Real estate

Oxford Properties Group (Oxford) is one of North America’s largest commercial real estate investment and management firms. Oxford oversees and manages approximately $18 billion of real estate for itself and on behalf of its co-owners and investment partners at December 31, 2009.

Oxford’s focus is to build a global platform for real estate investment, providing superior risk-adjusted returns and secure, sustainable and growing cash flows for the Plan. Oxford’s strategy focuses on the ownership and active management of significant assets, diversified by property type, geographic market, partner relationship and risk-reward profile. A diversified real estate portfolio of this nature generates reliable cash flows, facilitating our ability to meet both current and future benefit obligations. Furthermore, actively managed real estate generally appreciates in capital value over time in step with inflation, which helps to offset the inflation exposure of our pension liabilities.

Oxford’s operating income declined slightly from $533 million in 2008 to $510 million in 2009 primarily as a result of lower net operating income from the retail, hotel and industrial sectors due to lower occupancies. Net investment income dropped from $431 million in 2008 to $127 million in 2009 primarily due to downward property valuation adjustments of $312 million and a mark-to-market loss of $70 million on debt obligations. The continued impact of the global economic crisis and the reduced economic activity in certain sectors of the economy have resulted in a decline in real estate market values primarily for the Calgary office portfolio, hotels and foreign assets, leading to a decline in the overall real estate return to 1.3 per cent in 2009, compared with a 2009 benchmark return of 6.7 per cent and a 6.0 per cent return in 2008.

Oxford’s total real estate assets were valued at $11,975 million at December 31, 2009. Total assets under management of $18 billion at December 31, 2009 will decline to $16 billion on January 1, 2010 resulting from the end of an asset management agreement.

Oxford’s real estate portfolio is partially funded by $4,518 million in mortgages, debentures, commercial paper and other debt. This has increased by $620 million from 2008 primarily due to two new debenture issuances totalling $350 million and an increase of $204 million in outstanding commercial paper.

Visit the Oxford Properties web site at http://www.oxfordproperties.com/