February 15, 2012 / 7:23 PM / in 6 years

CPPIB eyes real estate deals amid turbulence

TORONTO (Reuters) - Canada Pension Plan Investment Board, fresh from striking its biggest real estate deal ever, is weighing three or four other acquisitions as it looks to scoop up undervalued assets in a tumultuous global property market.

CPPIB, with C$153 billion ($153.38 billion) in managed assets, is mostly interested in property in emerging market powerhouses such as Brazil and China, with their strong long-term growth outlooks, said Graeme Eadie, senior vice president for real estate investments at CPPIB, one of Canada’s largest pension fund administrators. But it might also unearth value in more established centers such as London.

In an interview with Reuters after CPPIB announced two big property deals, Eadie offered no specific timetable for the next acquisition by the fund, which invests on behalf of 17 million Canadians.

“You go through cycles,” Eadie told Reuters. “We’ve gone through years where it was very difficult to find anything, and then this year we’ve been able to do a fair number of large deals.”

CPPIB struck three major real estate investments in the last month. It is part of a joint venture that agreed a $4.8 billion deal to buy a U.S. regional mall portfolio from Australia’s Westfield Group WDC.AX. CPPIB paid $1.8 billion for its stake, its biggest bet ever on real estate.

Also this week CPPIB said it would join forces with one of Britain’s top commercial property companies, Land Securities Group (LAND.L), to develop land in Victoria Circle in London’s West End.

Eadie wouldn’t give specifics about any deals in the pipeline except to say he was keeping busy.

“I would say, right now, deals of this magnitude, probably three or four,” he said when asked how many were under review.

CPPIB’s strategy is flexible, Eadie said, geared to seizing assets that offered good value, rather than allocating fixed amounts to predetermined sectors.

He also said the fund prefers to find opportunities through its own resources rather than bid on deals that are marketed, which tend to be more expensive.

“Obviously the world is struggling a bit economically, and that creates some challenges because there isn’t the economic growth, but on the other hand that can often create some opportunities where people need to find a capital partner, so you react to that,” he said.

The deals announced this week, plus an agreement last month to buy a Rio de Janeiro shopping mall with the C$157 billion Caisse depot et placement du Quebec, are just the latest show of strength from the CPPIB and other Canadian pension funds that grew powerful during the global economic crisis.

The deals are the fruit of decades of painstaking legwork and relationship-building carried out by CPPIB and its peers.

The Victoria Circle deal was first broached with Land Securities Group three years ago. Negotiations gathered steam in the last six months. Eadie said CPPIB would probably hold the asset for at least 20 years.

Similarly, the Westfield deal was a year in the making.

“These take a lot of time and they start with us going out and speaking with these kind of partners, the major operators and owners, and then hopefully through a long series of conversations you find an opportunity that works for them or for us,” he said.

($1=$0.9976 Canadian)

Reporting By Pav Jordan; Editing by Frank McGurty

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