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Pension giant Caisse to sell one-third of its malls in Canada amid e-commerce hit

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Pension giant Caisse to sell one-third of its malls in Canada amid e-commerce hit

Canada’s second-biggest pension manager is preparing to sell a third of the shopping centres it owns in its home market as e-commerce finally starts to bite the country’s brick-and-mortar retailers.

Caisse de dépôt et placement du Québec, says it will look for an array of solutions for its 25 Canadian malls after their problems contributed to a 2.7 per cent decline in the value of its real estate portfolio in 2019. Besides a sale, the Caisse’s real-estate unit, Ivanhoe Cambridge, will consider transforming malls with everything from residential housing to logistics space.

“Canada had been relatively protected but global trends are accelerating and are hitting us too,” Ivanhoe’s President Nathalie Palladitcheff told reporters Thursday. “When you have 25 shopping centres, it’s a big amount — even if it changes just a little bit, it has a great impact immediately in terms of figures.”

Ivanhoe Cambridge held $39.7-billion (US$29.9 bililion) worth of real estate at the end of 2019, about 12 per cent of the total funds under Caisse management. Its shopping centres include the Eaton Centrein Montreal and Metropolis at Metrotown I and II in Burnaby, a suburb of Vancouver.

“One can’t be satisfied with the 2019 returns,” Palladitcheff said. The division will reduce traditional assets, which she described as malls and offices.

The investment shift comes as real-estate funds in the U.S. and Europe struggle to meet a surge in investor requests to get their money back, driven by mounting concerns about the health of malls at a time of rapid growth e-commerce.

As store closures and bankruptcies pile up for retailers, malls are trying to find ways to draw foot traffic and keep their properties full of rent-paying tenants.

Metrotown illustrates the changing landscape, Palladitcheff said. Five years ago, a contract with Target Corp. was considered the best outcome, she said.

“As you well imagine, things have changed,” she said. “Today when we discuss a residential development for Metrotown, we see that is the best possible transaction.”

Target closed its Canadian stores in 2015 after losing billions.

Bloomberg.com

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