Canadian bank headquarters stand on Bay Street in Toronto.Brent Lewin/Bloomberg
The Canada Pension Plan Investment Board is making its first investment foray into New Zealand, buying half of a real estate portfolio from another Canadian pension plan.
The Public Sector Pension Investment Board (PSP) is selling CPPIB half of a group of Kiwi office and retail properties in a deal valued at $545-million, primarily in the urban markets of Auckland and Wellington. CPPIB's initial equity stake will be $216-million. The properties are managed by Sydney-based AMP Capital, which CPPIB already works with in Australian property investments.
It's the latest example of CPPIB teaming up with another Canadian pension fund on a deal, specifically in real estate. In the fall, the pension plan bought a 50 per cent interest in seven Canadian office properties from the real estate arm of the Ontario Municipal Employees Retirement System for nearly $1.2-billion – the most recent transaction in a long-time partnership.
Many of the country's largest pension funds like to join forces with other investors and operators on their major global deals. But as the Canadian funds get bigger and do more international acquisitions, they have increasingly sought to work together to buy and share alternative assets while broadening their exposure to infrastructure, private equity and real estate overall.
The past year has been no exception. In June, CPPIB and Ontario Teachers' Pension Plan went in on a 49 per cent stake in the Arco Norte toll road in Mexico, a major artery that in the country that connects several states. More recently, PSP teamed up with the Caisse de dépôt et placement du Québec and some other investors to acquire global consulting business AlixPartners.
In many cases, the partnerships offer a convenient way to build on each others strengths. CPPIB has said in the past that it plans to expand its investments geographically, and before Monday it didn't have any assets in New Zealand. Meanwhile, PSP had about 7.8 per cent of its investments allocated to Japan, Australia and New Zealand (as of its last annual report in 2016), including a stake in the Kaingaroa Timberlands in New Zealand, a major supplier of softwood lumber to Asia, and stakes in two dairy farming operations.
CPPIB pointed to population and tourism growth in New Zealand as a driving force behind its attraction to the 13 properties, which cover more than 2.9 million square feet of space. PSP has only been invested in the assets since July of 2014, when it bought 18 buildings from AMP Capital and its investors.
"With this acquisition, we are able to gain a meaningful presence in the New Zealand commercial real estate market, partnering alongside PSP Investments, who is a like-minded, long-term partner and extending our relationship with AMP Capital," said Jimmy Phua, head of real estate investments in Asia at CPPIB. The pension fund had $38.4-billion worth of real estate investments around the world as of Sept. 30.