With its assets under management set to hit a quarter of a trillion dollars in the next decade, the Canada Pension Plan Investment Board continues to look for opportunities abroad as it outgrows the domestic markets.
The latest global move for the CPPIB, which oversees Canada's national pension fund assets, is a $572-million investment in European real estate through a fund that will be managed by Denver-based distribution facilities owner ProLogis.
Launched this week, ProLogis European Properties Fund II will invest in modern warehouses located near airports, seaports and in other strategic areas.
The widespread adoption of the euro has extended the reach of such facilities, making this an interesting niche within the real estate sector, said Graeme Eadie, senior vice-president of real estate investments at the CPPIB.
More Report on Business Stories
"It used to be much more regional, but now large, modern facilities can service a number of countries rather than just being focused on one. We think it's a good long-term asset base and the returns are attractive," Mr. Eadie said.
The CPPIB also invested $590-million in British real estate last month, including a stake in another third-party fund and the purchase of the Whitefriars Quarter outdoor shopping centre in Canterbury, England.
As of June 30, the CPP fund's assets stood at $120.5-billion, including $5.6-billion in real estate. As it seeks to diversify geographically, the CPPIB has also put money into private equity and infrastructure in countries including England, Chile and Turkey, and holds a portfolio of global equities.
"We believe the new fund will enable CPP Investment Board and our other fund partners to achieve their investment objectives by delivering stable cash flows and long-term asset appreciation, while delivering access to Europe's leading platform of industrial properties," Jeffrey Schwartz, chairman and chief executive officer of ProLogis, said in a statement.
ProLogis is the world's largest warehouse owner, operator and developer, and had $29.9-billion (U.S.) in assets and 2,523 properties as of June 30. This week it also launched funds that will invest in Mexico, South Korea and the United States.
The CPPIB is putting up approximately 17 per cent of the European fund's total equity. The fund will comprise 28 institutional investors, and will have a total capacity of up to $10.7-billion (Canadian). This includes equity of $4.3-billion and a targeted leverage amount of 50 to 60 per cent. ProLogis will maintain a significant stake in the fund, and will receive property and asset management fees.
The CPPIB has a good relationship with ProLogis, and will consider future investments in its funds, Mr. Eadie said.
31