CPPIB benefits from RE valuation boost and return upswing

Year end results show the Canada Pension Plan’s real estate portfolio increased in value to C$10.9 billion and returned 13.9 percent in a year described by president and CEO David Denison as an ‘excellent performance year’.

The Canada Pension Plan Investment Board (CPPIB) saw the return from its real estate portfolio increase by 24 percent over its last fiscal year.

CPPIB president and chief executive officer David Denison pointed to the Canada Pension Plan’s real estate as well as infrastructure investments as he highlighted the fund’s ‘excellent performance’.

The overall value of the state Canada Pension Plan grew to C$148.2 billion (€103.4 billion; $152.8 billion) from $127.6 billion in 2010, CPPIB said as it announced its fiscal year end performance to 31 March.

The C$20.6 billion valuation increase, marking an ‘all-time high’ for the fund, resulted from a number of acquisitions, C15.5 billion in investment income and C$5.4 billion in net CPP contributions. The value of its real estate increased from C$7 billion to C$10.9 billion, or from 5.5 percent of total assets to 7.3 percent.

CPPIB said its real estate portfolio returned 13.9 percent compared to -10.1 percent the year before, with Denison attributing the performance upswing to market valuations starting to reflect the ‘economic recovery of the past two years’.

Denison said: “Many of our investment programs such as real estate and infrastructure are very long-term in nature, and we are pleased that the benefits of those programs are materializing as private market valuations start to reflect the economic recovery of the past two years.” CPPIB’s infrastructure was valued at C$9.5 billion, reflective of 6.4 percent of total assets, up from C$5.8 billion or 4.6 percent.

It has been a busy year for CPPIB on the real estate investment front. Among the investments highlighted in its announcement, was a C$700 million combined outlay for two Manhattan offices, the 25 percent acquisition of the 1.9 million square foot Westfield shopping centre in Stratford and a 42.5 percent stake for C$604 million in the ING Industrial Fund, a portfolio of prime industrial properties.

The fund has continued its aggressive programme into 2011. Last month, it invested C$783 million on retail assets in New England in the US and Dusseldorf in Germany.

The pension fund’s real estate and infrastructure asset allocation increases coincided with a reduction in equities, both public and private, from 55.7 percent of total assets the previous fiscal year to 53.5 percent last year. Within its equities portfolio, private equities increased to 15.3 percent from 12.5 percent.

Among CPPIB’s infrastructure highlights, CPPIB said, was the acquisition of a 40 percent stake in the 407 Express Toll Route outside of Toronto and an interest in a toll road in Sydney. The combined investment was $4.1 billion, part of which was then syndicated to a group of other institutions.

Among its private equity investment highlights was its partnership with Onex Corporation. The partners completed the largest private equity transactions in 2010 of Tomkins, the global engineering and manufacturing group, in a deal valued at $1.1 billion.