The Canada Pension Plan Investment Board is setting aside C$1.4 billion ($1.17 billion; €903 million) to target distressed real estate opportunities in the US and UK.
A spokesman told PERE, the C$127.7 billion pension fund would invest the money in addition to its existing real estate allocations, worth an estimated C$7.2 billion.
CPPIB is expected to commit the capital to opportunistic real estate funds, such as those run by The Blackstone Group and Morgan Stanley, with Graeme Eadie, senior vice-president of real estate investments, telling local Canadian media direct investment partners might also be considered.
“People are under pressure to solve their debt problems, which often means selling the best assets because those are the ones they can sell,” Eadie told the Globe and Mail.
The overleveraging of the industry would present investors with prime opportunities over the next 12 to 24 months, Eadie added in the report. CPPIB said it would wait for asset prices to fall further.
CPPIB has a real estate target allocation of 5.6 percent, with capital focused primarily on office and retail commercial properties in Canada and the UK, and to a lesser extent the US, Europe and Asia Pacific.
Eadie said in the report that CPPIB had avoided the US over the past few years owing to high real estate prices. He said there was too much growth built into the investment assumptions.
CPPIB has invested in Blackstone’s latest funds, including €200 million to Blackstone Real Estate Partners Europe III, which is expected to hold a final close in the New Year, according to the pension’s website. The fund is also a “significant” investment partner in Callahan Capital Partners’ $770 million Denver office portfolio, previously part of the Equity Office Properties portfolio. In Asia, CPPIB has invested with $300 million to MGPA’s Asia Fund III, which closed on $3.9 billion earlier this year.