CPPIB forays into Australia, NZ real estate debt market by seeding new fund

View of the Sydney Opera House from the water.

Canada Pension Plan Investment Board (CPPIB) is entering the real estate debt market in Australia and New Zealand by extending A$500 million ($370 million) in seed lending to a new fund with global fixed income and real estate manager Challenger Investment Partners (CIP).

The fund will invest in middle-market real estate loans in Australia and New Zealand. CIP will source and manage investments on behalf of the fund.

In a statement on its website, CPPIB said its wholly owned subsidiary, CPPIB Credit Investments Inc, will partner with CIP to provide alternative financing to owners of well-located properties in key gateway cities across Australia and New Zealand.

CIP is an institutional manager that originates and manages assets for global and Australian firms. It had approximately A$19 billion ($14.1 billion) in assets under management as of March 31, 2018.

“This partnership marks our first real estate debt investment in Australia and New Zealand. We believe these markets offer compelling investment opportunities and we look forward to exploring these together with CIP,” said Geoffrey Souter, Managing Director, Head of Private Real Estate Debt, CPPIB.

The Asia-Pacific region, according to Suyi Kim, Senior Managing Director & Head of Asia Pacific, CPPIB, offers “attractive investment opportunities supported by strong fundamentals”.

“It remains high priority for our growth,” Kim said.

CPPIB hiked its exposure to Asian private equity by nearly 27.8 per cent to C$17.1 billion ($13.3 billion) in the year ended March 2018, according to its annual report.

“CPPIB’s selection of CIP as a manager is a tangible endorsement of CIP’s position in originating and managing real estate debt assets for leading institutions,” said Gerard Hargraves, Head of Real Estate Debt at CIP.

In 2016, CPPIB made its foray into New Zealand by acquiring a 50 per cent interest in a diversified real estate portfolio in New Zealand for $417 million from pension investment manager PSP Investments. The portfolio comprised a mix of 13 well-located office properties and high-quality shopping centres totalling approximately 268,000 square meters.

CPPIB is a global investment management organization that invests the assets of the Canada Pension Plan and operates at an arm’s length from government. It invests in public equities, private equities, real estate, infrastructure and fixed income instruments. The fund totalled C$337.1 billion ($262.1 billion) at the end of last year.

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