Canadian pension fund giant CPPIB has established a dedicated European debt team in its London office, in line with its approach to cover the entire risk spectrum, CPPIB’s managing director and head of real estate investments Europe Wenzel Hoberg told PropertyEU.
Canadian pension fund giant CPPIB has established a dedicated European debt team in its London office, in line with its approach to cover the entire risk spectrum, CPPIB’s managing director and head of real estate investments Europe Wenzel Hoberg told PropertyEU.
The move is part of a real estate mortgage and mezzanine loan investment programme launched by the pension fund first in the US in 2011 and subsequently extended to Europe in 2013.
‘We believe the ongoing retrenchment of European banks should generate attractive opportunities for us and we therefore initiated a programme to invest in private junior debt and mezzanine opportunities, typically with a loan to value between 50% and 80%,’ Hoberg said. Compared to the equity side, property debt has a shorter duration and generates higher returns. ‘This programme allows us to broaden our scope on real estate investment while using the know-how of the existing property team.’
The business, which is led by Martin Healey, managing director and global head of private real estate debt, targets high-quality assets that are managed by strong operators in countries and sectors where the company is already active. As such, the debt strategy parallels the equity investment programme, Hoberg noted. ‘We are prepared to refinance or recapitalise the type of assets which we would otherwise have bought ourselves.’
Over the past three years, CPPIB has developed a C$2.3 bn global real estate debt portfolio, currently representing over 10% of its total real estate holdings. Hoberg: ‘Although the majority of commitments are currently in North America, we are looking to roll out this investment strategy in Europe but the pace at which we will be able to grow is not yet clear.’
CCPIB, which manages €135 bn of assets worldwide on behalf of 18 million Canadian contributors, is also switching its focus from the UK to Continental Europe as part of plans to rebalance its European portfolio. Two-thirds of the fund's European real estate assets are currently in Great Britain against one third on the Continent.
‘We want to grow more in Continental Europe and, following our global strategy, we want to grow in emerging markets, where our London office focuses on Turkey and India,’ CPPIB’s Hoberg told PropertyEU.
'So far it’s been easier for us to deploy capital in the UK, given the local office presence and the availability of large-ticket transactions. Even though we have not set ourselves a limit for investment in the UK, we believe that there is a very competitive environment in this market today while we see compelling opportunities in Continental European countries.'
CPPIB recently made its first foray into the Nordics with the acquisition of a half share of the €534 mln Kista Galleria, one of Stockholm’s largest malls. The deal was carried out jointly with Nordic retail specialist Citycon. In 2011, the pension fund also bought half of the massive Centro Oberhausen shopping centre in Germany, in its first major direct property acquisition in Western Europe.
The group currently has direct exposure to Germany, Sweden, France and Turkey, while it is present in Central and Eastern Europe and Southern Europe through fund mandates. Hoberg: ‘From a global perspective, the economic environment has been more challenging in Continental Europe and it has been harder for us to deploy capital. However, it has to be said that we never closed the tap on Europe, we remained consistent in our presence in this market and today Europe continues to be a target region.’
