Investor Profile

CPPIB doubles logistics spend in China

The $165.8-billion Canadian Pension Plan Investment Board (CPPIB) has substantially increased its investment in logistics properties in China, doubling its funding of a partnership with the Goodman Group.

It is the second time in a year that CPPIB has doubled its exposure to logistics properties in this Chinese joint venture, with its latest injection of funds totally $400 million.

Goodman, which also partners with CPPIB in logistics-themed property investments in North America, Hong Kong and Australia, will kick in an extra $100 million into the Goodman China Logistics Holding (GCLH) fund.

It is understood that CPPIB has invested more than $2.2 billion in co-investments with Goodman across these three countries in the past two years.

CPPIB’s most recent expansion in its China investments comes on the back of announcing earlier in the month that it would make its first direct investments – also via a Goodman joint venture – in US industrial real estate.

Goodman and CPPIB have targeted an equity amount of $890 million on a 55/45-per-cent basis, representing a $400 million investment from the Canadian investment manager, which manages the assets of 18 million Canadian contributors and beneficiaries.


The American ventures

The North American joint venture will target logistics and industrial properties in key North American markets.

Other large Canadian institutional investors such as the Ontario Teachers’ Pension Plan and la Caisse du dépôt et placement have been among the most active deal makers in recent years, making major investments in both North America and Europe.

CPPIB’s allocation to property now totals more than $17.7 billion, representing about 10.7 per cent of its total portfolio.

The Pension Real Estate Association’s August investment report reveals that 46 per cent of funds in its database report a target allocation to real estate of less than or equal to 8 per cent of their total portfolios.

About a quarter of funds reported they targeted a 10-per-cent allocation.

Across all the funds the average actual allocation was 9.1 per cent in 2011 up from 7.7 per cent the previous year.

The database covers 1000 US public and private pension plan sponsors, endowment foundations and other funds.


Logistics lowdown in the People’s Republic

CPPIB’s increased commitment to China takes the GCLH to $1 billion, with the joint venture having a portfolio of 12 properties in the key Chinese cities of Shanghai, Beijing, Tianjin, Kunshan, Chengdu and Suzhou.

The joint venture partners report that the portfolio has a 100-per-cent occupancy rate, with a strong tenant base.

Despite fears of an economic slowdown in China, Mark Machin, president of CPPIB Asia says that rising domestic demand will underpin its logistic property investments.

“CPPIB’s additional investments reflect our belief that China’s logistics sector will continue to grow as demand for modern, efficient logistics facilities is being fuelled by a rising domestic demand for consumer goods,” he says.

“Together with Goodman, we expect that GCCLH will continue to perform well over the long term through its participation in the rapid growth of this market.”

Other investors that are seeing an opportunity in investing in Chinese logistics real estate include Global Logistics Properties, a unit of Singapore’s sovereign wealth fund.

Bloomberg reports the company invested $1 billion in China last year, with online retail giant Amazon among its list of tenants.


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