Two of the world’s largest pension plans have paid $1.4 billion for a 50 percent stake in a retail development located next to the site of the London 2012 Olympic Games.
APG and Canada Pension Plan Investment Board (CPPIB) both acquired 25 percent interests in the 1.9 million-square-foot Westfield Stratford City development for £871.5 million (€1 billion; $1.4 billion). The deal values the entire project at £1.7 billion.
The retail and entertainment centre is due for completion in the third quarter of 2011, with 75 percent of the retail space already leased or committed, Westfield said in a statement. The deal is expected to close in 2011 and is “subject to the project completing and opening”.
APG's head of European non-listed property investments, Robert-Jan Foortse, said the centre itself would “over time become one of the UK's best shopping centres”, while Graeme Eadie, senior vice-president of real estate investments at CPPIB, added the deal was part of the pension plan’s retail strategy of targeting prime assets that will “deliver stable cash flows and good growth prospects over the long-term”.
As a result of the deal Westfield will book a development profit of about £300 million pounds on Stratford City, according to a report by Bloomberg. Westfield expects roughly 70 percent of the anticipated 10 million Olympics spectators to pass through the retail centre, which will include 300 retail shops and 50 restaurants.
Earlier this month, CPPIB said it would continue to eye core real estate deals after its property portfolio rose in value by 24 percent in just six months. The C$138.7 billion (€100.5 billion; $138.5 billion) pension valued its real estate portfolio, excluding debt, at C$9 billion as of the end of September – up from $7 billion six months earlier and C$6.9 billion one year earlier.
Real estate now accounts for 6.5 percent of CPPIB’s total fund, with the pension’s president and chief executive officer David Denison saying at the time “long life assets such as infrastructure and core real estate” provided the plan “strong risk-adjusted returns … over many years”.
CPPIB recently teamed up with LaSalle Investment Management to buy the regional mall, Hürth Park, in Hürth, Germany, from the open-ended fund Degi Europe for €157.3 million. That followed a deal in October to acquire 45 percent stakes in two prime office properties owned by Vornado Realty Trust for $91 million.
Henderson Global Investors acted as investment management advisor to APG and CPPIB.