Real estate
Oxford Properties Group (Oxford) is one of North America’s largest commercial real estate investment and real estate management firms. Oxford oversees and manages approximately $18 billion of real estate for itself and on behalf of its co-owners and investment partners.
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 offsets the inflation exposure of our pension liabilities.
Oxford generated net investment income of $431 million; including operating income of $533 million after interest expense of $167 million, compared to 2007 net investment income of $1,239 million, which included operating income of $372 million after interest expense of $157 million. Based on total investment income of $438 million before investment management expenses, Oxford’s return was 6.0 per cent in 2008, compared with a 2008 benchmark return of 8.3 per cent and a 22.9 per cent return in 2007. While rental income and occupancy rates in most of Oxford’s real estate portfolio continued to improve in 2008, the global economic crisis and the slowdown in the economy has resulted in an overall decline in Oxford’s real estate market values in 2008 compared with strong market appreciation in the prior year.
Oxford’s total real estate assets were valued at $12,037 million at December 31, 2008, an increase of $1,133 million from 2007. Our asset mix exposure to real estate increased to 15.2 per cent at December 31, 2008 compared with 12.5 per cent in 2007 due to the sharp decline in the value of our public market investments and due to net investments in real estate during the year. Although at the end of 2008 we have exceeded the Plan’s target asset mix allocation to real estate investments of 12.5 per cent, there is no requirement to reduce our allocation to real estate. We will continue to pursue our global investment strategy in order to ensure that we are positioned for future growth in accordance with our long-term asset mix targets.
Visit the Oxford Properties web site at http://www.oxfordproperties.com/