Q2 2025 Fund Commentary

Market commentary

Continued Bank of Canada interest rate adjustments brought overnight rates down to 2.75%. However, positive market sentiment at the start of the quarter turned cautious as tariff uncertainty and trade fictions weighed on investors’ confidence. Bond yields fell for the quarter.

Performance

The Fund’s relative exposure to Ontario and British Columbia retail assets was positive for performance. These holdings were well occupied neighbourhood centres, performing better than regional and enclosed malls that carry more leasing risk and are more expensive to operate.

Relative exposure to High Park Village, a residential complex in Toronto, Canada was negative for the Fund’s performance. The property’s value declined after a change in its appraisal because of recent comparable sales.

At the sector level, exposure to the retail segment was positive for the Fund’s performance. Overweight exposure to the residential segment was negative for the Fund’s performance. It was affected by market rent pressures and affordability, particularly in the Montreal and Calgary areas.

Portfolio activity

The sub-advisor reduced the Fund’s Richmond, British Columbia office exposure.

Outlook

The sub-advisor is focused on enhancing the Fund’s long-term growth and improving the overall age and quality of the portfolio.

The threat of U.S. tariffs has increased uncertainty, which tends to stall decision making and the deployment of capital. In real estate, this can lead to tenants being less likely to to engage in longer-term discussions and landlords putting capital projects on hold. Investors are also likely to pause until uncertainty decreases.

The Fund is invested in high-quality urban offices as part of its diversified investment strategy. The sub-advisor continues to invest in repositioning some core holdings. To date, the Fund’s office exposure has been reduced through a series of non-core dispositions and already realized value declines. The Fund’s industrial and multi-family exposure was increased. Retail has been a robust performer, with resilient cash flows. The sub-advisor continues to recycle capital.