REAL ESTATE - The Canada Pension Plan Investment Board makes its first major move into the US with a $500m (€378.3m) investment with TIAA-CREF Asset Management.
Graeme Eadie, senior vice president of real estate investments for CPP Investment Board, said: "We have been looking for a way to enter the US market for more than one year. It’s a part of the world that we want to invest in because of its size, the liquidity nature of it and it will give us another layer of diversification."
Eadie knows how difficult it is to entry the US market on its own. He said: "That is the reason why we chose a proven partner like TIAA-CREF to invest in the country."
The initial investment will not be the only time that CPP Investment Board looks at investing in the US, as he added: "We will be looking placing more capital in this part of the world in the future."
The CPP Investment Board split its investment with TIAA-CREF in two ways. The first was a direct joint venture with TIAA-CREF. There is a total of $612m of equity in the venture.
The Canadian investor put in 49% equivalent to $300m and TIAA-CREF put in 51% or $312m. The ownership interests for any assets in the venture will go along the same lines as the equity contributions. The total capitalisation of the venture is $1.5bn.
TIAA-CREF has contributed the first two assets to the joint venture. One of the properties is in Pleasanton, Ca, and the other is located in McLean, Va.
The investment strategy for the joint venture is to invest in major class A office properties, with the focus on partially leased assets. The relationship will invest in properties that are located in stable or recovering metropolitan areas with a population of at least 500,000. All of the properties will have a gross asset value of $100m to $200m.
The other $200m investment by CPP Investment Board was put into a commingled fund that is managed by TIAA-CREF. The size of the commingled fund is now north of $500m.
The commingled fund has a core and core plus investment strategy. TIAA-CREF has its own definition of core plus. Tom Garbutt is managing director of TIAA-CREF’s Global Real Estate Unit. "We think that core plus is mainly leasing issues," he said,. "That there is some space that needs to be filled. It also might include some minor rehab."
The commingled fund will look for assets nationwide. The property types being considered for investment are office, industrial, retail and apartments.