Canada Pension Plan Investment Board (CPPIB) has formed its fourth real estate venture in China with the country’s largest residential developer, China Vanke, and plans to invest $250 million in the Chinese residential market with its new partner over the next few years, according to a CPPIB statement.
The venture is expected to focus on projects in the large cities of China, where CPPIB hopes to take advantage of the demand for middle-income housing generated from rising income and urbanization. Vanke will be responsible for sourcing and developing projects for the venture, all of which will be new residential developments, and will also co-invest in the projects.
In all, CPPIB’s $250 million commitment is expected to fund between four and five projects, but to allow for market volatility neither partner has set a time limit on the deployment. PERE understands that CPPIB and Vanke have formed this partnership with the intention of growing it over the long-term, and as such have worked in potential re-up options once most of the capital is deployed as well as the potential to recycle capital realized from previous investments.
To seed the venture, CPPIB and Vanke are investing in a residential development in Qingdao, Shandong province, which is understood to be a three-phase project to be completed over four years.
“We see this as an excellent opportunity to expand our presence in the country and invest in the residential sector alongside Vanke,” Graeme Eadie, senior vice president of real estate investments for CPPIB, said in the statement.
He added that CPPIB already has significant investments in Asia’s commercial and logistics sectors, but this is only the firm’s second residential venture in the region, following its $500 million residential debt platform that the pension set up last month in India alongside domestic conglomerate Piramal Enterprises.
Hauling revenues of over $22 billion last year, Vanke has developments in 65 large- and medium-sized cities across the country and four overseas cities. In the past, Vanke has teamed up with investors such as Tishman Speyer and Dutch pension APG for developments both within China and abroad.
Headquartered in Toronto, the C$201.5 billion (€132 billion; $182 billion) Canadian pension has invested a total of C$23.4 billion in Asia, representing 11.6% of the total portfolio, including C$4.2 billion of real estate investments. In July, CPPIB added another $400 million to its logistics JV with Goodman, bringing the joint venture that started out smaller than this one with Vanke to $1.5 billion of equity.
Baker & McKenzie advised CPPIB on this transaction.