Square (2020) and Vancouver Centre II (2021) are moving toward completion while a series of new initiatives are scheduled to break ground. Development will continue to play an important role in augmenting the portfolio as a primary source of risk adjusted return.
The Fund is well capitalized, diversified by asset class and geography, occupied with term, has a significant development pipeline and is managed by a vertically integrated, full-service manager. It is very well positioned to build off a long history of delivering investors predictable returns as we move into 2020.
The Canadian Real Estate Investment Fund No.1 is one of the largest open-ended core real estate funds in Canada and will celebrate its 40th year in operation in 2020. To learn more, please visit our website at www.gwlrealtyadvisors.com