Recently, Canadian pension funds slash US real estate bets as tariffs and hedge costs bite
Healthcare of Ontario Pension Plan's real estate financing arm is tapping the bond market for the first time, according to Bloomberg.
HOOPP Realty Finance is raising up to $500m through a two-tranche offering.
The bonds will mature in five and seven years, with yields set at 0.75 to 0.80 basis points and 0.90 to 0.95 basis points above government benchmarks, respectively.
The move comes as Canada's largest pension funds tighten their approach to real estate investments south of the border.
According to the Benefits and Pension Monitor back in September, HOOPP and Alberta Investment Management Corp.—members of Canada's Maple Eight holding close to $300bn in combined assets at year-end—are taking a more cautious stance on further US deals.
Tariff uncertainty and deteriorating economics are driving the pullback.
As per the Benefits and Pension Monitor, Eric Plesman, global head of real estate with HOOPP, stated the pension fund is derisking its portfolio: "No new shovels go in the ground unless everything is pre-leased."
The reality of US market conditions has left little room for speculation.
Interest rate differentials between Canada and the United States have made cross-border hedging prohibitively expensive.
Labour supply challenges compound the risks.
Undocumented workers constitute approximately 15 percent of the US workforce, creating unpredictability on construction sites as workers avoid appearing on job sites due to deportation concerns.
The pullback is reshaping capital flows globally.
As per Plesman's comments to the Financial Post, European investors have begun reallocating capital originally intended for the US to Canada instead, drawn by the country's stability.
Bloomberg reported the bond could come to market as early as Thursday following investor meetings this week.
