Great-West Life Real Estate Fund

As part of the Fund’s discipline, management reviews the strategic positioning of each asset annually. While the majority of holdings in the Fund are categorized as core, long term positions, there are instances whereby management looks to divest of assets to recycle capital in an effort to strategically reshape the portfolio. In 2019, two suburban office assets were identified as disposition targets and transactions were initiated. The Fund was able to successfully divest of these assets in the second quarter, realizing better than 98% of previously appraised value and resulting in over $200M in net proceeds.  Crestwood Corporate Centre and Commerce Court, a 906,852 square foot portfolio located in Richmond, BC, was sold in May for $156M at the Fund’s 70% interest. Similarly, the Fund divested of its 70% interest in 9500 Glen Lyon Parkway, located in Burnaby, BC, a 164,580 square foot suburban office building for $52.5M.

Activity for the quarter was highlighted by the completion of a significant leasing transaction at Goreway Business Park in Brampton, ON.  In June, management executed a new 10-year, 453,297 square foot lease with one of the world’s largest online retailers, utilizing the space as a fulfillment centre.  The deal stabilizes the asset from an occupancy perspective and provides the Fund with predictable, long term cashflow from a strong covenant tenant.

Overall portfolio occupancy at the end of the quarter remains strong at 93.2%, down slightly from 93.8% relative to Q1.  All else equal, the aforementioned Goreway Business Park transaction should lead to improvement upon commencement in August.

Impacts on businesses due to COVID-19 have been widespread and management has been working closely with those tenants who have been most affected to partner in a solution that results in the long-term viability of the relationship.  In that regard, the Fund has committed to participation in the Canada Emergency Commercial Rent Assistance (CECRA) program which is designed to help qualifying small business tenants access this important government aid as simply and quickly as possible. 

For the second quarter, the Fund averaged a promising 92% collection level across the portfolio (94%, 93% and 89% in April, May and June respectively). Collection levels remain strongest in the office, residential and industrial sectors, while retail continues to be challenged. The Fund’s significant underweighting to retail mitigates the Fund’s overall collection exposure.  With the majority of the country entering advanced phases of their economic re-opening programs, there is reason to be optimistic looking ahead.