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CPPIB commits $375m to PAG fund

Canada’s largest public pension plan continues its push into Asian real estate with its second fund commitment in recent months.

Canada Pension Plan Investment Board has backed Hong Kong-based alternative asset manager PAG’s latest real estate fund, Secured Capital Japan Real Estate Fund VI, to the tune of $375 million.

The $298.1 billion pension plan made the commitment during the third quarter of its fiscal year 2017, the three-month period ended December 31, the organization revealed in its quarterly results. The commitment was not previously disclosed.

SCREP VI is focused on distressed debt and off-market commercial real estate opportunities in Asia, primarily in Japan with additional opportunities in South Korea and China. CPPIB’s investment represents an approximately 25 percent stake in the fund.

The investment was one of two real estate fund commitments that CPPIB made during its fiscal third quarter. The institution also wrote a $375 million check to Raffles City China Investment Partners III, CapitaLand's third development fund in China. Similar to its PAG commitment, CPPIB’s investment represents a 25 percent interest in the vehicle.

In this month’s Blueprint feature, Peter Ballon, CPPIB’s head of real estate investments, told PERE that the CapitaLand was not a typical fund commitment. “Funds have a connotation to them, that the investors have limited discretion over investment decisions,” he said. “We have a considerable amount of discretion over that investment. That’s really the thesis. We want to control how our investments are managed.”

Much of CPPIB’s real estate activity in recent months has focused on Asia. Also during its fiscal third quarter, the pension plan invested $162 million to purchase a 40 percent interest in the Pavilion Dalian shopping mall in northeast China from the Pavilion Group; and also formed a second joint venture with Longfor Properties to invest in Chongqing West Paradise Walk shopping center in the Chinese city of Chongqing. CPPIB committed approximately C$193 million for a 49 percent interest in the asset.

CPPIB ended its fiscal third quarter with net assets of C$298.1 billion ($227.68 billion; €214.11 billion), compared with $300.5 billion at the end of the previous quarter. As of December 31, the institution held C$37.7 billion, or 12.6 percent of its total portfolio, in real estate.

To read this month’s PERE Blueprint on CPPIB, click here.