Heading into 2007, indicators pointed to a more challenging year for HOOPP’s real estate portfolio. Despite those early indicators, however, the portfolio turned in a strong performance. The portfolio outperformed its estimated benchmark by 6.7 per cent (or 670 basis points), generating a total return of 22.65 per cent.

Continued strength in the real estate portfolio can be attributed to a combination of:

• a well-established and disciplined development program
• improved occupancy levels (reaching an unprecedented 97 per cent)
• better-than-expected cash flows
• lower-than-expected expenses, and
• robust valuation gains

HOOPP focuses on building a real estate portfolio that is balanced and diversified by type of property and geographic location. To this end, HOOPP has – over the years – acquired a mix of retail, commercial and industrial properties across the country.  

During the first half of 2007, efforts to acquire new properties were fettered by a shortage of sensible buying opportunities. However, the pace picked up in the second half of the year as the credit  crisis took hold, reducing competition for quality properties. By year end, HOOPP had made several acquisitions, including:

• three existing industrial properties (two in Montreal and one in Toronto)
• a 75 per cent interest in the Mayflower Mall, the market-dominant retail shopping centre in Sydney, N.S., and
• select land for future industrial development in Bolton, Cambridge, Halifax, and Montreal

On the development side, HOOPP:

• started construction on a new shopping centre in Toronto (a co-venture with a partner)
• completed the construction of a new industrial building in Halifax, now fully leased, and began construction on one other
• continued with the construction of three industrial buildings in Milton that will be ready for occupancy in early 2008
• completed and leased 600,000 square feet of industrial buildings in Calgary’s Eastlake District
• completed the construction and lease-up of the Centrium office tower in downtown Calgary (a co-venture project), and
• commenced construction of Phase IV of Westpoint, an industrial complex in Edmonton

HOOPP, as part of its focus on liability driven investing, has revised its asset mix to include a higher allocation towards real estate investments. Real estate is shown to have a high positive correlation with inflation, thus providing an effective hedge against inflation-sensitive elements of the Plan’s liability exposure. At year end, real estate accounted for about 10.3 per cent of the Fund’s total assets.

As of December 31, 2007, the total value of net equity in HOOPP’s real estate portfolio stood at $3.06 billion, up 18.12 per cent from $2.59 billion at year-end 2006.