CPPIB buys stake in Australian shopping centre for A$455m

The C$148 billion pension fund has bought big again, this time acquiring a 50 percent stake in the Northland Shopping Centre in Melbourne from a private Australian real estate investment company.

The Canada Pension Plan Investment Board (CPPIB) has continued an aggressive buying streak with the purchase of a 50 percent interest in Northland Shopping Centre in Melbourne for A$455m (€338.8 million; $488 million).

The purchase of the 994,370 square foot shopping centre from the Gandel Group, a private real estate business, is the latest of a number of big-ticket buys in 2011 by the giant pension fund.

The other 50 percent stake is owned by the Colonial State Retail Property Trust, the largest REIT managed by Australian investment management firm Colonial First State Asset Management, which will continue to manage the asset.

Graeme Eadie, CPPIB's senior vice-president, real estate investments, said: “This is a rare opportunity to invest in a high quality retail asset in a key Australian city where CPPIB does not currently have a presence. Northland has recently undergone a major redevelopment and repositioning and is the major full scale shopping centre in Melbourne's northern suburbs.”

“This investment further diversifies our exposure to the Australian retail market, one that has proven to be resilient during the global financial crisis, and allows us to work with a strong manager in CFSGAM, with whom CPPIB already has an existing relationship.”

The fund has been one of the more aggressive buyers on the international real estate investment scene in 2011. According to data from Real Capital Analytics, CPPIB has invested the third highest amount of equity in the world over the last 12 months, deploying $7.8 billion. The only investors to have deployed more are The Blackstone Group and China Vanke Company, which have deployed $16.61 billion and $7.8 billion respectively.

CPPIB’s investment in Australia follows the 25 percent acquisition of the 1.9 million square foot Westfield shopping centre in Stratford, a 42.5 percent stake for C$604 million in the ING Industrial Fund, a portfolio of prime industrial properties and the C$783 million purchase of stakes in shopping centres in New England in the US and Dusseldorf in Germany.

CPPIB saw its assets increase in value to C$148.2 billion (€103.4 billion; $152.8 billion) in its fiscal year to 31 March from C$127.6 billion a year earlier. The platform has put a stronger emphasis of late on further value growth through alternative investments including real estate. In the year to 31 March, 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.

Last November, David Denison, CPPIB’s president and chief executive officer, said the pension fund would continue to acquire ‘long life assets such as infrastructure and core real estate’ arguing it would give the plan “strong risk-adjusted returns … over many years. This message was reiterated last month when he said the benefits of the fund’s investment programmes, including real estate, were ‘materializing as private market valuations start to reflect the economic recovery of the past two years.’