Pension funds flock to apartment buildings
Rental rush: pension funds flock to apartment buildings
After the financial crisis battered the U.S. economy in 2008 and 2009, the real estate investing team at Quebec’s public-sector pension manager noticed an interesting trend in its portfolio of holdings.
The Caisse de dépôt et placement du Québec owned a group of apartment buildings in New York, the epicentre of the global financial meltdown. Yet, despite that proximity to chaos, demand in the buildings was virtually unchanged, even as companies cut office space and consumers curtailed trips to malls.
“We found out that our investments were very resilient,” says Sylvain Fortier, who heads residential investment at Ivanhoé Cambridge, the Caisse’s real estate investing arm.
“We felt like our overall occupancy of our buildings remained about the same, the rents stayed about the same.”
A review of that experience helped to persuade the pension plan to launch a new apartment strategy in 2011 to capitalize on low-risk returns where rental supply is tight. Six years and a spate of deals later, Ivanhoé owns more than 40,000 apartment units worth about $12-billion, accounting for about 20% of its total real estate holdings.