CPP forms $1.5bn venture with TIAA-CREF

The Canadian pension fund has teamed up with the asset management arm of the academic retirement system to boost its exposure to the US real estate market.

The CPP Investment Board has invested $500 million (€385 million) in two separate ventures with TIAA-CREF Asset Management as the Canadian pension fund looks to significant increase its presence in the US property market.

Under the terms of the agreement, the CPP Investment Board will invest $300 million in a TIAA joint venture focused on Class-A office properties in the US, primarily partially leased buildings in stable or recovering cities. The joint venture will be capitalized with $612 million of equity, including $312 million, or 51 percent, from TIAA. The New York-based asset management firm has contributed two properties near San Francisco and one asset in McLean, Virginia to the venture. With leverage, the partnership is expected to invest in approximately $1.5 worth of assets.

In addition to the joint venture, the Canadian pension fund has also committed $200 million to a direct project program, managed by TIAA, focused on institutional quality US assets.

“Our investment significantly increases our exposure in the US real estate market which supports our focus of diversifying the overall CPP Investment Board portfolio by product type and geography,” Graeme Eadie, CPP IB’s senior vice president of real estate investments, said in a statement.

The Canadian pension fund currently manages approximately C$110 billion ($95 billion; €73 billion) worth of assets, approximately C$5 billion of which are invested in real estate. While the bulk of the property portfolio is located in the major cities of Canada, CPP has made an effort to diversify its portfolio into the US and Western Europe. In recent years, the institutional investor has committed to several European-focused funds managed by La Salle Investment Management and ING Real Estate, as well as a £100 million investment to Liquid Realty Partners III, a secondary property fund that invested in a portfolio of UK assets.