CPP Investing in Real Estate

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.