Tag: real estate

Canadian Pensions Bought $2.75 Billion in Commercial U.S. Property in January

skyscraper

Canadian pension funds have collectively invested $2.75 billion in commercial U.S. real estate in 2015, according to a survey conducted by the Financial Post.

Canadian entities, including pension funds, invested $9.7 billion in U.S. real estate in 2014.

More from the Financial Post:

The quick start to 2015 comes on the shiny heels of 2014, in which Canadians dominated the U.S. investment scene, easily doubling the country’s closest foreign rival, Norway, according to real estate research company CBRE.

[…]

While Canadian investment in the U.S. is impressive, it’s still a fraction of the entire investment market in America, which was worth US$434 billion in 2014.

Whether a falling dollar will impact future purchases, Jeanette Rice, Americas Head of Investment Research at CBRE, said, “It could mitigate investment, but there are a lot of other positives to balance each other out.

“We know that since September, 2012, the dollar has [gained] 20%, so it has been significant,” she added.

Proximity and similar customs factor into Canada’s U.S. interest, but the limited ability to grow domestically has also created a need for pension funds to invest abroad, Ms. Rice, the author of the study, pointed out.

“If you want to invest in China, it takes a lot of homework. It’s a lot easier to come visit a property, talk to professionals and so on [in the United States],” she said.

The Canadian invasion has been led by pension players who are heavily weighted in real estate compared to their American peers. Canada’s five largest pensions funds by asset size hold on average 12.7% of their investments in real estate compared to an average of 8.7% for 11 similar U.S. pension funds, according to CBRE.

Read more Pension360 coverage of Canadian pension investments here.

 

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CPPIB Can Invest Like “An 18-Year-Old”, Says CEO As Fund Looks to Cut Bond Allocation

canada

Canada Pension Plan Investment Board (CPPIB) CEO Mark Wiseman told Bloomberg this week that his fund can invest like “an 18-year old” as he looks to cut the fund’s bond allocation and move more money into riskier assets.

CPPIB allocates 28 percent of assets to fixed income. That’s down from 95 percent 15 years ago.

More from the Bloomberg interview:

With years of income and investing ahead, the Canada Pension Plan Investment Board can afford to own more risky assets such as real estate and stocks, according to Chief Executive Officer Mark Wiseman. Pension contributions will continue to grow through 2022, allowing the fund to reduce its 28 percent holdings in fixed income, he said.

“We’re an 18-year-old investor,” Wiseman, who’s 44, said during an interview Tuesday at Bloomberg’s Toronto office. “The portfolio can afford to have less bonds than it has today.”

With yields on fixed-income securities at or close to record lows, Wiseman is joining Canada’s second largest pension plan, the Caisse de Depot et Placement du Quebec, in saying he’s looking to reduce the amount of money invested in debt to seek higher returns elsewhere.

“The low interest environment is a big challenge for institutional investors,” Wiseman said. “We can get higher risk-adjusted returns than we can in the bond market.”

The yield on Canada’s benchmark 10-year bond fell to a record 1.294 percent Friday after government data showed gross domestic product contracted in November. The central bank unexpectedly cut its key interest rate Jan. 21.

CPPIB manages $183 billion in assets.

 

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Ontario Municipal Pension Buys $227 Million Paris Office Building

Paris

Oxford Properties Group, the real estate arm of the Ontario Municipal Employees Retirement System (OMERS), has completed the $227 million purchase of Paris office building, according to the Wall Street Journal.

The pension fund is make nearly $800 million worth of investments in Paris over the next three years.

More from the Wall Street Journal:

Oxford, the real-estate arm of Canadian pension fund OMERS Worldwide Group of Companies, told The Wall Street Journal it purchased 92 Avenue de France from a joint venture between German companies GLL Real Estate and Union Investment Real Estate GmbH.

Oxford made its first Paris acquisition in September. With its second deal the group is almost halfway to its €1 billion, three-year target for the city.

[…]

Over the last year, “London has become more expensive than Paris,” said Michel Vauclair, an executive at Oxford. He also noted that rates for long-term debt in euros are more favorable than in sterling.

[…]

With London’s property market booming, it has been challenging to acquire high-quality assets preferred by pension funds, Mr. Brundage said. “Not impossible, but challenging,” he said, noting as demand pushes up prices, “it’s harder to meet total return expectations” in the U.K. capital.

[…]

92 Avenue de France is a 235,000 square foot office located just over a mile from the Gare de Lyon train station. It is entirely leased to Réseau Ferré de France, the state-controlled manager of France’s railways.

OMERS managed $65.1 billion in assets as of December 31, 2013.

 

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Ontario Health Pension Buys Two Malls From Quebec Pension

mall

The Healthcare of Ontario Pension Plan has bought large stakes in two shopping malls from fellow Canadian pension fund Caisse de depot et placement du Quebec.

From Reuters:

Ivanhoé Cambridge, the real estate arm of Canada’s second-largest pension fund, said on Friday it had sold its 50 percent interest in two Ontario shopping centers to a rival pension plan manager in Canada for C$240 million ($190 million) as part of a move to reposition its retail portfolio.

Ivanhoé, a subsidiary of the Caisse de depot et placement du Quebec, said the properties sold to HOOPP, or the Healthcare of Ontario Pension Plan, were the Quinte Mall in Belleville and the Devonshire Mall in Windsor.

“This transaction completes the repositioning of our retail portfolio in Canada,” Arthur Lloyd, Ivanhoe’s head of global Investments, said in a statement. “We are now focused on expanding our Canadian retail platform through organic growth in key properties across the country.”

The Healthcare of Ontario Pension Plan manages $51.6 billion in assets.

Caisse de depot et placement du Quebec manages $214 billion in assets.

 

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Real Estate Returned 11.82 Percent For Institutional Investors in 2014, Reports Group

small model house

U.S. institutional investors saw their real estate investments return 11.82 percent in 2014, according to the National Council of Real Estate Investment Fiduciaries.

The group also reported that 2014 saw the highest volume of real estate transactions among institutional investors since 2005.

More from the Wall Street Journal:

The council’s NCREIF Property Index showed that real estate owned by institutions had returns of 11.82% in 2014. That’s up slightly from 2013, when returns were 11.22%, but down from 2011 when returns were 14.26%.

The index tracks the performance of over 7,000 properties valued at over $400 billion that are owned by pension funds, asset managers and other institutional investors. The return is a combination of income and the appreciation of the properties. All the returns are unleveraged, assuming the properties are purchased on an all-cash basis.

For 2014, the 11.82% return consisted of a 5.36% income return and a 6.21% appreciation return, NCREIF said.

[…]

NCREIF reported that net income at the properties that it tracks increased 6.5% for the year. Occupancy ended the year at 9.9%, the highest level since the first quarter of 2008.

NCREIF also said that sales volume was increasing. In the fourth quarter of 2014, the institutions that the council tracks sold 282 properties and added 271 buildings. That’s the highest transaction volume since 2005.

The 2014 return of 11.82 percent is considered a “sustainable level”, Jeffrey Fisher, a NCREIF researcher, told the Wall Street Journal.

 

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New York City Pension Wants In On Lawsuit Against Real Estate Firm Accused of Inflating Prices

gavel

The New York City retirement system is attempting to join a lawsuit already being brought by two pension funds against a real estate firm that allegedly inflated its performance figures.

The two pension funds already heading the case, State Teachers Retirement System of Ohio (STRS) and the Ohio Public Employees Retirement System (OPERS), are claiming millions in losses.

From ai-cio.com:

American Realty Capital Properties (ACRP), a real estate investment trust provider, is facing a growing group of investors claiming it fraudulently inflated performance figures.

The $159 billion New York City retirement system and TIAA-CREF have filed complaints against the firm, requesting to join in an ongoing lawsuit led by two Ohio public pension funds.

In October 2014, nine days after the Ohio pensions first filed suit, the real estate firm admitted it had made intentional accounting errors, and purposely failed to correct other mistaken figures. Its stock plummeted by 30% within hours of the revelation, and closed trading for the day having lost roughly $2 billion in market capitalization.

[…]

“In light of general investor concerns about the quality of the company’s accounting functions, internal controls, and corporate governance (as highlighted by several embarrassing reporting mishaps), ACRP desperately sought to reassure investors that it had righted the ship and that its internal control systems were above reproach,” TIAA-CREF’s complaint stated.

Read more Pension360 coverage of the lawsuit here.

 

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Survey: New York Top Real Estate Market for Institutional Investors

wall Street

For institutional investors, New York is the most desirable real estate market in the United States, according to a survey conducted by the Pension Real Estate Association (PREA).

Other sought-after markets: Chicago, Boston, Los Angeles and San Francisco.

More from IPE Real Estate:

The Investment Intentions Survey, carried out with INREV and ANREV, found that the East Coast city was the most preferred market for 86.3% of institutional investors in 2015.

Among non-US capital, the Big Apple was also preferred, with 95% of non-US investors expecting to invest there this year.

PREA said non-US investors continue to target major US markets, while domestic investors are spreading capital more widely.

”In general, US-based investors are targeting investments on a more widespread basis across the US than are non-US investors, who continue to be most interested in the major, primary markets,” PREA said.

Boston, Chicago, San Francisco and Los Angeles are also high on investors’ wishlists, with two-thirds expected to place capital in the four cities in 2015.

Fund managers have a stronger interest than investors in major West Coast markets such as San Francisco, Los Angeles, Texas and Florida.

For domestic investors, Texas is tied with Boston as the top US destination for domestic capital in 2015, with 71% of US-based investors.

However, amongst non-US investors, there is far less interest in either Texas, Florida or other markets outside the largest and most liquid.

The survey results can be accessed here.

 

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CalPERS Put Its Money to Work in India in 2014

India

The Canada Pension Plan Investment Board, among other pension funds, has been vocal about making India part of their long-term investment strategy.

CalPERS hasn’t announced it from the top of the hills, but the numbers reveal that the country’s largest public pension fund is also taking considerable interest in India.

CalPERS increased its exposure to India by over 33 percent in 2014.

From VC Circle:

The California Public Employees’ Retirement System (CalPERS), one of the top public pension funds in the US, saw its exposure to assets linked to Indian currency rise by over a third to $1.7 billion in the fiscal ended on June 30, 2014 as compared to $1.27 billion in the year ago period, according to the annual financial report of the company.

Almost all of this was due to changes in fair value of assets in the equity securities bucket from $885 million to $1.3 billion. The value of the real assets, representing primarily real estate assets, shrunk marginally.

This data represent investment securities of all CalPERS managed funds, including derivative instruments that are subject to Indian rupee foreign currency risk.

It did not list any quantum against PE assets in India and it could not be ascertained if this is due to its forex hedging over dollar denominated offshore funds or it has actually disassociated itself with India-focused PE funds.

But CalPERS does counts itself as an investor in several global PE funds investing in India including some in their regional funds. These include Blackstone, KKR, Carlyle, TPG, Clearstone, SAIF Partners, etc.

CalPERS manages over $300 billion worth of pension assets.

 

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Preqin: Hedge Funds Grew More Than Any Alternative in 2014

balanceHedge funds experienced the most asset growth of any alternative asset class in 2014, according to a Preqin report.

Despite scrutiny over low returns and high expenses, investors put more money into hedge funds in 2014 than private equity, infrastructure or venture capital.

More from Chief Investment Officer:

Despite a disappointing year for returns and some high-profile withdrawals from the sector, Preqin’s “2015 Global Alternatives Report” showed that hedge fund industry assets grew by roughly $360 billion during the year.

This accounted for more than half of the $690 billion increase in total assets invested across hedge funds, private equity, venture capital, private real estate, and infrastructure. In total, Preqin estimated $6.91 trillion was invested across these sectors.

“The recent news of CalPERS cutting hedge funds and reducing the number of private equity partnerships within its portfolio does not reflect the wider sentiment in the industry,” said Mark O’Hare, CEO of Preqin.

“From our conversations with investors, the majority of investors remain confident in the ability of alternative assets to help achieve portfolio objectives.”

However, Preqin predicted that investors would continue to scrutinise hedge fund performance and fees during 2015.

Preqin’s “2015 Global Alternatives Report” can be bought here.

San Diego County Pension May Ramp Up Real Estate Investment As it Looks to Reach Target Allocation

one dollar bill

To reach its target real estate allocation, the San Diego County Employees Retirement Association (SDCERA) could invest $500 million in real estate over the next two years, according to an Investments & Pensions Europe report.

The fund’s target real estate allocation is 10 percent.

More details from IPE Real Estate:

According to board meeting documents, San Diego is considering placing this capital with existing and new real estate managers.

The pension fund, advised by consultant The Townsend Group, is considering hiring a manager for a new separate account.

It is also considering investing in commingled funds to gain access to niche investment strategies, as well as real estate investment trusts (REITs).

The fund has previously placed capital with CBRE Global Investors, Blackstone, Cornerstone Real Estate Advisers, JP Morgan Asset Management, Pramerica Real Estate Investors and Deutsche Asset & Wealth Management.

San Diego will look to rebalance its portfolio, moving from an even split between core and non-core investments to a 70-30 weighting, a move that will be aided by some of its existing opportunity fund investments coming to an end.

The expected return for the new portfolio weighting is around 7.5%, with a standard deviation of 10.8%, according to Townsend.

SDCERA manages approximately $10 billion in pension assets.

 

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