CPP Investing in Real Estate

January 13, 2003 (PLANSPONSOR.com) - The CPP Investment Board, a Canadian government corporation that invests funds not needed by the Canada Pension Plan to pay current pensions, has made its first commercial real estate investment.

The joint investment is an approximately $300 million Canadian acquisition of five shopping centers from Cadillac Fairview Corp. The Ontario malls are in Thunder Bay, Sudbury, Hamilton, Stoney Creek and Cornwall, according to a Dow Jones report.

Additionally, the CPP announced a $200 million Canadian commitment to Osmington Inc to build a co-owned income-property portfolio with value-added growth potential over normal real estate cycles. Yet to be developed is a second strategy to build a real estate portfolio of high-quality core properties that will be held for the long term.

According to the CPP, the investment will be invested over three years in office, retail and industrial properties through a co-venture investment program with Osmington.   The property would then be managed by Osmington and its subsidiary Redcliff Realty Advisors Inc. Currently, Osmington and Redcliff manage about $1 billion Canadian in properties for Canadian institutional investors and Osmington, itself.

The board said these strategies will diversify Canada Pension Plan assets beyond equities and bonds and enhance the long-term risk-adjusted returns of the total portfolio.   Overall, the board has stated its long-term plan is to invest up to 5% of Canada Pension Plan equity assets in real estate and infrastructure. With assets under management expected to reach $160 billion Canadian by 2012, as much as $8 billion Canadian could be invested in real estate and infrastructure in less than 10 years, the board said.