Real Estate Fund Update
Canada Life and the Real Estate Fund manager, GWL Realty Advisors Inc., continue to work towards lifting the current suspension on withdrawals and transfers from the Fund, which took effect Dec. 15, 2008.
The Fund manager continues to actively manage the portfolio of high-quality properties to generate stable, long-term income while we work to build up the Fund’s cash position. To date, the Fund’s value has been relatively stable during the suspension.
Mid-2010 Proportional Payout
We will not be in a position to fully lift the current suspension until the Fund has enough cash to process withdrawals and transfers on a daily basis. However, we expect to have enough cash in the Fund by mid-2010 to meet at least some portion of withdrawal and transfer requests at that time. Our plan will be to accept requests over a specified period (dates to be announced).
If the total of withdrawal and transfer requests exceeds the cash available at that time, each unitholder making a request will receive the same percentage of the amount they requested. For example, if the cash available equals 25% of total withdrawal and transfer requests, then each unitholder will receive 25% of the amount they requested.
In the first few months of 2010, we will update unitholders on our progress and the steps we will follow to process withdrawal and transfer requests.
Fund Activity
The primary way for the Fund manager to increase cash in the Fund is to continue selling selected commercial properties held by the Fund—7 properties were sold from Jan. 1 to Oct. 31, 2009, generating $59.4 million in total net cash proceeds. A further 7 property sales are agreed upon or under contract, with expected closing dates ranging from December 2009 to early 2010. Additional properties are at the early stages of marketing for sale.
The Fund had $179 million of its assets in cash as of Oct. 31, 2009, representing 6% of net asset value.
A Sound Investment
Canada Life and its affiliates have managed real estate segregated funds for nearly 3 decades, and have managed through previous recessions when the cash position of the Fund also experienced challenges.
GWL Realty Advisors is one of Canada’s largest real estate advisory firms with about $11.7 billion of assets under management for some of Canada’s largest institutional and pension fund real estate investors. It manages more than 332 properties in Canada.
We remain committed to managing the Fund’s well-diversified portfolio of high-quality assets to strengthen the Fund’s returns.
The Real Estate Fund is not the same as other equity investments. The stock market is generally accepted as a leading indicator of where the economy is headed. However, the Fund holds commercial real estate properties which are generally slower than equities to respond to an economic downturn. They are also slower to recover when the market improves. This pattern makes real estate more stable than equities and it’s why the Real Estate Fund is such a good diversifier in a portfolio.
The Fund’s 10-year annualized gross return (before fees) compares favourably with returns of other investment products: 9.21% as at Oct. 31, 2009.
The Real Estate Fund remains a sound and appropriate investment for those with a long-term investment horizon who don’t need cash in the short term.
More Information
Learn more about how the Fund’s total return and unit value are determined and the current status of the Canadian commercial real estate market.
You can also contact your advisor.
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