The Canadian Pension Plan Investment Board insisted 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, compared to 4.5 percent for infrastructure. CPPIB’s infrastructure portfolio was valued at C$6.2 billion as of the end of September, up from C$5.8 billion at the end of March. Those figures include roughly C$4.5 billion of direct infrastructure investments.
The pension’s private equity portfolio was valued at C$20.3 billion, including Canadian, foreign developed and emerging market private equities, compared to C$16 billion six months ago. The pension invests with more than 140 funds from 70 managers. Direct private equity investments were valued at C$5.2 billion at the end of September, compared to C$4 billion at the end of the first quarter and C$3.1 billion in September 2009.
David Denison, CPPIB’s president and chief executive officer, said the Canadian pension 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”.
Earlier this month, CPPIB 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.
CPPIB bought minority interests in the Warner Building at 1299 Pennsylvania Avenue and 1101 17th Street NW, marking pension’s first foray into the Washington DC area.
Denison told Reuters the pension’s 40-year investment horizon gave the fund a competitive advantage in a market where credit was sometimes still difficult to obtain.
“That requires people to put more equity into the capital structures of these real estate acquisitions and that still means that there is a lot of participants who can't do that … their business models doesn't allow them to do that,” he reportedly said.