The Ontario Teachers' Pension Plan Board office in Toronto, Sept. 28, 2021.COLE BURSTON/The Canadian Press
Ontario Teachers’ Pension Plan is bringing its real estate investment operations in-house and naming Sal Iacono as the next chief executive of Cadillac Fairview Corp. Ltd., with the real estate company’s long-time head, John Sullivan, preparing to retire.
Mr. Sullivan will step down from Cadillac Fairview, which the Teachers pension plan owns, on Nov. 1 after 25 years at the company. Mr. Iacono, the current executive vice-president of operations, will take over, with Mr. Sullivan staying on as an adviser.
By January, Teachers aims to create an in-house real estate group that will take charge of its investing in the sector. Teachers will absorb the entire 37-person team of investment professionals from Cadillac Fairview and launch a search for a global head of real estate to lead it, the pension plan announced Monday.
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Cadillac Fairview will continue to own, operate and develop real estate as Teachers takes over the investing activities.
Teachers framed the change as a way to create a more consistent approach to investing in real estate that better matches the model it uses for other asset classes such as infrastructure and private equity. Until now, investing in real estate has been managed by Cadillac Fairview as a subsidiary, but bringing it in-house is intended to allow for more information sharing and make it easier to co-source deals, according to a news release.
The real estate investment group will be “a strategic complement to our existing investment teams across other asset classes,” Ziad Hindo, Teachers’ chief investment officer, said in a prepared statement.
The change comes amid a dramatic shift in the investing climate for real estate, as the values of commercial real estate have declined and the volume of real estate deals has slowed. Evolving hybrid working habits are driving office vacancy rates higher and retail customers’ shopping preferences are changing.
In 2022, Teachers’ real estate portfolio – invested through Cadillac Fairview – lost 3.5 per cent, falling short of a benchmark portfolio it uses to measure its performance, which gained 6.7 per cent. Valuations on its Canadian retail and office portfolios, which make up a large proportion of Teachers’ real estate investments, fell as those properties underperformed.
Mr. Iacono has been at Cadillac Fairview since 2008, where he led the investments team and was a senior vice-president of development before he took over operations.
“I am confident that given his extensive experience, broad network, and strong leadership capabilities that he is well-placed to lead CF in the coming years,” Jeff Jacobson, chair of Cadillac Fairview’s board, said in a statement.
Mr. Sullivan has been CF’s CEO since 2011 and has guided the real estate company as it built its portfolio of retail, office and mixed-use properties, including major malls such as Toronto’s Eaton Centre. Teachers’ real estate portfolio is now worth $28-billion and makes up 12 per cent of its $247-billion in assets.
Mr. Sullivan was instrumental in helping land U.S. luxury retailer Nordstrom Inc. as an anchor tenant for some of its malls, and worked to build Cadillac Fairview’s brand into more of a household name. But with Nordstrom pulling out of Canada, some of Cadillac Fairview’s malls have been left scrambling to find new anchor tenants to fill the spaces it is leaving empty.
“Together we have built an unmatched portfolio, transformed cities across Canada and built exciting partnerships with some of the best companies in the world,” Mr. Sullivan said in a statement.
Editor’s note: An earlier version of this story incorrectly stated that Cadillac Fairview owns Yorkdale Shopping Centre. Yorkdale is owned by Oxford Properties Group.