Blueprint: Ballon’s exit at CPP Investments, Goldman Sachs’ latest real estate secondaries capital raise, PERE’s MIPIM coverage

Another leadership shakeup at Canada’s major pension plans, with Peter Ballon leaving the top real estate post at CPP Investments after nearly two decades at the investor; PERE reports back on the mood at MIPIM; Goldman Sachs Asset Management raises $1.2 billion for Vintage Real Estate Partners III; and more in today’s briefing, exclusively for our valued subscribers.

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They said it

“I do believe in 2024 we’ll have some distress playing through the system, but that will be helpful to getting us to the point of resolution”

Cushman & Wakefield CEO Michelle MacKay speaking on Bloomberg’s Wall Street Week about the outlook for commercial real estate and what opportunities are emerging.

What’s new

Peter Ballon is leaving his role as global head of real estate at Toronto-based CPP Investments after 17 years at the firm. (Image: CPP Investments)

Another senior real estate exit at the Maple 8

The global real estate leadership changes continue among Canada’s major pension plans. Peter Ballon, global head of real estate at Toronto-based CPP Investments, will be leaving over the summer after 17 years at the investor, which ranks 13 on PERE’s Global Investor 100 ranking. CPP declined to comment on where Ballon is going or when a new global real estate head will be announced.

His departure is the latest in a string of global real estate head changes at the so-called Maple 8 – which also include the Alberta Investment Management Corporation, British Columbia Investment Management Corporation, Caisse de dépôt et placement du Québec, Healthcare of Ontario Pension Plan, OMERS, Ontario Teachers’ Pension Plan and PSP Investments – over the past year.

Last February, OMERS tapped former Ivanhoé Cambridge CEO Dan Fournier to lead its real estate unit Oxford Properties, while Ontario Teachers named Pierre Cherki as its new real estate head in December 2023 following its decision to take its property business in-house. In January, CDPQ announced the departure of Ivanhoé Cambridge CEO Nathalie Palladitcheff concurrently with its own decision to integrate its real estate subsidiaries. The search for Palladitcheff’s successor is still in progress.

Goldman notches $1.2bn close for real estate secondaries fund

Goldman Sachs Asset Management raised $1.18 billion for its third dedicated real estate secondaries fund, Vintage Real Estate Partners III, according to filings with the US Securities and Exchange Commission. The fund was launched in 2022 with $250 million, according to affiliate title Secondaries Investor‘s database, and its third close was in March 2023 at $707.5 million. Goldman closed the fund’s predecessor in 2020 at $2.75 billion – well above the target of $1.25 billion.

Missing: Debt deals

PERE was at MIPIM last week in Cannes, speaking with managers, investors and advisers from across Europe and beyond. Although sentiment was much improved from last year’s conference, which saw the real-time demise of three major banks and continued interest rate hikes from central banks, the mood was still somewhat subdued.

The scale of the opportunity unfolding for credit strategies was a particular talking point, with European banks reported to be increasingly selective and imposing stricter covenants on new lending. That said, the non-bank lenders waiting on the sidelines with capital to deploy into the gap left by retrenching banks are, well, still waiting.

“It has taken longer than expected to see opportunities to deploy credit in Europe on a relative basis globally,” said James Boadle, senior vice-president, Europe at Oxford Properties. The Canadian investor has up to €1 billion to deploy in credit across the region over the next two years, but has yet to invest any of the capital. As explained in our coverage, Boadle was not alone in his observation.

Trending topics

Schroders checks into UK hotels

London-based manager Schroders Capital has announced a new closed-end fund centered on hotel assets, more than two years after it closed its debut pan-European hotels fund on €525 million, exceeding its €300 million target. This time, however, the firm is looking to focus exclusively on hotels in the UK.

According to a release, the firm has secured a £100 million ($127 million; €117 million) initial commitment for Schroders Capital UK Operating Hotels, which will invest in operationally intensive hotels in cities across the UK.

Investment in the UK hotel industry is expected to increase this year off the back of a surge in asset performance over 2023, according to research from Cushman & Wakefield. The average daily rate in the UK over the past 12 months stood at £120 in December 2023, representing real growth of 6.1 percent. Furthermore, occupancy is only 40 basis points behind 2019 levels, and the broker expects this to fully recover by the middle of this year.

New industrial venture for Investcorp

The lure of US industrial real estate is still strong, despite recent talk of oversupply in some parts of the market. Investcorp Real Estate has launched a new $526 million industrial real estate venture, PERE has learned, arming the firm with $1.5 billion in buying power in the sector.

The venture was funded by two unnamed sovereign wealth funds, which also invested in a similar venture Investcorp set up in 2021. Over the past two-and-a-half years, the two investors have deployed more than $1 billion of equity across both ventures. “The US industrial sector continues to exhibit strong fundamentals, and we continue to see attractive opportunities to expand our investments in the last-mile subset of this asset class,” said Herbert Myers, the firm’s co-head of US real estate.

Data snapshot

Bounce back to positive

Although all sectors generated negative total returns in 2023, performance is expected to gradually bounce back from 2024 onwards, according to the Pension Real Estate Association’s Consensus Forecast, Q1 2024. Industrial and retail are projected to achieve positive total returns in 2024 while office and apartment are forecasted to follow in 2025.

People

Goldman exec joins SVP

Goldman Sachs’ long-serving real estate executive Mike Ungari has joined alternative investment firm Strategic Value Partners to lead its real estate activities.

Prior to joining SVP, Ungari spent more than 16 years at the New York-based investment bank, where he was most recently a partner managing its opportunistic and value-add real estate portfolio in the US. Before that, he worked at the firm’s special situation group leading transactions on commercial real estate, consumer and transportation assets for 10 years. He participated in more than $19 billion of real estate transactions across equity, development, opportunistic credit, and take-privates during his time at Goldman Sachs. Ungari’s hire came as SVP sees a growing opportunity in distressed real estate, where the firm has deployed $2.4 billion since 2020.

Investor watch

Connecticut’s third go with Carlyle

Connecticut Retirement Plans and Trust Funds has made its third and largest commitment to date to Carlyle’s real estate business, earmarking $200 million to Carlyle Realty Partners X, the latest offering in the Washington, DC-based firm’s closed-end opportunistic fund series. The vehicle, which has an equity goal of $8 billion, will target the residential, self-storage and industrial sectors across about 30 major US markets.

CRPTF previously committed $150 million in 2020 to Carlyle Property Investors, a core-plus open-end real estate fund, and $180 million in 2021 to Carlyle Realty Partners IX, CRP X’s predecessor fund. CRP IX was approximately 75 percent committed as of January 22 and is expected to be fully committed by the end of 2024, according to a due diligence report from the Connecticut state treasurer’s office. Meanwhile, CRPTF expects to make the first investment in CRP X in Q4 2024 or Q1 2025.

This week’s investor meetings

Tuesday, March 19

Wednesday, March 20

Thursday, March 21

Friday, March 22

Today’s letter was prepared by Miriam Hall, with Jonathan Brasse, Evelyn Lee,Charlotte D’Souza and Christie Ou contributing.