Canada Pension Plan Investment Board (CPPIB) has entered the real estate debt markets in Australia and New Zealand through a A$500m (€317m) partnership with Challenger Investment Partners.

The Canadian pension fund said its credit investments business will participate in A$500m of seed lending to a fund to invest in middle-market real estate loans.

Challenger will manage the newly created fund on behalf of CPPIB.

Geoffrey Souter, managing director and head of private real estate debt at CPPIB, said: “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.”

Suyi Kim, senior managing director and the head of CPPIB’s Asia-Pacific business, described the partnership as “a further step in the expansion of CPPIB’s investment activities into new asset classes across Asia-Pacific”.

He said: “This region offers CPPIB attractive investment opportunities supported by strong fundamentals, and it remains a high priority for our growth.”

Gerard Hargraves, the head of real estate debt at Challenger, said the mandate was a “tangible endorsement” of Challenger’s ability to originate and manage real estate debt investments.

Challenger established its debt platform in 2010 after the global financial crisis and it has since placed A$2.5bn in commercial real estate debt on behalf of institutions that include Singapore’s GIC and Australia’s AustralianSuper and HostPlus.

It is understood that the new fund will make loans of between A$25m and A$150m across gateway cities and in the office, retail, industrial and hotel sectors.

According to a source close to the matter, Challenger is expected to make three transactions by the end of October, representing a “substantial” portion of the fund’s capital.