Cadillac Fairview Corp. Ltd. has made good on its goal of expanding its holdings outside North America, inking a deal to buy a part interest in Brazil's leading owner and operator of shopping centres.
Under the terms of the agreement, Cadillac Fairview, the real estate arm of the Ontario Teachers Pension Plan, will acquire a 46-per-cent stake in Multiplan Emprendimentos Imobiliarios SA, a private real estate company based in Rio de Janeiro. Multiplan manages 14 regional malls in Brazil and has an ownership stake in nine of those sites. Cadillac Fairview did not disclose the price on the deal, but recent reports in the local media have put the value of Multiplan's assets at more than $1-billion (U.S.).
Cadillac Fairview said it plans to use its interest in Multiplan as a base for further investment in Brazil and other parts of South America.
"We see this as a good start," said Cadillac Fairview chief executive officer Peter Sharpe. "This is a strategic investment in a market we like."
Ownership of retail property is fragmented in Brazil, he said, which could allow the company to grow through consolidation. There also is the potential for some development activity with Multiplan, he said.
The deal with Multiplan is part of a push by Cadillac Fairview and other major Canadian pension funds to increase their real estate holdings in foreign markets. Investments outside North America now account for 9 per cent of Cadillac Fairview's $13-billion (Canadian) real estate portfolio. Mr. Sharpe said he would like to raise that to between 15 and 20 per cent over the next three to five years.
Andrea Stephen, executive vice-president of investments at Cadillac Fairview, said the pension fund focused on Brazil after extensive research. The decision was based on the potential returns available, she said, as well as investment security and the level of competition from other foreign investors.
Brazil is a good market for retail property investment because of its growing middle class and expanding economy, she said.
Multiplan applied this spring to Brazil's securities commission to do an initial public offering, a process that has been halted by this deal. Mr. Sharpe said the mall owner and operator has 30 years of experience in the business and a solid management team that will continue to run the company.
In return for its stake, Cadillac Fairview will get "a solid presence on the board," he said.