Blueprint: CDPQ’s Ivanhoé Cambridge integration leads to big departure, Blackstone’s BREIT sees drop in redemptions, fundraises hit and miss targets

Senior managing director and head of the New York private capital group at broker JLL Bob Knakal speaking on CNBC’s “Last Call.”

From wanting 12 Nathalies to having none

The Caisse de dépôt et placement du Québec has become the next Canadian state pension provider to determine it is better to run a real estate business internally than be the parent of an externally managed organization. Last week, CDPQ announced it would internalize Ivanhoé Cambridge, a real estate business with C$77 billion ($57.3 billion; €52.9 billion) of assets under management, and its real estate lending firm Otera Capital, which is responsible for another C$29.7 billion, a move intended to drive efficiencies and save up to C$100 million in costs.

In the announcement, CDPQ’s chief executive officer Charles Emond extolled the virtues of the integration but as a consequence will have to contend with the loss of Nathalie Palladitcheff, whom he considered one of his best senior executives and who will leave after the transition completes. “I need a dozen Nathalies,” Emond told us in an interview marking Palladitcheff’s winning of PERE’s Lifetime Achievement Award, published last March. He will soon have none.

CDPQ’s plans follow those of Ontario Teachers’ Pension Plan Board, which last year similarly announced its intention to internalize its previously external property firm Cadillac Fairview.

Weathered the storm

Blackstone reported its full year earnings last week, describing how weak confidence in the real estate market was providing an opportunity to buy. Values are bottoming out, and the “pillars of a real estate recovery” are starting to take shape, president Jon Gray said. There was also brighter news for the firm’s Blackstone Real Estate Investment Trust, which has been fending off redemption requests by spooked investors. In November 2022, the firm began blocking withdrawals from BREIT, after requests exceeded the fund’s 5 percent net asset value limit. Gray said during the earnings call redemption requests dropped 50 percent in Q4 2023 from the previous quarter and were now down 80 percent since January 2023.  “If current trends continue, we expect to be out of proration this quarter,” he said. Meanwhile, the value of the firm’s overall real estate assets under management increased last year by 3 percent to $336.9 billion, Blackstone reported.

Local backing

Industrial specialist GLP Capital Partners continued to grow its RMB strategy as it attracted a big-ticket investment from an unnamed global investor for its latest China income fund. With 10 billion yuan ($1.4 billion; €1.3 billion) of assets under management, China Income Fund XII was closed in partnership with the investor. Similar to its predecessors, the fund has been seeded with assets in China’s high-growth sectors such as high-tech manufacturing, e-commerce, and alternative energy. While the firm raised the majority of its capital from domestic institutions for its RMB strategy, this is not the first time it received investment from an overseas investor. Last year, the firm also closed China Income Fund IX with an international investor, also not named. Nearly half, or $2.2 billion, of the $4.5 billion GCP has raised across strategies has come via RMB vehicles in the 12 months ending November 2023. In addition, GLP C-REIT, the firm’s Chinese real estate investment trust, also attracted 1.85 billion yuan in a follow-on offering last year.

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Back for more logistics

Boston-based manager Cabot Properties has closed its biggest fund yet, raising $1.57 billion for its Value Fund VII. The fact it was oversubscribed is down to it being a logistics-only fund, firm chief executive officer Franz Colloredo-Mansfeld told PERE. The sale of some $5.6 billion of assets in the four years leading up to 2021 was also a big help, he said, as that provided returns to some of the firm’s legacy investors, 90 percent of which returned to back Fund VII. And while oversupply has been a concern for the firm, Colloredo-Mansfeld said that issue is starting to ease as construction activity tapers off. “We’re in a cycle now where there’s some uncertainty. But I think, in general, based on what we see, tenants are active so demand for 2024 should continue to be good.”

Missing the mark

While managers like Cabot managed to beat their targets, despite a challenging fundraising environment, other firms are falling short. Boston-based manager Rockpoint, for example, has collected $2.7 billion for Rockpoint Real Estate Fund VII against a reported $4 billion target, while Germany’s Patrizia attracted close to €300 million for its debut real estate impact fund, Patrizia Sustainable Communities, for which the firm originally aimed to raise €500 million. Both managers pointed to reasons for missing the mark, primarily related to changes in investors’ ability to make fund commitments. PERE understands in the case of Rockpoint, investors not only faced various capital constraints, but also became more cautious about deployment because of heightened macro and geopolitical risks. Meanwhile, investors’ pullback on impact investing amid changing market conditions made it more difficult for Patrizia. For more on Rockpoint’s fundraise, click here and for more on Patrizia’s capital raise, click here.

Packaged for pensions

A global study by insurer platform Aviva Investors reveals 69 percent of defined contribution corporate pension funds expect to increase their allocation to real assets in the next two years. One manager looking to capture some of this upside is Invesco, which launched a global real estate fund exclusively for DC pension schemes in the UK. The fund, which the Dallas-based manager claims is the first of its kind, will be invested in Invesco-managed funds focused on direct property investments across Europe, the US and developed Asia-Pacific. Although the approach is like a fund of funds, Simon Redman, managing director and head of DC and wealth at Invesco Real Estate, told PERE all underlying properties are managed “with exactly the same investment process and philosophy – there is no double-counting of fees.” The Global Direct Property Fund is evergreen and has been structured to allow DC schemes to trade daily, without the liquidity notifications and restrictions that Long-Term Asset Funds have, added Redman. An LTAF is an open-ended fund structure designed to enable institutions to invest in long-term, illiquid asset classes.

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