The Canada Pension Plan Investment Board (CPPIB) has hit new heights in its global investment strategy by agreeing to make its largest single real estate asset investment anywhere in the world to date.
The pension plan is injecting A$ 1 billion ($1 billion; €830 million) alongside two Australian partners to develop the Barangaroo South Project, a 1.78 million square feet scheme in Sydney's Central Business District (CBD) where two premium-grade, 41 and 38- story office towers will be built by 2015 as well as 73,000 square feet of retail space.
In an announcement today, CPPIB revealed its partners on the scheme were developer-cum-fund manger Lend Lease and Lend Lease’s wholesale investment vehicle, the Australian Prime Property Fund Commercial (APPFC), both of which will commit 25 percent to the venture in addition to CPPIB’s 50 percent. The total equity injection for the scheme is A$2 billion.
Not only is this the first direct office investment in Australia, but also the largest single real estate asset equity investment that the CPPIB has made anywhere in the world to date, it said.
Its most eye catching deal in Australia came in March 2011, when it participated in a consortium to privatise the A$2.5 billion ING Industrial Fund, with the pension plan committing A$600 million to the transaction for a 42.5 percent stake. That venture provided access to a high-quality institutional portfolio of industrial assets in Australia and Europe, plus a land bank for future development.
Other real estate investments by the pension include CPPIB’s first direct investment in Hong Kong, two retail investments in Brazil, a joint venture to develop Victoria Circle in London and a joint venture to develop an office tower in Toronto.
However, its biggest real estate investment ever was revealed in February this year when it formed a venture with Australian mall giant, The Westfield Group, to buy a 45 percent stake in a US mall portfolio for $1.8 billion. That group of properties consisted of 10 regional malls totalling 13.5 million square feet in California, Maryland and Washington, as well as two redevelopment sites. The Westfield deal made the CPPIB one of the largest institutional owners of US shopping centres.
Of its latest investment in Australia, Graeme Eadie, senior vice president of real estate investments for CPPIB said: “We will be able to gain a significant exposure in Sydney's Central Business District through a premium-grade office development offering the tenants highly efficient and environmentally sensitive facilities.” Eadie added: “This investment supports our real estate strategy to acquire premium, long term assets in key global markets.”
As of 31 March 2012, CPPIB's real estate portfolio totalled C$17.1 billion, of which approximately C$1.7 billion was invested in Australia.