CANADA - The Canada Pension Plan Investment Board (CPPIB) is to invest $355m (€293m) to develop five apartment complexes, and has acquired interests in two other apartment assets in the US.
Peter Ballon, vice-president and head of real estate investments for the Americas, said: "There are some good investment opportunities in the US for apartments, and this is especially true for apartment developments, where the returns are better than buying existing properties."
Many of the core properties are being bought at around 5% cap rates in the top-tier markets on the East and West Coasts. This yield is based on where rents are at the time of the purchase.
The deals the CPPIB completed involve three separate companies.
In a joint venture with Essex Property Trust, the pension fund acquired a 45% interest in a 463-unit development project in San Francisco and a 309-unit development complex in Dublin, California.
In a development project with Bentall Kennedy in Chicago, the CPPIB acquired a 44% interest in the 360 West Hubbard project in the Windy City.
This 450-unit development will be constructed in a joint venture with the Multi-Employer Property Trust - a core open-ended fund managed by Bentall Kennedy - and the Habitat Company.
CPPIB also closed on a four-property venture with AMLI Residential, where it acquired a 45% interest.
Two of the assets are new developments. These are the 700-unit AMLI at the Ballpark in Frisco, Texas and the 398-unit AMLI Lofts in Chicago.
The other assets are existing properties - the 440-unit AMLI 900 in Chicago and the 294-unit AMLI Museum Gardens in Vernon Hills, Illinois.
Ballon said: "We see there is an opportunity now to fund developments with our equity due to the lack of debt for these projects," he said.
"I'm not sure how long this opportunity will last, but it's there for us now to take advantage of."
He said the CPPIB was looking to invest in apartments with top-tier apartments developers and owners.
The Canadian pension fund has been investing in apartments in the US since the middle part of 2011.
It has now made equity commitments in this sector totalling $912m and controls interests in more than 6,000 units in seven US markets.
The pension fund said it was still looking for more apartment deals in the country, particularly deals in markets that have high barriers to entry.
These could be either physical barriers or areas where it is difficult to get new projects approved.
These markets are for the most part Boston, New York, Washington DC, San Francisco, Los Angeles and Seattle.
The CPPIB will also consider deals in Chicago and Dallas.