CANADA - The Caisse de dépôt et placement du Québec has revealed the value of its real estate portfolio had fallen by C$4bn (€2.57bn) by the end of June 2009, and it is no longer investing higher risk real estate debt.
Although no news comes following the launch of an "action plan" in April to shift the focus of the Canadian pension fund's real estate operations to "key operations" and to "streamline its structure".
The institution said it is calling a halt to all new mezzanine and other subordinated loans, as well as the integration of Cadim - which carried out such investments until 2008 - into its office and business parks subsidiary SITQ.
The Caisse said another subsidiary, Otéra, which now looks after all real estate debt activities, will cease any further subordinated loans investments and instead focus on the core business of first mortgage loans.
"The investment model adopted by Cadim was aimed at seeking higher returns through increased risk," said Caisse president and chief executive Michael Sabia.
"In the real estate financing sector, Cadim's strategy was based on forecasts calling for marked growth of the subordinated loans market. The financial crisis, however, eroded market conditions needed to underpin that strategy."
René Tremblay, the newly-appointed executive vice-president of real estate and president of the real estate group, said the following about the integration of Cadim into SITQ: "Cadim and SITQ carry out their operations in complementary sectors. Our goal in this reorganisation was to streamline the structure of the real estate group and to give it the flexibility required to take advantage of investment opportunities and better manage risk."
Since the beginning of 2009, the Caisse's less liquid investments - namely real estate, private equity and asset-backed commercial paper - have declined in value under what the pension fund terms "precarious economic and financial conditions".
Sabia said: "Considering the scale of decreases in value we have accounted for, primarily in real estate, and the fact that the Caisse's returns are of great importance to Quebecers, we felt it was the right time to take stock of the situation."
The fund had C$120bn in assets at the end of 2008.