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. *

* Effective June 26, 2020, the valuation of the properties in the Fund resumed. The current conditions continue to give rise to significant valuation uncertainty. In the interests of protecting the Fund and its investors, the suspension of any contributions, redemptions or transfers from the Fund remains in place.

Fund Performance

as of June 30, 2020 *

$3.2B

in real estate assets *

$3.3B

in total assets *

88

properties

Source of Return

2011201220132014201520162017201820192020
Income 5.8%5.1%4.3%4.3%4%4.5%4.4%4.2%4.2%1.9%
Capital 12.5%14.1%4.3%1.7%0.4%0.8%0.9%2.1%5.5%(2.4)%
Total 18.2%19.2%8.6%6%4.5%5.3%5.3%6.3%9.7%(0.5)%

Compound rates of return

(gross of investment management fees)
Three Month – Q2 * -2.1%
Year-to-date * -0.5%
One Year 4.90%
Three Year 5.98%
Five Year 5.56%
Ten Year 8.51%

Diversification by property type

By property type (millions)

Retail 12.5% $ 374
Office 40.7% $ 1,218
Industrial 21.0% $ 628
Residential 19.6% $ 585
Other 6.1% $ 183

Diversification by region

By region (millions)

British Columbia 22.0% $ 656
Alberta 11.8% $ 351
Prairies 0.7% $ 20
Ontario 53.8% $ 1,607
Quebec 9.0% $ 268
Atlantic 2.6% $ 79
U.S. 0.2% $ 7

Quarterly Highlights

Q2 2020 London Life Real Estate Fund Bulletin

Temporary Suspension

Property valuations resumed in June, as encouraging signals within the marketplace, such as the gradual lifting of emergency orders and increased visibility on the cashflow implications for real estate, including rent collection levels, and government rent relief programs provided increased visibility on the impact. Commencing in June, the Fund increased the frequency of external valuations, moving from annually to quarterly, while continuing to complete monthly internal valuations for the balance of the portfolio. This shift to quarterly external valuations provides enhanced valuation independence and aligns with best in class standards.   While visibility has materially improved, there continues to remain a lack of transaction activity to provide comparable data points. As well, the appraisal community continues to qualify their valuations as having “significant valuation uncertainty”. In the intertest of protecting the Fund and its investors, trading activity remains suspended.

9500 Glenlyon Pkwy, Burnaby, BC
Crestwood Corporate Centre, Richmond,BC
Goreway Business Park, Brampton, ON
Investment Activity

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 approximately $90M in net proceeds.  Crestwood Corporate Centre and Commerce Court, a 906,852 square foot portfolio located in Richmond, BC, was sold in May for $67M at the Fund’s 30% interest. Similarly, the Fund divested of its 30% interest in 9500 Glen Lyon Parkway, located in Burnaby, BC, a 164,580 square foot suburban office building for $22.5M.

Leasing and Occupancy Update

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%, down slightly from 93.3% relative to Q1.  All else equal, the aforementioned Goreway Business Park transaction should lead to improvement upon commencement in August.

CECRA Participation and Collection Levels

Impacts on businesses due to COVID-19 have been widespread and management has been working closely with those tenants who have been most effected 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 (93%, 93% and 90% 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.

 

Downloads

Latest bulletin

Past Performance Reports

Quarterly Bulletins

Q2 2020 Bulletin PDF (193 KB)
Q1 2020 Bulletin PDF (1 MB)
Q4 2019 Bulletin PDF (1 MB)
Q3 2019 Bulletin PDF (1 MB)

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