Half-yearly report of the Caisse de dépôt | Real estate still a burden

The difficulties in the office building market continued to weigh heavily on the overall performance of the Caisse de dépôt et placement during the first half of its 2024 financial year.

As a result, the Caisse’s real estate portfolio, which accounts for 11% of its total net assets, posted a negative return of 3.6% during the first six months of the year.

And this negative return is still below the slightly negative return of 0.9% of its benchmark real estate index.

“The challenges of the real estate industry in recent years continued in the first half of the year, particularly due to the difficulties in the office sector and the high interest rate environment which weighs on the cost of financing,” the Caisse said in its 2024 mid-year report, released on Wednesday.

“This is a reflection, among other things, of the difficulties in the office sector. Since the pandemic, working habits [au bureau et en télétravail] have changed. The sector has not returned to its pre-pandemic level, particularly in North America.”

On the other hand, Charles Emond stressed that the changes made over the past four years in the management and composition of the Caisse’s real estate portfolio had “really produced results” by reducing the negative performance gap compared to the benchmark index.

“We have undertaken a ‘pivot’ [en immobilier] since 2020. We have bought more in [les secteurs de] logistics and residential, which are profitable, explained the president of the Fund.

“In return, we reduced our exposure [pondération] on the side of offices and shopping centers, which have had headwinds during and since the pandemic.

“Results”

By mid-2024, we can see that “these changes have really produced results,” according to Charles Emond.

“Our gap [de rendement en immobilier] compared to the benchmark index, over five years, has fallen by almost 300 basis points [3 points de pourcentage] in four years. So, we are on the right track,” said the president of the Fund.

But going forward, he admitted, “it’s important to stay active with our real estate portfolio. We continue to review what’s working versus what needs to be rethought to meet the needs of a market that’s very different than it was not so long ago.”

Furthermore, it was also during the first half of 2024 that the Caisse implemented the restructuring of its real estate subsidiaries, Ivanhoé Cambridge and Otéra Capital, in order to integrate them into its management structure.

According to the Caisse, this integration, which should be completed at the beginning of 2026, will enable it to achieve annual savings of around 100 million in management and operating costs.