Caisse de Depot to Sell One-Third Of Malls Amid E-Commerce Hit

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

Caisse de Depot et Placement du Quebec says it will look for an array of solutions for its 25 Canadian malls after their problems contributed to a 2.7% 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 centers, 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 C$39.7 billion ($29.9 bililion) worth of real estate at the end of 2019, about 12% of the total funds under Caisse management. Its shopping centers include the Eaton Center in 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 ladscape, 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.

--With assistance from Doug Alexander.

To contact the reporters on this story: Sandrine Rastello in Montreal at srastello@bloomberg.net;Paula Sambo in Toronto at psambo@bloomberg.net

To contact the editors responsible for this story: Nikolaj Gammeltoft at ngammeltoft@bloomberg.net, Derek Decloet

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